3 lessons for innovators from a tiny car’s colossal failure


Nov 19, 2020

Upon its release in 2008, the Nano—a simple, innovative car made by India’s Tata Motors—seemed destined for greatness. Tata rolled out their tiny vehicle to much fanfare and a host of international awards. At a price point of just $2,000, it aimed to be a simple yet effective vehicle that an average Indian family could afford. 

Tata felt sure they were onto something big. In a country with more than 1.2 billion people, there were only 105 million cars on the road, and Tata hoped the Nano could help fill the enormous gap. But by 2015, the automaker had sold just 250,000 vehicles. In December 2018, Tata Motors manufactured its last batch of 82 Nanos at its Sanand plant before halting production altogether.

Tata Motors had followed many best practices for innovating in an emerging market. It had wisely focused its efforts on serving nonconsumers—people who can’t access beneficial products or services because they are too expensive, complicated, or otherwise inaccessible. After all the innovative thinking that went into the Nano’s design and launch, why did the new market Tata attempted to create fail to materialize?

Tiny car, big problems

Jobs Theory sheds light on the Nano’s flop. The framework helps clarify why customers make the decisions they do. People don’t just buy a product because of its unique characteristics; they pull it into their lives to make progress in specific ways. The progress a customer is trying to make can be thought of as the “job” she or he is trying to get done. In this sense, when people buy or use a product, they are essentially “hiring” it to accomplish a job that’s arisen in their lives.  

The jobs people hire a product to do are almost never one-dimensional. For example, a car might be a functional way to get from point A to point B, but it’s also much more; anyone who has purchased a car knows that social and emotional considerations play an important role in the decision.

In the case of the Nano, Tata had employed conventional marketing techniques, thinking in terms of a product category (cars) and a market demographic (people living on low incomes). This led Tata to focus on cutting costs, but also caused it to overlook many other functional, social, and emotional components of the jobs its would-be customers were likely trying to get done.

Consider three lessons the Nano teaches when viewed from the lens of Jobs Theory.

  • First, Tata overlooked important functional aspects of the progress customers were trying to make. Jobs Theory can help companies identify their true competition. From a functional standpoint, one job that people in India likely needed to accomplish could be described as, “get from point A to point B quickly and affordably.” Tata Motors was a car company that was used to competing with other car companies, but when it came to trying to help average Indians accomplish mobility-based jobs similar to the one above, the real competition wasn’t just other, more expensive cars, but things like bicycles, carts, or motorbikes. These solutions were more affordable, easier to maintain, and could weave through dense traffic more quickly than the Nano. People likely stuck with bicycles and motorbikes because they accomplished their job better than the Nano could. Had Tata examined the problem it was trying to solve from the functional perspective of Jobs Theory, it could have understood the Nano’s true competition and designed accordingly. 
  • Second, Tata failed to recognize the social dimensions of its customers’ purchasing experience. Much of the marketing and press surrounding the Nano focused on a single attribute: its low cost. Affordability is important when designing a car for people who haven’t traditionally been able to afford them, but from a social perspective, the Nano needed to offer more. People are status-conscious creatures. From newly-licensed teenage drivers to senior business executives, anyone can tell you that cars are about more than functionality—they are status symbols too. Tata’s marketing of the Nano effectively branded it a product for people living in poverty. For first-time Indian car owners making an aspirational purchase that would signal their upward mobility and societal progress, this provided a powerful incentive not to drive it.
  • Finally, Tata ignored key emotional elements of its customers’ experience. The automaker’s endeavors to brand the Nano as a low-cost product had a second unfortunate outcome: in the experience of many Indian consumers, low cost often signifies poor quality. When Tata touted the Nano’s low cost, it thought it was making a compelling pitch, but what many Indians heard was simply that the car was cheaply built. The thought of owning a machine that might break down and require frequent, sometimes expensive repairs prompted frustration, stress, and anxiety, and Tata unwittingly tapped into those emotions when it branded the Nano as inexpensive. Risk-averse consumers chose to stick to their reliable motorcycles and bicycles instead.

The Nano’s unfortunate journey from international acclaim to market flop teaches a valuable lesson for emerging market entrepreneurs: when targeting the needs of nonconsumers, it’s usually not enough to create a cheaper version of a conventional product. Instead, innovators need to consider the functional, social, and emotional progress people are trying to make and then build a solution to the specific struggles they face.

For more, see:

How an “umbrella with 4 wheels” got France rolling again after WWII

Lincoln Wilcox is a research associate at the Christensen Institute, where he researches ways in which individuals, businesses, governments, and nonprofits can leverage innovation to create prosperity in low-income countries and communities.