What can Tata's Nano teach Detroit?

Businessweek: 'Understanding your customer, or potential customers, is another. What do your customers need? What do they really want? What can they afford? The customer was ever-present in the development of the Nano. Tata didn't set the price of the Nano by calculating the cost of production and then adding a margin. Rather it set $2,500 as the price that it thought customers could pay and then worked back, with the help of partners willing to take on a challenge, to build a $2,500 car that would reward all involved with a small profit.

The Nano engineers and partners didn't simply strip features out of an existing car—the tack Renault took with its Dacia Logan, which sells in India for roughly $10,000. Instead, they looked at their target customers' lives for cost-cutting ideas. So, for instance, the Nano has a smaller engine than other cars because more horsepower would be wasted in India's jam-packed cities, where the average speed is 10 to 20 miles per hour.

The Big Three, by contrast, are insulated. As Dev Patnaik, founder of strategy firm Jump Associates (and someone with family in Detroit) argues in his book, Wired to Care, U.S. automakers are disconnected from even the average American consumer because all of their employees and those employees' friends and family are given steep discounts. A company can't develop successful products if it doesn't have regular contact with customers. And no, focus groups don't count.'


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