Management of Multi Alliances For Innovation Sona Koyo Steering

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Asian Journal of Management Cases
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DOI: 10.1177/097282010900600205
2009 6: 135 Asian Journal of Management Cases
Shilpi Jain and Pallavi Srivastava
Initiatives
Management of Multi Alliances for Innovation: Sona Koyo Steering Systems Limited
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MANAGEMENT OF MULTI ALLIANCES FOR INNOVATION:
SONA KOYO STEERING SYSTEMS LIMITED INITIATIVES
Shilpi Jain
Pallavi Srivastava
Sona Koyo Steering Systems Limited (SKSSL) is one of the major automobile component
manufacturing organizations in India. A decade ago, SKSSL realized that they could
not totally depend upon their technology partners for orders but needed to expand
independently within the global market. The company had to become a partner of
choice for its technical partners as well as for its global corporate customers. It was
facing constraints because of contractual obligations under which the organization
could not supply auto components to its partners customers. Further constraints were
imposed by the Research and Development (R&D) investments and establishments.
This case is about how Dr Surinder Kapur, founder chairman of SKSSL, was able to
strategically increase the companys global customer base and take the organization
on the path of innovation.
Keywords: Innovation, alliances, academia, strategy, automobile, technology,
partnerships, India.
On a chilly morning of January 2007, Dr Surinder Kapur left his Delhi home to visit Sona
Koyo Steering Systems Limited (SKSSL), his auto component manufacturing plant situated
at National Highway 8 (NH-8), Gurgaon.
1
Dr Kapur, founder and CEO of Indias largest
steering manufacturing group was contemplating, how his company could increase export
sales from the current 2 per cent to 45 per cent by the year 2010? What strategic changes
ASIAN JOURNAL OF MANAGEMENT CASES, 6(2), 2009: 135156
SAGE PUBLICATIONS LOS ANGELES/LONDON/NEW DELHI/SINGAPORE/WASHINGTON DC
DOI: 10.1177/097282010900600205
This case study was written by Shilpi Jain and Pallavi Srivastava, Doctoral candidates, Management
Development Institute, Gurgaon, India. The authors are grateful to Dr Ajay Kumar Jain, Associate
Professor, Management Development Institute, Gurgaon, India for his valuable inputs in writing
this case.
1
Gurgaon, situated in the state of Haryana (India), has emerged tremendously as an IT outsourcing and
development destination and also as a real estate market.
at INDIAN INSTITUTE OF MGMT on July 28, 2014 ajc.sagepub.com Downloaded from
136 SHILPI JAIN AND PALLAVI SRIVASTAVA
and efforts towards innovation could establish his group as a partner of choice to its
global customers? While sitting in the rear seat of his chauffer-driven car, his thoughts
took him twenty years back. Gurgaon then had been barren and deserted with only a
small number of industries. Today, he was driving through the same route but on an eight
lane expressway, newly constructed between Gurgaon and New Delhi. Glancing at world-
class buildings on both sides of the road, he wondered how his organization could grow
and achieve high protability through technology innovations. Should they invest heavily
in research and development for new products? How can they build an organization of
engaged employees and what policies do they need to build in order to serve their global
Original Equipment Manufacturers (OEMs)?
He began reecting on his groups achievements so far. The thirteenth day of November
2003 was a special day for his company. It was awarded the 2003 Deming Prize by the
Chairman of Toyota Corporation for excellence in Manufacturing and Quality Systems,
making it the rst recipient of this award among the steering system manufacturers in
northern India. This accomplishment was followed by a remarkable increase in customer
base. They even bagged an international order from General Motors (GM) supplying them
with 20,000 steering units per month. The dream that he had conceived twenty ve years
ago had turned into a reality. He had come a long way and still had many more milestones
to reach. As the driver entered the porch of the company premises, he broke from his
reverie to the present and called a meeting with his department heads.
COMPANY BACKGROUND
Sona Koyo Steering Systems Ltd (SKSSL), the agship company of the Sona Group, was
formed in technical and nancial collaboration with JTEKI Corporation, Japan under the
entrepreneurship of Dr Surinder Kapur. Established in 1985, it was the largest manufacturer
of steering systems for the passenger car and utility vehicle market in India. The company
was involved in the manufacture and supply of steering systems and driveline products.
Sona Koyo steering systems product portfolio included manual steering, hydraulic
power-steering, steering column and column-type electronic power steering systems.
Their products were supplied to passenger car and UV manufacturers. The company had
three plants, one in Haryana and one each in New Delhi and Tamil Nadu.
2
In 2007, the
company added the manufacturing capacity of 300,000 units of electronic power-steering
systems at its Gurgaon plant in Haryana.
2
All three are states in India.
MANAGEMENT OF MULTI ALLIANCES FOR INNOVATION 137
In 2007, the company set up an associate company, Sona Autocomp Europe, to provide
logistics management services for auto components sourced from India. During the same
period, the Sono Koyo entered into a majority owned joint venture with Arjan Auto Private
Ltd to manufacture stamped parts for steering columns and seat recliners for the European
market. They also acquired technology from JTEKI Corporation and Fuji Autotech AB,
Sweden for electronic power-steering systems and steering columns, respectively. Sona
Koyos customers included major vehicle manufactures in India such as Maruti Suzuki,
Toyota, Hyundai, Tata Motors, Mahindra and Mahindra, General Motors and Mahindra-
Renault. The company was exporting high quality precision products to USA, Europe and
Japan (see Exhibit 1 for Sono Koyos achievements).
SETTING AN AGENDA FOR FUTURE GROWTH
As a result of heated discussions and analysis, major plans of expansion were laid out
in the meeting called by Dr Kapur. These included incorporation of 3 million pieces of
manual steering gears, 250,000 units of hydraulic power-steering and increasing the
capacity of steering columns from one million to two million parts. It was decided that
the organization would invest US$
3
108 million to achieve a turnover of US$ 270 million
by 2010. It was expected that by 2010, the company would earn 45 per cent of its revenue
from exports.
The foremost aim of the organization was to become a partner of choice to global auto
manufacturers, which would be possible only when SKSSL could deliver new technology
to its customers at a reasonable cost. For this, the company needed to innovate and have
their own registered patents and Intellectual Property Rights (IPRs).
During the meeting, Mr Kiran Deshmukh, the Chief Operating Ofcer of SKSSL acknow-
ledged that:
If Indian companies want to build their outsourcing business, it is imperative for them
to build on their technological strength. It is not just about using low-cost labour; it is
about using technological strength. Therefore, they need to develop innovative manu-
facturing technologies and processes suited for India.
3
US$ 1 = Indian Rs 39.12 as on 1 February 2008. The market rate exchange to the US dollar uctuates
marginally.
The second challenge was to increase revenue through exports. The company had
contractual obligations and tie-ups with their technology partners. Thus, they could not
serve customers who were also their partners clients in the same product segment.
The third challenge was to develop a culture of innovation among their employees.
This could be achieved by grooming managers as leaders, transforming leaders into icons
so that they could create an empowered organization, by allowing employees to think
and innovate and by positioning the management in line with future organizational goals
and risks.
The journey was denitely not so easy, as huge amounts of cost and time were involved
to set up an in-house Research and Development (R&D) centre. One brainstorming ses-
sion among employees resulted in the identication of leading technology institutes
with which strategic alliances could be formed for exponential expansion. The selection
of these institutes was based on three important factors, namely research initiatives by
the institutes (publications, aids, industry interaction, patents, etc.), infrastructure and
its intellectual capital.
Scenario in the Indian Automobile Sector
In 200304, at the same time when SKSSL management was planning its strategic goals,
the Indian government liberalized the norms for foreign investment and import of
technology. This appeared to have immense benets for the automobile sector in India
and resulted in an increase in the production of total vehicles from 4.2 million in 199899
to 7.3 million in 200304 (see Exhibits 2 and 3). It was perceived that the production of
such vehicles would exceed 10 million in the next few years. Global leaders in the industry
were keenly looking towards India as a potential market for their vehicles and also as a
manufacturing destination. The auto component sector posted a signicant growth of
20 per cent in 200304 to achieve a sales turnover of US$ 6.7 billion. The manufacturers
also realized the potential for higher growth as a result of outsourcing activities by global
automobile giants.
The global manufacturing trend had spread to developing countries with large popula-
tions because of lower cost of skilled manpower and design capabilities. It was expected
that the automotive sector would contribute to 10 per cent of the countrys GDP and ap-
proximately 30 per cent of the industry. About 3.1 billion dollars were invested in the
auto component industry for manufacturing world-class auto components.
RESEARCH AND DEVELOPMENT INITIATIVES AND ALLIANCES
Certain immediate actions were taken by SKSSL to not only move up on the value chain
but also broaden its customer base. The organization decided to adopt a multi-pronged
approach. With a long product development cycle, SKSSL felt the need to upgrade its
engineering side as well. They automated their engineering functions after a thorough
evaluation by the R&D team. As a result, many auto majors such as Maruti Udyog Limited
(MUL: renamed Maruti Suzuki India Limited on 17 September 2007), Hyundai Motors,
Tata Motors, Toyota Motors, General Motors and Mahindra and Mahindra were added to
the companys client list. MUL continued to be the single largest customer accounting
for 45 per cent of SKSSLs revenues. The company supplied Electronic Power Steering
(EPS) systems to MUL and Hyundai. For the rst time in India, a fully functional EPS
was assembled on Indian production lines. They also became the sole supplier of manual
steering wheel for Toyota Motors.
SKSSLs Initiatives Towards Innovation
Under the umbrella of strategic decisions, the organization rst focused on its research
and quality systems because the requirements of the customers (vehicle manufacturers)
were becoming more complex and demanding. For example, the earlier demand for a
40,000 km warranty was now increased to 100,000 km to provide vehicle owners with a
hassle-free driving experience. Such warranty liabilities needed commitment from manu-
facturers and could only be achieved if the organization trusted its research abilities,
production processes and quality systems from conception to implementation. This was
true with SKSSL. It also had the advantage of being competitive in its prices, because of
lower production costs in India.
The second step was to have an efcient production system. They implemented
Toyota Production System (TPS) across the board. TPS laid stress on kaizen teams,
kanban and jidoka (see Exhibit 8 for background note on kaizen, kanban, and jidoka). Self-
study groups and visits from experts were integrated into the work ethos at SKSSL. TPS
streamlined operations at the manufacturing end, reduced costs, eliminated waste and
improved quality. The company also expanded its capacity at its Chennai plant, which
placed it in a better position to serve car makers such as Hyundai and others based in
south India.
Lastly, SKSSL understood its limitations in investment in indigenous technologies. It
was realized that in order to expand exponentially, the organization needed to identify
and form strategic alliances with technology leaders.
PARTNERSHIP WITH ACADEMIA
Under the visionary leadership of Dr Kapur, the team expanded its research capabilities
to attain excellence and meet customer expectations at a lower price. A consensus was
achieved to emphasize industryinstitute interactions for enhanced technological innov-
ations and developments to provide India an edge over other countries.
4
As a result, the
company entered into many parallel partnerships with technology institutes such as:
Indian Institute of Technology (IIT), DelhiTo build advanced steering column
applications.
Indian Institute of Technology (IIT), MumbaiTo build a prototype for steer by
wire steering, a futuristic project.
InnosightA project on the development of the new ideas conceived by SKSSL
employees.
University of San DiegoWorking on Driverless Driving project with US scientists
and manufacturers.
Indian Alliances
IIT Delhi
Instead of underestimating their capabilities, the management decided to exploit avail-
able resources. SKSSL engaged in strategic alliances with Indian research institutes to
strengthen its research capabilities. At rst it partnered with Indian Institute of Technology
(IIT),
5
Delhi for new steering column applications. There were plenty of supporting fac-
tors for choosing IIT Delhi. The prominent ones were: (a) availability of expertise within
the institute and (b) absence of immediate competitive threat identied with academic
alliances.
4
In his lecture at 11th National Conference on Machines and Mechanisms (NaCoMM-2003)
5
IIT Delhi is one of the Indias best technical engineering institutes.
Mr Ashish Singh, Manager Design & Development (D&D) at SKSSL mentioned:
We do not have these specialized skills. Those skills cannot be attained in a small fraction
of time; it is also difcult to acquire them since such information is not available within
the industry. We are working in collaboration on a futuristic project. The idea is to have
that know-how and then our internal R&D can help to employ some of that learning in
our existing products. We dont work with the aim of immediate commercialization. We
are working together to develop a concept. Once the concept is proven, then internal
R&D can go a step further and develop products to get commercial benets.
Such an alliance was a sure shot practical example of application engineering and
systems engineering. The project was funded by SKSSL and the technical expertise was
provided by IIT Delhi. The review committees met periodically to monitor the progress
of the project.
IIT Mumbai
SKSSL and Indian Institute of Technology, Mumbai agreed to work jointly for two years, the
period could be extended, on the development of steer-by-wire prototype. The futuristic
technology steer-by-wire already existed in military jets and the latest civilian airplanes
but it was hard to implement it in cars because of costs, reliability without maintenance
and the required steering precision of less than one centimeter. Once successful, it was
considered to be a major breakthrough in the passenger cars segment. In alliance with
IIT Mumbai, SKSSL closely monitored the growth of this project.
Jobs and roles were well dened in the alliance. SKSSL was responsible for providing
funds for the project. In different phases, it paid approximately US$ 68,000 to the insti-
tution. It also agreed to pay the institution US$ 80,000 towards transfer of technology
on completion. Besides this, all of the electronic Research and Development work and
simulations were the responsibility of IIT Mumbai to whom SKSSL was supposed to
provide mechanical and integration support. A full-time electronic engineer was also
deputed by SKSSL to provide support and necessary assistance to both the parties. Funds
towards expenses were provided by the organization. However, intellectual assistance and
experimentations were the institutes responsibility. Any title to inventions, copyrights,
patents as an outcome of the project was to be in the joint name of SKSSL and IIT Mumbai.
Moreover, SKSSL could have exclusive rights to commercially exploit any development
resulting out of the research. It had to pay a royalty of 10 per cent of the net sales value of
the product(s) for a period of six years, from the date of the rst unit sold, to the leading
academician of the institution once the patent was granted. People at SKSSL were very
excited about this partnership. Dr Ravindra Sharma, Director Research & Development
at SKSSL was optimistic in his statement as follows:
We will be able to exploit and explore new resources through the esteemed faculty of
the institution. IIT professors are world renowned for their excellence in knowledge
and access to theory and information. If we work in close association with these insti-
tutions, we are more close to innovations.
International Alliances
A tie-up with JTEKT Corporation (erstwhile Koyo Seiko) of Japan worth US$3 billion
helped SKSSL to have access to the strong Research and Development base of its parent
organization that owned a 20 per cent stake in the Indian company. They enabled SKSSL
to work in close association with the Japan Institute for Plant Maintenance, Tokyo to im-
plement Total Quality Maintenance (TQM) and Breakthrough Management.
To have global competence and excellence in the development of new products, SKSSL
signed a technical collaboration agreement with two Russian institutions namely, Institute
of Power Electronics at Siberia and Sibtehnomash to conduct joint research on steering
applications and electronics with a focus on control systems.
To develop a new concept, they also tied-up with a US-based rm Innosight. This entity
was conceived by Prof. C. M. Christensen.
6
They provided concepts and mechanisms
to evaluate innovative ideas. Based on their rating, the ideas were selected for further
development. The management at SKSSL showed interest in these ideas and agreed to
provide funding for the development of these ideas.
Innosight
Innosight was using Professor Christensens research as a foundation. The organization
had customers as varied as multinationals like Procter & Gamble (P&G), start-up rms
like Vanu Inc. of India and even governments of different nations. They determined the
causal factors behind successful and failed innovations for their clients. Innosight helped
them apply critical thinking to real practice, thereby nding new growth.
6
Professor Clayton. M. Christensen is the founder CEO of Innosight and also an author of the famous book
Innovators Dilemma. The author introduces theories on disruptive innovation. Innosight was founded in
January 2000 to help companies understand and overcome the challenges of disruptive innovation.
SKSSL approached Innosight to understand the process of how to evaluate new ideas?
The Research & Development and D&D departments of SKSSL had a system in place where
a register was maintained and employees were invited to write their ideas, irrespective of
their designations. All those ideas were discussed in formal meetings and some potential
ones were selected for further discussion. SKSSL approached Innosight with the list of
such selected ideas for evaluation. After the evaluation, ten ideas were chosen by the
team members of both the organizations for further development. Since this was just a
beginning, SKSSL management initiated the process to develop one idea from the top ten
by providing resources in terms of money and manpower.
The partnership between SKSSL and Innosight was crystallized in March 2007. A separate
company in Singapore was set up with each party having a stake of 40/60. The entire
development was to be monitored and reviewed in three phases. SKSSL had an option
to be released from the agreement after any phase, in case they were unsatised by the
outcome of the project. In fact, SKSSL could even take control of the entire project.
Jobs and roles were well dened for both the parties. SKSSL was to provide project
funding close to US$ 100,000 in phase one and then US$ 200,000 to 400,000 depending
upon the progress of the business. Sona Koyo also agreed to provide relevant technical
and engineering skills. On the other side, Innosight was responsible for judgments re-
garding the design and set-up, the vendor management system, vendor negotiation,
programme management skills and capacity, commercial development in terms of
customers, advertising, promotions, sales, gap-lling technical skills, and management
recruitment skills.
In-house Initiatives
In the annual meeting of SKSSL, Dr Surinder Kapur addressed his team:
I have been stressing on the imperative need of building in-house technological and
R&D capabilities to transform from being a manufacturer of components to a full ser-
vice provider and becoming a critical partner for OEMs in the product development
process.
While encouraging partnerships for outsourcing R&D, Dr Kapur also felt the need for an
in-house R&D team for the long-term sustainability of the organization. Thus, the founda-
tion for SKSSLs rst fully-equipped research centre for technological innovations and
development was laid in Gurgaon in 2004 under the supervision of Dr Ravindra Sharma
and four new employees. According to Dr Sharma, Some employees had apprehensions
and doubts on its success, but ultimately everyone was proven wrong.
MILESTONES ACHIEVED
In 2006, believing in continuous research and innovation, the team of scientists and
engineers at SKSSL made the rst electronic power steering prototype, indigenously
developed in their laboratories (rst time ever in India). The company led a patent for
it in India and in the US and registered it as EPAM (Electric Power Assist Module).
SKSSL continued to harness its in-house design capabilities in concurrence with insti-
tutional alliances. In 200506, it invested Rs 15.7 million in R&D that had a positive
outcome. In the same year they led six patents compared to the cumulative four pa-
tents in the previous years. Besides this, other incremental innovations were coming up
simultaneously in the Department of Design and Development (D&D) under the super-
vision of Ashish Singh (Manager D&D). All of the new design and development processes
were contributed by the international partners. The department attained skills to re-
engineer existing products to save costs. For example, it redesigned the steering system
for a small car produced by Suzukis Indian venture, the Maruti Alto (an economy car
for Indian households available in the market for only US$ 6,000). The rework combined
three components into one and reduced the weight of the system by 15 per cent.
The list of innovation initiatives did not end here. The company further entered into a
partnership with US based manufacturers on a project called Driverless Driving with the
University of San Diego. They teamed with international manufacturers and US scientists.
With these two core coordinators, the role of SKSSL was to provide a 500 metre platform
for testing in India, besides the steering testing tools.
Achievement from Multi-Alliances
The result of having in-house R&D centres and alliances helped SKSSL to achieve many
business goals. It successfully rolled out Total Quality Management (TQM) and Total Pro-
ductive Maintenance (TPM) practices throughout the organization, including the shop oor
under the supervision of Dinesh Sharma, General Manager, Quality Assurance at SKSSL.
He believed that after getting the production process right in India, gaining acceptability
in other parts of the globe would not be an issue.
In 200203, sales had increased by only 6.4 per cent whereas in the next calendar year,
they showed a signicant growth of 23.74 per cent [see Exhibit 4] which was close to four
times than that of previous years. Since then there was no looking back.
The proposed expansion plans were aligned with their vision To become a world class
quality supplier of auto components as well as abide by contracts with technology partners.
SKSSL identied a need to create a niche to introduce and promote steering innovations
in the global market. In order to achieve this second goal they planned to diversify signi-
cantly. Dr Ravindra Sharma was clear about his strategic intent:
We are not willing to poach in our partners market segments; also we have clear
agreements and their consent on our diversication.
7
..The aim is to provide hassle
free steering systems to consumers in their lawn mowers, golf carts, garden tractors
etc., so that they can have leisure time on weekends working in their gardens, playing
golf..A conventional global auto component manufacturer might not be interested
in supporting these niche market segments. However, SKSSL foresees huge opportuni-
ties in such markets. We are ready to undertake the entire design work as well as the
development.
They also bagged a contract with Case New Holland (CNH), US in the off-highway
segment. As a small vendor, SKSSL started with a portfolio of three products in 1988. By
mid-2007, they had developed a portfolio of fty-seven products, as well as the skills to
re-engineer existing products. With an Indian market share of 50 per cent, the company
became the largest manufacturer of steering gears in 2007 and became the leading supplier
of Electric Power Steering Systems, Hydraulic Power Steering Systems, Manual Rack and
Pinion Steering Systems, Collapsible, Tilt and Rigid Steering Columns for passenger vans
and multi-utility vehicles.
The strategy of having their own innovations (initially incremental and then radical)
helped to reduce the risk of SKSSLs domestic business with an increased focus on exports
as well. It demonstrated a 100 per cent growth in export revenues from US$ 5.5 million
to US$ 12 million. This contributed signicantly in registering a revenue growth of
14 per cent while the domestic passenger car industry registered a growth of 7.5 per
cent. Customer rejection came down from 90 pieces per million (ppm) to 57 ppm as shown
in Exhibit 5. It was proposed that customer rejection would continue to be maintained
below 50 ppm. Supplier rejection from last years 1,368 ppm was reduced to 537 ppm.
It was in the process of being reduced even further. The World Economic Forum named
7
SKSSLs outsourcing biz is built on technical prowess article downloaded from Auto Monitor in July
2007.
SKSSL as a Global Growth Company in 1997. In 2007, SKSSL was upgraded by ICRA
(Investment Information and Credit Rating Agency of India Limited) and was given the
rating of A1+, indicating the highest investor safety level awarded by the agency.
SKSSLs partners were interested in multi-faceted relationships, though the expected
outcome was yet to come, because the technologies they were working on, were all
futuristic and could not be immediately commercialized. However, there were some
intangible benets which both the partners were already aware of and many that were
yet to come. Institutions needed funds to continue with their research initiatives while
organizations engaged with universities to make greater use of exploratory university-based
research alliances. Such alliances emphasized exploration, tapping external knowledge
to aid in investigating trajectories that were new to the rm. These alliances would help
SKSSL in enhancing competitiveness compared to their competitors. They could present
themselves as a full solution provider to their clients, from proposing newly designed
technical solutions to actually developing a product.
According to Dr Surinder:
The emerging scenario in Indias small car industry holds promise and excitement
for all involved. The growing liberalized economy, favourable demographics, healthy
environment for investment, will help propel the growth of the automotive industry
in India.
The company had a planned capital expenditure of US$ 22 million. It also planned an
investment of US$ 4.5 million to set up manufacturing facilities for electronic steering
systems and another US$ 9 million to increase the capacity of its existing facilities.
Dr Surinder continued:
The automotive industry (OEM and auto components) is poised to become the third
largest market by 2050..We are at a historic juncture, where the exports revenue
of some Indian suppliers will exceed their domestic revenues and their outlook will
transform to be a global supplier of the automotive industry.. SKSSL employees be-
lieve that we are well on our way to achieving our vision of being a Supplier of choice
to global customers.
Strategic issues such as enhancing competitiveness and the value of the rm motivated
this growth in alliances, rather than focusing on only short-term cost efciencies. SKSSL
was helping Management Development Institute (MDI),
8
Gurgaon to develop a centre for
innovation excellence and promotion of entrepreneurship. It also sponsored an Incubation
Centre for Innovation and Entrepreneurship which was inaugurated in February 2008.
The group allocated funds of worth US$ 400,000 to develop a support structure for entre-
preneurs and research and development. According to Dinesh, the whole idea was to
encourage young minds to innovate because innovations could transform a nation and
give it better global positioning.
THE ROAD AHEAD
In 200708, the Indian auto components industry witnessed a turnover of US$ 18 billion.
Between 200207 it grew at a compound annual growth rate (CAGR) of 27.2 per cent and
according to the Auto Components Manufacturers Association of India (ACMA), it was
likely to grow at a CAGR of 10.5 per cent between 200715 to touch US$ 40 billion by
201516. Investments in the Indian automobile components industry were witnessing
continuous growth. Investments grew at a CAGR of 21.7 per cent during 200207 and
were worth US$ 7.2 billion in 200708. ACMA expected investments to grow at a CAGR
of 14.2 per cent during 20072015 and reach US$ 20.9 billion by 2015 (Refer to Exhibits 6
and 7 for the growth in the automobile sector).
With the burgeoning potential in the Indian auto component sector, industry leaders saw
a huge latent opportunity. Dr Surinder Kapur had some pertinent issues hammering in his
mind. Should his organization expand its research initiatives and diversify from auto parts
manufacturing to other elds? What should be the level of indigenous R&D infrastructure
at SKSSL? Should it be 100 per cent R&D, indigenous R&D with technical collaborations
or non-indigenous R&D with total dependency on technical collaborations? Dr Kapur
knew that heavy investments in R&D were not feasible. Hence, should his organization
go for collaboration with technical academic institutions with no equity, collaboration
with international auto-component companies with equity stake or purchase technology
from international auto-component companies with no equity stake? However, such tie-
ups with academic institutes may complicate things further. Would a collaboration with
an academic institution lead to impractical innovations that could not be applied?
Dr Kapur was also concerned about the balance between new product development
and improvements or improvisation of existing products so that the focus on new product
8
MDI is one of the premiere management institutes situated in the state of Haryana in India.
development may not lead to neglect of existing products. How could he ensure this? Did
he make sound investments in improving the production processes and quality systems, in
R&D for existing product improvisations, and in alliances with institutes for new product
or process development?
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watch.com/business-and-economy/automobile-industry.html on 9 July 2007.
Outlook from Directors report 200506. 2006. Retrieved from Baljeet Securities Web site: www.baljeet
securities.com on 15 June 2007.
Sona Koyo bags Order from GM India. 2005, 29 November. Retrieved from The Financial Express
Web site: http://www.nancialexpress.com/old/fe_full_story.php?content_id=109997 on
23 October 2007.
Sona Koyo eyes at Rs 1,000-crore turnover. 2006, 4 April. Retrieved from Jim Trade Web site: http://
news.jimtrade.com/200604/1266.htm on 17 June 2007.
Sona Koyos outsourcing biz is built on technical prowess. 2006, September 25. Retrieved from India
Car Web site: http://www.indiacar.net/news/n40744.htm on 10 July 2007.
Sona steeringAbout Us. 2007. Retrieved from Sona Group Web site: http://www.sonagroup.com/
steer.htm on 10 May 2007.
The Deming Journey. 2004, 27, 29 November. Retrieved from Domain-b Web site: http://www.
domain-b.com/management/quality/20041127_journey.html on 12 November 2007.
Exhibit 1
Sono Koyos Achievements
Month Year Description
Jan 1985 Technical Collaboration Agreement with Koyo Seiko Co. Ltd., Japan, for
Manufacturing
Oct 1987 Commencement of ProductionManual Steering GearManual Steering
Column
Sep 1994 ISO-9002 Certicate by TUV-CERT, GERMANY
]ul 1996 Production of Hydraulic Power Steering Gear
Dec 1998 Established Plant in Chennai
Oct 2003 Established Export Oriented Unit (EOU) in Chennai
Nov 2003 Deming Award by JUSE, Japan
Oct 2004 Acquired 21% stake in Fuji Autotech France
Mar 2006 Started Production of Column-type Electric Power Steering
Feb 2007 Established Plant at Dharuhera, Haryana
Source: Company prole.
Exhibit 2
Industry AnalysisAuto Components Sector
Auto Component IndustryStatistics
200304 200405 200506 200607 200708
(Value in US$ million) Estimated
Turnover 6,730 8,700 12,000 15,000 18,000
Exports 1,274 1,692 2,469 2,873 3,615
Imports 1,428 1,902 2,482 3,328 4,938
Investment 3,100 3,750 4,400 5,400 7,200
Export as % of Turnover 18.9% 19.5% 20.5% 19.2% 20.1%
Source: http://www.acmainfo.com
The Hindu Business Line: Sona Koyo Steering:Buy. 2004, 10 October. Retrieved from Blon Net Web site:
http://www.blonnet.com/iw/2004/10/10/stories/2004101000960800.htm on 7 July 2007.
Vision & Philosophy: Toyota Production System. (n.d.). Retrieved from Toyota Web site: http://www.
toyota.co.jp/en/vision/production_system/jidoka.html on 23 August 2007.
Exhibit 3
Passenger Vehicles Production Growth Trend (Qty in 000 Nos)
Source: http://www.acmainfo.com
Exhibit 4
SKSSL Annual Sales Report
Source: www.sonagroup.com
Exhibit 5
Quality Improvement
Source: www.sonagroup.com
Exhibit 6
Automobile Industry-Past Ten Years
Source: www.acmainfo.com
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EXHIBIT 8 BACKGROUND NOTE
Company ProfileSona Koyo Steering Systems Limited (SKSSL)
(Source: www.sonagroup.com)
Sona Koyo Steering Systems Limited (SKSSL) is a technical and nancial joint venture
company of JTEKT Corporation, Japan and the global technology leader in steering sys-
tems. With a market share of 50 per cent, the company is the largest manufacturer of
steering gears in India and is the leading supplier of Hydraulic Power Steering Systems,
Manual Rack and Pinion Steering Systems and Collapsible, Tilt and Rigid Steering Columns
for passenger vans and MUVs. The companys product range also extends to Rear Axle
Assemblies and Propeller Shafts. Named as a Global Growth Company in 1997 by the World
Economic Forum, the company is now well positioned to lead the Indian Automotive
Component Industry to global standards in the coming millennium.
It is surging ahead in the journey of Total Quality Management (TQM). It is also develop-
ing its core competence and aligning objectives at all levels so as to realize synergy in
operations. An initiative of improving the most important resources, the Human Resource,
as well as the plant equipment has been initiated. This technique, Total Productive Main-
tenance (TPM), has been adopted to improve performance through the philosophy of
prevention. SKSSL aims to achieve:
Zero accidents.
Zero defects.
Zero breakdowns by using the Koyo Production System as the foundation of all
change programmes.
Customer satisfaction continues to be of utmost importance to SKSSL as do consist-
ent quality, constant innovation, value engineering, process improvement and customer
orientation.
Company ProfileInnosight
(Source: www.innosight.com)
To help companies understand and overcome the challenges of disruptive innovation,
Christensen and Mark Johnson formed Innosight in January 2000. Professor Clayton
Christensen of the Harvard Business School shook the business world with his 1997
best-selling book, The Innovators Dilemma, which introduced the theories of disruptive
innovation. Christensens follow-up book, The Innovators Solution, shed more light on
what companies could do to overcome the challenges of disruptive innovation and pro-
vided managers with key insight into the business conditions that could be shaped to
enable great growth. His most recent release, Seeing Whats Next, coauthored by Innosight
Managing Director, Scott D. Anthony, uses the theories of innovation to predict business
growth and industry change.
Using Christensens research as a foundation to explain the causal factors behind
successful and failed innovations, Innosight was created to apply that thinking to real
practice, helping companies nd new growth. Over the last six years, Innosight has worked
with numerous companies in a wide range of industries, from leading corporations like
P&G to start-ups like Vanu, Inc. and even national governments. Through eld work,
Innosight has uncovered key principles to recognize patterns of success that lead to better
connection with consumers and reduced competitive threats. Its pattern recognition tools
build internal processes and identify the right opportunities to reduce project time and
minimize required investment while increasing revenue potential.
Concepts
(Source: www.wikipedia.com)
Kaizen: Kaizen was created in Japan following World War II. The word Kaizen means
continuous improvement. It comes from the Japanese words Kai meaning school and
Zen meaning wisdom.
Kaizen is a system that involves every employeefrom upper management to the clean-
ing crew. Everyone is encouraged to come up with small improvement suggestions on a
regular basis. This is not a once a year or monthly activity. It is continuous. At Japanese
companies, such as Toyota and Canon, 60 to 70 suggestions per employee, per year are
written down, shared and implemented. In most cases these are not ideas for major
changes. Kaizen is based on making little changes on a regular basisalways improving
productivity, safety and effectiveness and reducing waste. Suggestions are not limited to
a specic area such as production or marketing. Kaizen is based on making changes any-
where that improvements can be made. The Kaizen philosophy is to do it better, make
it better, and improve it even if it aint broke, because if we dont, we cant compete with
those who do.
Kanban: Kan means visual and ban means card or board, is a concept related to Lean or
Just In Time (JIT) production, but these two concepts are not the same thing. (The Japanese
word kanban is a common everyday term meaning signboard or billboard). According
to Taiichi Ohno, the man credited with developing JIT, kanban is a means through which
JIT is achieved. Kanban is a signaling system. As its name suggests, Kanban historically
uses cards to signal the need for an item. It was out of a need to maintain the level of
improvements that the kanban system was devised by Toyota. Kanban became an effective
tool to support the running of the production system as a whole. In addition, it proved
to be an excellent way for promoting improvements because restricting the number of
kanban in circulation highlighted problem areas.
Jidoka: The term jidoka used in the TPS can be dened as automation with a human
touch. The word jidoka traces its roots to the automatic loom invented by Sakichi Toyoda,
Founder of the Toyota Group. The automatic loom is a machine that spins thread for cloth
and weaves textiles automatically.
Historically, back-strap looms, ground looms and high-warp looms were used to
manually weave cloth. In 1896, Sakichi Toyoda invented Japans rst self-powered loom
called the Toyoda Power Loom. Subsequently, he incorporated numerous revolutionary
inventions into his looms, including the weft-breakage automatic stopping device, which
automatically stopped the loom when a thread breakage was detected, the warp supply
device and the automatic shuttle changer. Then, in 1924, Sakichi invented the worlds
rst automatic loom, called the Type-G Toyoda Automatic Loom (with non-stop shuttle-
change motion) which could change shuttles without stopping operation. The Toyota
term jido is applied to a machine with a built-in device for making judgments, whereas
the regular Japanese term jido (automation) is simply applied to a machine that moves
on its own. Jidoka refers to automation with a human touch, as opposed to a machine
that simply moves under the monitoring and supervision of an operator.
Since the loom stopped when a problem arose, no defective products were produced.
This meant that a single operator could be put in charge of numerous looms, resulting
in a tremendous improvement in productivity.
Sources of Information
Information has been collected from various interviews conducted at the organizations
site in Gurgaon, India.
The principal members who participated in the interview sessions were:
1. Mr. Dinesh Sharma, General Manager (Quality Systems), SKSSL Gurgaon, Haryana,
India.
2. Dr. R.N. Sharma, Assistant General Manager (R&D) SKSSL, Gurgaon, Haryana,
India.
3. Mr. Ashish Singh Manager D&D, SKSSL Gurgaon, Haryana, India.

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