2017 2017 June 14 , Cachan, ENS

Colloquium International GERPISA 25th , ,

& Christophe Christophe & Midler

Bernard Jullien, Yannick Lung Lung Yannick Jullien, Bernard

strategy

: The The : Kwid Entry Entry

Renault's

From the Logan to the the to Logan the From the Logan to the Entry Range

In 1998, Louis Schweitzer, CEO of , launched the idea of a $/€5000 car (X90 project) In 1999, Renault bought the Romanian carmaker Dacia … Logan’s production begun in Romania (Pitesti) in 2004 Initially designed for CEEC, the car has a great success in European market and in Emerging countries A complete range is progressively developed: Logan (, MCV, pick-up, and commercial version), Sandero (including Steepway), Duster (Oroch pickup), Lodgy and Dokker Entry , key for Renault internationalization

Entry range became central for Renault-Dacia-Samsung group Unit: 000s vehicles Renault-Dacia-Samsung sales in 2016 (passenger cars)

Total sales: 2.75 millions Entry & SubEntry: 1.25 millions (45.3%)

Source: Atlas Renault 2016 Entry range is at the core of Renault products in emerging countries (except Slovenia and Turkey: in 2017, itsmodels are assembled in 10 different countries, 12 assembly plants on 4 continents

3 Kwid, the Sub Entry segment

(CEO) aims in 2010: increase the Alliance Renault- up to 10% of the world car sales, being more aggressive on emerging markets To propose a modern car to the buyers of new cars A global platform (a set of modules: CMF-A Common Module Family) to derive new models Renault (Nissan)

4 and its sister Datsun Redi-GO

Starting Price in India: 3670€

Starting Price in India: 3340€ About the methodology

A comparative approach based on a double survey carried out by the authors for a decade. › Logan (2007-11): analysis of the documentation (press, internal documents of the group), interviews with the main actors of Renault, Dacia and suppliers (44 people met) and visits to industrial sites in different countries. › Kwid (2014-16) in the same way with three trips to Chennai (State of Tamil Nadu, India) where the car was designed and produced. Some fifty interviews with the key actors of the project were conducted in or India Principle of "open book: › No financing by Renault › Access to people, plants and documents (including strategic) in return for a visa on the dissemination of information 2012 2017 Agenda of the presentation

Understand under what conditions these strategic intuitions could be realized Perceiving more finely how internationalization is managed Indicating that the activation of resources of large companies in innovative directions is possible and promising Challenging the obsessive focus on "start-ups" that structure - both in the car and elsewhere - both managerial credits and policy makers' software today

8 Presentation’s structure

I. Short history of the Kwid project in 7 steps

II. What to learn from this story? I. Kwid History: An Overview in 7 Steps

1. Upstream exploration 2. Autonomy given to the project 3. Original design organization 4. Sourcing 5. Difficult start of production 6. Commercial launch 7. Internationalization 1. Upstream exploration (April 2010-October 2011)

A reasoning on the growth strategy similar to that of 1995

Source L. Feuvray et J.F. Vial Renault The need for a joint Alliance initiative

Difficulties on the Indian market for Nissan and Renault products The target: the A segment, less than 3,5 lakhs (5000 euros)

Source L. Feuvray et J.F. Vial Renault

A shift from Renault previous market positioning The failure of previous Indian hypotheses

Renault › Failure of the joint venture with Mahindra & Mahindra to produce the Logan (Mahindra Verito) 2007-2010(>4 meters) › New failure of the joint-venture of Renault with Indian firm Bajaj, manufacturer of motorcycles and leader for 3-wheelers (rickshaw) Nissan › Datsun, a brand for a new Entry range in emerging markets (DO in Russia, GO in India) › Failure of Nissan cooperation with Defiance, an Indian engineering company (Hinduja Group, subsidiary: Ashok Leyland): first I2 project 12 Rethinking Innovation and Design for Emerging Markets

“At the start of the project in 2010, the director for pre-projects, the LCI direc- tor, and I met over lunch at the Technocentre’s canteen,” recounts Patrick Le Charpy. T e initial idea proposed by Philippe Klein, the Renault product plan director, was 12 Rethinkingto Innovationuse the Micra and Design as the for base, Emerging and LCI Markets duly worked on this idea for six months. In the beginning, the Design department quickly constructed two small-scale mock-ups, “At the startwith of thedimensions project in extrapolated2010, the director from for the pre-projects, existing vehicles—somewhatthe LCI direc- like a mini-Zoe tor, and I met overand luncha mini-Captur. at the Technocentre’s However, canteen,” they failed recounts to convince. Patrick Le Charpy. T e initial idea proposedAt the by in-house Philippe IndianKlein, the design Renault studio product in plan Mumbai, director, Ramesh was Gound, one of the to use the Micrathree as thedesigners base, and on LCI the dulyteam worked of Jean-Philippe on this idea Salar,for six workedmonths. Inon a small brief, the beginning,a the “baby Design Duster” department inspired quickly by constructed the Indian two success small-scale of themock-ups, Duster, which had just been with dimensions extrapolated from the existing vehicles—somewhat like a mini-Zoe and a mini-Captur.launched However, in India. they failed Gérard to convince. Detourbet, who saw the sketches in January, 2011, marked At the in-houseit immediately Indian design as the studio preferred in Mumbai, path. Ramesh T e same Gound, month, one during of the a project review at the three designersin-house on the team design of Jean-Philippe of ce in Mumbai, Salar, worked Renault on a small Design crossover Director brief, Laurens van den Acker, a “baby Duster”who inspired joined by thethe Indian company success in of 2009, the Duster, and Patrick which had Le just Charpy been discovered Ramesh launched in India.Gound’s Gérard “green” Detourbet, sketch who saw and the validated sketches in thisJanuary, choice 2011, (see marked Figure 1.3). it immediately as the“We preferred knew path. straight T e same away month, we were during on athe project right review path,” at the recalls Laurens van Den in-house ThedesignAcker. of ce keyinIndeed, Mumbai, LCIrole Renault pursued Design of this Director directionan Laurens integrated by vanmobilizing den Acker, a team of exploratory 15 to 20 peo- approach: LCI who joined the company in 2009, and Patrick Le Charpy discovered Ramesh ple, along with the product and architecture design departments, and no alter- Gound’s and“green” sketch converged and validated this choice (seemock Figure 1.3). -up “We knewnate straight scenarios away we were were developed.on the right path,”With recalls this design, Laurens LCIvan Den believed it had the key to Acker. Indeed,completing LCI pursued the this project direction and by mobilizing to becoming a team an of important,15 to 20 peo- possibly indispensable ple, along withauthority the product on andstimulating architecture new design innovation departments, within and the no group.alter- So it worked toward Upstream Exploration 13 nate scenariosthis were goal: developed. “At LCI, With 70% this design, of our LCI activity believed is itbased had the on key requests to and we make our completing theown Theproject decisions and role to for becoming theof remaining the an important, Cooperative 30%. possibly T is was indispensable the case Innovation for this project. It wasLaboratory (LCI) which gathers authority on stimulating new innovation within the group. So it worked toward this goal: “At LCI,people 70% of our fromactivity is basedthree on requests departments and we make our (Product, Design and Engineering): an own decisions forinside the remaining creative 30%. T is was start-upthe case for this project. spirit It was within Renault

Figure 1.3 The “green” sketch by Ramesh Gound, a member of the Renault Design Figure 1.3 The “green” sketch by Ramesh Gound, a member of the Renault Design Studio, Mumbai,Studio, January, Mumbai, 2011. (© January, Renault Design 2011. Studio, (© Renault reprinted Design with Studio,permission.) reprinted with permission.)

Figure 1.4 The converged mock-up, June, 2011. (© Renault Design Studio, reprinted with permission.)

important for LCI to show it could provide added value by proposing new inno- vations,” says Patrick Le Charpy. From January to July, 2011, LCI worked on the project. T is work culmi- nated in a so-called “converged” mock-up (see Figure 1.4) that incorporated economic and ergonomic constraints. “Our design was, as always, in competi- tion with other more conventional approaches developed at the Technocentre. Tracks that favored rather the internal habitability against the strength and dynamism of the exterior design. But people who knew the Indian market clearly preferred our product vision,” recalls Jean-Philippe Salar—a position that eventually prevailed. T is does not mean that the f nalization of the design was easy. “T ere were conf icts over complying with the economic constraints. For width, Design wanted 1,600 mm, while Project wanted 1,500 mm; for the size of the wheels, Design wanted 14 inches and Project wanted 13 inches,” said Laurens van den Aker. Ultimately, the project won: Gérard Detourbet, former program director of Entry, who worked single-mindedly on this project from July, 2011, but was involved in it right from the beginning, proposed 13-inch wheels, prompting Laurens van den Aker to note: “I have never been asked to use 13-inch wheels before . . .” T e agree- ment was as follows: the vehicle was to have 13-inch wheels, but the wheel arch would accommodate 14 inches for markets in which it was mandatory (namely, ). Moreover, Gérard Detourbet accepted that plastic rods for the wings would be provided, to increase the apparent visual size of the 13-inch wheels. Convergence in a strategic Alliance scenario

2 products Nissan I2 and Renault XBA sharing the same new platform (CMF-A) … an new engine (0.8l and 1 l) and 2 transmissions (1 manual gearbox and its robotized version ATM) The leading role of the Renault XBA project The Renault pre-contract signed in October 2012

Target markets: India first, others then Product strategy: 2 cars on the same platform 4 key selling points (USP) for the XBA Renault › USP1: "Breakthrough TCO (total cost of ownership, lead price, fuel consumption); › USP2 "Unique SUV Design”; › USP3 "My connection to Modernity"; › USP4 "superior roomness in a compact car"), Technical architecture Volume targets Engineering outlay Target Profitability But waiting for the Nissan Approval(1/2) 16 2. From the definition to the affirmation of an original autonomous approach (October 2011-July 2012)

2ASDU (Alliance A-Segment Development Unit) › Gérard Detourbet, Program Director (previous director of the Entry program) › Joint Renault Nissan team: Nobuyuki Kawai #2 › A war-room (plateau) in the RNTBCI buildings, suburbs of Chennai, Tamil Nadu, South-India (Renault Nissan Technical Business Center) › A direct governance by the Alliance (not Renault and Nissan) › An organization struggling to grow in power Figure 2.1 Target organization for the project as of November, 2011. Formation of the 2ASDU team

Renault expatriates, Defiance and RNTBCI engineers

Jean François Vial, 2ASDU chief vehicle engineer for the Kwid • “It’s not just about having engineers who can design the parts. It’s also important to understand why a certain part was designed in a particular manner, how it will be manufactured—and the experience of adapting models for the local market doesn’t prepare the engineers for this, Fortunately, the vehicle was so simple that the expats could be involved right up to the detailing of the parts, and we could progressively train the Indian engineers in parallel.” Confirming the “2ASDU Way”

The difficulties to coordinate Renault and Nissan teams (Spring 2012 crisis) Detourbet analysis › “Team is not yet operational (. . .) and does not share ‘one- way thinking.’ 2ASDU is not autonomous neither for management nor for methodologies” … I want "No more Renault or Nissan people but only 2ASDU people" A clarification › Parent companies determine volume objectives, product general definition, technical main characteristics, styling, mile- stones, etc. › 2ASDU provide answers to these objectives—for instance, “optimize with full and entire autonomy: technical specifications, product secondary characteristics, (and) manufacturing processes.” 3. Product-Process Development: Fractal Innovation and Intrusive Management (Spring 2012, Fall 2013)

A strong Target-Based Cost Control › Objective costs fixed "top down" to ensure the profitability of the project in the context of an aggressive selling price strategy on the markets; › A "design to cost" approach implemented with suppliers on all components, which can impact functional and technical specifications such as planning; › A reallocation of targets in the event of a major obstacle, and agreement of the program if these are major challenges; › The process does not end before the target is reached, unless the program management agrees; › Weekly reporting of the cost management within 2ASDU team (under the control of the Program Director), and periodic reporting to the Alliance Board. 28 Rethinking Innovation and Design for Emerging Markets

• Weekly reporting on cost management within the 2ASDU team, and of course regular reporting to the Alliance board

T e following sections elaborate further on these points and their impact on the project.

3.1 Target-Based Cost Control

T e foundation of the approach was to start with a prof table pricing strat- egy. Right from the initial studies, the pricing strategy was formulated as a highly aggressive move against the two dominant players in the sub-four-meter car market (which, as seen previously, is a limitation to avoid higher taxation that has an impact on the selling price). T ese were Maruti Suzuki’s Alto and Hyundai’s Eon (see Figure 3.1). Considering the target volumes and overall prof tability of the program, this price positioning imposed objectives for maximum unit cost and entry ticket (sum of development and industrial investments). To mobilize the project team around the principle of “design to cost,” a weekly meeting was set up to compare the cost statement based on the solutions

5000€

3500€

Figure 3.1 Pricing strategy of the 2XBA program (January, 2013). Managing costs by objective targets

30%

Bottom up XBA) RM1 XBA)Contrat Road)map TargetCible Précontrat 7/2013 7/2013 30 Rethinking Innovation and Design for Emerging Markets

Figure 3.2 Change in costs from pre-contract (January, 2012) to contract (July, 2013).

smallest vehicle in the Entry range and the cheapest vehicle in the Renault range at that time! (See Figure 3.3.) We saw huge gains for Purchasing as a result of these cost reductions. T is was logical, given that 85% of the vehicle’s value was purchased from external

120%

100%

80%

60%

40% Série2 Série1 20%

0% Product-Process Development 31

Figure 3.3 Breakdown of cost earnings for each technical area.

Figure 3.4 Breakdown of cost earnings in comparison to the reference vehicle. 24

suppliers (see Figure 3.4). By itemizing these purchasing costs for each technical area, we obtained this breakdown.

3.2 Adjusting Specifi cations According to the Local Market

Now let us see which action variables were mobilized to obtain these sav- ings.T e f rst key variable was the performance of the new product in rela- tion to the competitor for the target market. T e term localization generally refers to the installation of production plants; we forget that the other side of the coin is the ability to adapt the product to the conditions specif c to the local market. In this case, 2ASDU had to secure a viable competi- tive position against the two heavyweights of the sub-four-meter segment: Maruti and Hyundai. Once again, the project took advantage of the strategy that had proved so ef ective for the Entry program. We can summarize it in three principles: 1. Maintain the price (and hence the cost) as USP number one. Adjusting Specifications According to the Local Market

Focus on USP and be equivalent to the competitors for other characteristics (“bare minimum” principle)! benchmark, reverse engineering › “We sent an Alto to Corporate so it could test and benchmark comfort- handling- braking,” explains the customer requirements engineer, owner of the “voice of the customer” within 2ASDU. “The verdict was loud and clear: this vehicle was unsellable—despite the fact that it was the top-selling car in India!” The example of door mirrors To Save a Few Rupees More

No radical innovation, neither kaizen (continuous improvement): Challenging the usual way › "Many of the design rules are based on experience, For instance, the height of the seat track. Why do we use this standard? Can we change it to save costs? … the constraint of the specifications was that ‘it should not be possible to insert a Bic lighter inside the track’!” (Jean François Vial) Example: The design work for the electrical/electronic field of the vehicle › Reduction of the cost of cabling by half, from 6,000 to 3,000 rupees [€80 to €40], and of its weight. A lot of small changes introduced sometime difficult to manage with the Corporate management because they break the rules The organizational conditions for deploying fractal innovation

Mobilizing leading-edge skills

Systematic analysis of existing solutions throughout the automotive world

Ability to mobilize networks that could access skills not available inside the group

Justifying solutions when they infringed on established norms.

27 Other key factors

Hitting Deadlines Under “Design to Cost”: Concurrent Engineering and Heavyweight Project Manager,plus › Converging on a Style: An Early but Adjustable Freeze › Extended Supplier Relationships: Key Dates Driven by Achieving Targets The New Powertrain Plant: An Example of Frugal Industrial Investment / A case of “anti-transplant” The Assy Plant: A Difficult Coexistence with Nissan 52 Rethinking Innovation and Design for Emerging Markets

Indian manufacturers only do business with Indian customers, while other Indian f rms who specialize in doing business with Western companies out- source their work to the former. Obviously, with this switchover, cost perfor- mance is adversely af ected without the arrangement necessarily adding any value. I took the time to gain access to the ‘real Indians’ and capture their interest, because they are not too keen to conduct business with Westerners, let alone export. Another type of manufacturer is a subsidiary of an international group, who would of er rationales and solutions found in their home country. T ey can be interesting when it comes to highly technological spheres, such as we had on the project.” Large multinational component makers did feature among the Kwid sup pliers, but they manufactured only one or two highly targeted components. T ese included Saint-Gobain and Asahi for glazing; Valeo for the starter motor and 4. Supplying from IndiaEV purge valve; Bosch for the injection system and braking booster; Visteon for the air conditioning (HVAC) and radiator; Delphi for the fuel pump; etc. However, these suppliers were also subjected to the “2ASDU way” with tougher negotiation, and the success of the project lay in more than half the suppliers being “real Indians” (see Figure 4.1). Outsourcing : 85% of the manufacturing costs

Indianization → Local rate of integration ≈ 97% with « true » Indian suppliers (i.e. non-subsidies of global players) → Localization in the Chennai region (Tamil Nadu State) ≈ 60% of Figure 4.1 The origin of capital of the 70 main Kwid suppliers, which were all localized in India (Source: 2ASDU.) the sourcing A useful benchmark with local competitors › “We worked with the suppliers of the big Indian car manufacturers: Maruti, Suzuki, Tata,” explains Jean-François Vial. “As far as the fuel system is concerned, we did a carry- over of the fuel pump. The door locks were extrapolated from those of Alto, and so on. In this way, we could take advantage not only of the Indian suppliers’ frugal design skills, but also the benefits of mass production.”

L. Srinivas Reddy (vice-president of MATE, Motherson group) › “The collaboration with 2ASDU was a chance to take a new leap, including into the design stage, because of the close relationship established with Jean-François Vial through daily meetings. This attentiveness allowed us to develop in design,” 5. Investment Decisions at Industrial Start-Up and Ramp-Up (July 2013–June 2016)

Responding to Risks › Development of Crash Safety Performance • “What helped us was that this platform could be upgraded for other markets.” . › Acoustics • Ludovic Gouère, in charge of powertrain: “To move forward, we needed help from the experts at Corporate, Acoustics is a very difficult domain. Even when noise and vibration can be reproduced during simulations, it’s far from straightforward to understand what exactly caused them, in order to eliminate them. It took a year between detecting problems and implementing solutions.”. Project Commando Meets Plant Bureaucracy Leveling the Competitiveness of the Plant 6. The Commercial Launch of Kwid in India (March 2015 – June 2016)

Lessons learned from Entry › Duster, Lodgy › Expanding the network - Renault sales outlets: 14 in 2012, 200 by 2015, 270 in 2017 › Sumit Sawhney (Renault India Chairman) / Raphaël Treguer (Sales and Marketing Director) Indianizing the Business / Animate the Range Renault and its network challenging the two leaders of segment A: Maruti and Hyundai

Among the Indian buyers Among Indian dealers

A rapid commercial success June%2016*% Last 12-months sales on Indian May%2017% market – Segment A Maru0%Alto% 251,075% Hyundai%Eon% 61,147% Renault(Kwid( 108,892( Datsun(Redi(Go( 30,437( Market share: 1/3 Tata%Nano% 6,340% Total% 457,891%

Success Comes at a Price (165,000 orders for the first 11 months) Monthly car sales on Indian market – Segment A

30 000 Maruti Alto 25 000

20 000

15 000 Targets Renault Kwid 10 000

Huyndai Eon 5 000 Tata Nano Datsun Redi-GO

0

Maruti Alto Renault Kwid Datsun Redi Go Tata Nano

Source: http://www.team-bhp.com/

34 7. Prospects for International Deployment of a New Lineage (2016 !)

The objective for the CMF-A platform volume: 800,000 - 1 million vehicles/year (India : 200,000) The car is or will be exported from India to neighbour countries (Bhutan, Sri Lanka, Bangladesh, Pakistan), but also until South Africa (where Kwid is #6 in May 2016 car sales) Presented at the International Auto Show of Buenos Aires in June 2017 (initially planned for Fall 2016, ie 8 months later), it is produced and will be sold in Brazil since 15 June 2017 at a price of R$ 29.900-39.990 (8.100-10.800 € at the nominal exchange rate). Kwid will challenge directly (« popular car » segment): Chery QQ (Smile) R$ 25.990 / VW up!: from R$ 31.990 / : from R$ 33.700 XBB: The South American Kwid A different car developed by a 2ASDU Brazilian team: › ABS, ESP, 4 airbags, new engine (flexfuel 1l), reinforced chassis, 14’’ wheels (instead of 13’’), … 130 kg added compared with the India Kwid. › Plus: electric outside mirrors, rear-view camera, etc. in the Intense version Upgrading rather than decontenting An expensive engineering outlay (“ticket d’entrée”) due to important investments in Brazil (and Argentina) A limited local content: 45% ! 60% (import from India) Re-internalization for some parts: seat assembly Difficulties to reach the targets (one year of delay) An unfavourable macroeconomic context

37 But also to be produced in …

Iran (negotiation) Russia in 2018 Tangier (Morocco) for European market: not now, but in the future? EV version in China? II. What to learn from this story?

Les analyses • Fractal innovation and creative design • ‘Trickle-up’ approach within Renault • Start-up or not start-ups? 1. Fractal Innovation and Creative Product Development

Fractal Innovation: an invisible breakthrough? › 2015 : -50% costs vs Logan (-50% reference cost Sandero 2004) › A conventional product › ≠ radical change, incremental, disruptive or architectural innovation, (Clark, …) › A system challenging the design rules to fit with the context and program’s priorities • On the whole perimeter and variables of the program (product specifications, technical choices, sourcing, network) • At all scales (from the choice of installation to the screwdriver or the wires diameter) Organizational Conditions for Creative Product Development

Concurrent engineering Heavyweight Project Management › Leadership and legitimacy of the Program director › Direct reporting to Carlos Ghosn (CEO) › 2ASDU autonomy (localization) Intrusive Management › Systematic questioning of standards and business rules › Priority to adaptation to the program context on standards › Ability to derogate by assessing and controlling risks

A concentration of profound and varied automotive skills › Knowing and understanding standards to know and be able to transgress them › Capacity for in-house conviction and external negotiation 2. The Maturation of a “Trickle-Up” Approach of the Automobile at Renault

Between Logan (Entry range) and Kwid Kwid in Renault industrial model trajectory Which articulation with the classic Renault range? What conflicts? › Persistence? › Pacification? What about Kwid in the Alliance? Renault ambivalence

The 60s and 70s: the difficulty of embracing a Sloanian model Lowering of the neutral point in the middle of the 80s The apparent outcome at the beginning of the 90s: R19 (1988), Clio 1 (1990), Safrane (1992), Laguna 1 (1993) Schweitzer ambivalence (from 1992) › Twingo, Space then Scenic 1 (1996) and then Avantime / Vel Satis (2001, 2002) and then Modus (2004) and Logan (2004) › But the goals that remain Sloanian and the pride of having put the Renault and VW brands at MS parity before leaving "Renault, an innovation strategy and flexibility to be confirmed” (M. Freyssenet, 2000) : › Innovations that "emerge" from a system that is not designed to carry them but makes them possible › => Ambidexterity not explicitly sought after but sustained From Logan to the Kwid: From Marginality to Centrality?

Logan: › A project organized on the margins of the organization › Supported by the DG › Backed by "Renault core competencies" › Able to rally many young talents from all departments › Who becomes a "program" (2005) when the lineage and deployment spaces extend › And obtains that all the rules do not apply systematically to all programs: institutionalization of a "double standards” (« deux poids, deux mesures ») Kwid

› Strong bases in 2011 • Starts after 7 years of success of the Entry • 'Empowerment' by Gérard Detourbet patent • Numerous rallies • Multiple managers round trips between Entry and Mainstream • Learning and methods stabilized – Ex: Earlier freezing to have time to deploy design to cost › And yet • Attempts to avoid having to develop both a new platform and new engines and new transmissions • Difficulties – Completing the organizational chart – To obtain the cooperation of central office experts • Solved little by little – By the intervention of the CEO – Through the mobilization by the business experts from their networks

47 Kwid: A Renault Project

Interpretation 1 › "Used to work solo, the man is his team: 350 people, including Dacia manager and many young people. For emulation. Objective, to work like a start-up, thousands of kilometers from the centers of decision, and above all outside the company's standards." (Julie de la Brosse, L’Express / L’Expansion, 17/08/2015) Interpretation 2 › The fighter plane is organically linked to the liner › Resources are Renault ones • Expats very experienced, • Expats capabilities to mobilize the central, • Questioning of the business rules backed by very fine knowledge of the rules and their foundations (and limits): "contextual ambidextry"

48 › The ability to actually make 2ASDU an Alliance structure is uncertain • Low involvement of Nissan in the design of platform, engine and transmissions (a Renault powertrain) • Product / process and cost control vs. rules enforcement as a guarantee of efficiency • Difficulties with the assembly plant (Nissan management) • Incomplete integration of doctrine by Datsun teams

49 Towards a Peaceful Coexistence?

About Renault › "Program management": a single framework with variable content › Applied for Kwid or for EV while the Entry seems to be back to mainstream › The specificities of sub-Entry and emerging markets to legitimate the exceptions to the business rules › The renaissance of the classic range to calm the fearing the "low-cost" About Alliance › The search for convergence in engineering methods is rather towards Nissan methods (?) › Fears of weakening Renault's engineering skills to stay able to innovate › Recognition of the legitimacy of development engineering is unlikely Reversed Innovation: Innovative Global Fims rather than Start-ups

Two interesting oppositions in the literature on reverse innovation: › Weak vs. Strong reverse innovation (von Zedtwitz et al, 2015) • Depending on the phases of innovation involved: generation of ideas, product development and products diffusion › Single vs. Double • According to whether only the place or the place and source of value are moved Our "results" › From Logan to the Kwid, there is clearly enough a trajectory going from a "weak" inversion to a "strong" inversion › Transition from a simple logic to a double logic is less obvious

51 Simple vs Double Reverse

Geographical&logic&reversed Yes&&&&!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! No&!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Project!developed!in! Project!developed!at!the! emerging!countries headquarter Yes&&&&&! (Value! improved!;! uses! widened!;! Double&reversed& cost! innovation reduced)!!!!!!!!!!!!!!! Value! Traditional&model& determining! Value& costs for&international& source& diffusion&of& reversed No&&&&&&! innovations& (Cost! (Vernon,&1966) reduced,! historical! Geographically& uses! reversed&innovation unchanged)!!!!!!!!!!!!!!!!!!!!! Costs! determining! value!

52 The "subsidiaries" located in emerging countries

"Assume a determining role in the generation of new products of the multinational as a whole" "Become 'global innovators': they are the ones who inundate the other subsidiaries with new products, whereas the subsidiaries of the developed countries only assume an implementation role" Can be changed from single to double by combining: › Capacity to absorb local knowledge in order to design products and services adapted to local needs (=> reduced control and monitoring by headquarters). › The capacity of self-determination and autonomy of the subsidiaries of the emerging countries in the construction and management of the group's product portfolio. › The physical, organizational and "cultural" remoteness emerges as a kind of ‘Necessary but Not Sufficient Condition’ to access to the merits of reverse innovation 53 Logan - Kwid cases prompt de-simplification of this view

The source of the value was reversed at the headquarters for Logan and implemented locally; The process has changed little for Kwid The ability to absorb central knowledge by the local country has counted as much as the capacity to absorb local knowledge The quality and permanence of the link between the Indian autonomous entity and the central office was decisive => The ability to activate the central resources appears as a ‘Necessary but Not Sufficient Condition’ in the success of reverse innovation.

54 Global firms can manage the reverse innovation by maintaining a close relationship between the innovative entity located in emerging countries In so doing, it prepares the globalization (glocalisation) of the product It limits the risk that disruption involves by making the accumulated skills mobilizable

55 Because this is the case, we can defend › That assimilation between disruption and new entry by Christensen is problematic › That virginity can be a serious handicap in terms of radical innovation › That the focus on "start-ups" has something very naive and that it is necessary to restore a "Chandlerian" perspective › That there are some reasons to promote the figure of the innovator wage-earner versus that of the entrepreneur.

56