The common thought about competing with low-cost manufacturing countries is to go for higher-end products, powered by advanced technologies, and thus maintain substantial margins. Professor Christophe Midler does not buy it: in his latest book, “The Logan story, new directions for innovation”, he shows how low-cost approach is a quest for higher value, leveraging nimble innovation.
Conducting a disruptive innovation in an established company is nothing but easy. Christophe Midlers presented his analysis on key factors for succes, and hold a debate with former Renault CEO, Louis Schweitzer, who directly initiated the Logan project. Let’s go through some of the features that sort out.
Seeking for simplicity
The Logan project starts from the idea of building a new car, “modern, robust, and affordable”.
Low cost in the car industry involves a change of paradigm, from technology push to concept pull: new vehicles usually arise from advanced technology input where manufacturing platforms play a preeminent role. With low-cost, car design is based on a concept: can we lower drastically the cost while maintaining the necessary quality and comfort?
The virtue of ‘design to cost’ framework is that it rapidly converges to a seek for simplicity. Engineers are not passionate about simplicity: they have to be pulled into the game of economy of means. What is the appropriate level of simplicity to reach? What is below average customer expectation, and when does it become superfluous? What is “need to have” vs “nice to have?” These are the constant challenges the Logan project had to address so as to reach the “Enough is the best” as defined by Muji design.
To make conceptual innovation happen, a bottom-up learning curve is activated, getting in-depth in engineering know-how to perform sake of savings. Thinking in reverse give birth to creative levers: simplified architecture, single product platform, carry over (mutualizing pieces between Logan, Duster and Sandero cars), carry across (reuse of manufacturing line for a new vehicle), trickle-up (explicit value for the customer of engineering designed). Flexibility is the rule and innovation percolate across.
Dedicated branding, ‘Cuckoo’ distribution policy, ‘business to society’
Logan is a strategic bet for Renault: against traditional odds, it targets emerging customers in developing countries and starts from low-end product. Therefore innovative marketing action plan is set-up.
Dedicated branding, Dacia, makes difference with Renault.
Dacia leverages on existing distribution network like a cuckoo, pushing smoothly the other Renault cars out to grab exhibition space. An untraditional sales policy is used: no discount, no old car buy-back.
Advertising is not easy: presenting a car that parks itself, or a new car body, is more classic than promoting a ‘smart’ car purchase.
Logan marketing borders on disruption: it does not focus systematically on customer needs, or sales managers expectations, reproducing competition features. Pricing is not competition-based because there is no low-cost vehicles at this time: it has to meet with social imaginaries to define a ‘smart’ price. As national regulations strongly impact the possibility of Logan roll-out, it’s wider than business to consumers, it’s ‘business to society’.
CEO key involvement
Logan would not have been possible without the involvement of Renault visionary CEO, Louis Schweitzer.
He provides a susbtantial, but not over financed investment, around m€ 1. Enabling full autonomy for the project team, he manages to protect it by keeping it off the radar as long as necessary: once presented its convincing robust look, successfully performed internal tests, and received positive press feedback, Logan project finallly gets internal traction.
According to Louis Schweitzer, “what was mostly required for innovation success was an enormous amount of technical skills, and a strong appetite for risk“.
Let the team lead the team
Logan progression relies on some key principles: empowering project team, benefitting from marginality, playing on non central ground, breaking the traditional design rules, getting the best from engineering representative, up to substitution.
Logan becomes an ‘intraprise’, a small enterprise in itself, developing an extraordinary efficient design loop, with a small number of people assembling all necessary skills like a ‘feature team‘, immediately able to execute, and sometimes acting as a predator of Renault advanced technology.
Behind acting as a project team, the innovation team behaves like a business unit.
Developing a ‘lineage’
Launched in 2005-2006, Logan has still not been reproduced. Dacia has extended this ‘lineage’ of thoroughbred horses from Logan, to Sandero and Duster, rising from 0 to 800 000 sales, with a comfortable margin.
Logan is not a single hit as former vehicle Renault 5, quite difficult to renew, or a clone, like Volkswagen reproducing Skoda vehicles. With its ‘lineage’, Dacia manages to change while remaining itself, extending while keeping its identity: building on a first success, it drives a continuous expansion of knowledge and concepts, leading to new products ‘lineage’.
Lineage is a key concept according to Professor Midler. Differentiating from product line which is mainly ex-ante, ‘lineage’ opens new horizons for innovation by combining ex-ante (top-down vision) and ex-post (learning from hands-on experience).