How Harman International's tech centre became subject of Harvard case study

BENGALURU: Many global companies with R&D centres in India have stories to tell about fascinating products built by their India teams. But here's a story about how an entire company has literally been transformed by the work done by its Bengaluru technology centre, one that has even become the subject of a study by the Harvard Business School.
The company's Harman International.Not a household name in India, but many here will be familiar with one of its brands-JBL, the audio systems line. It also owns high-end audio equipment brands like Harman Kardon and Mark Levinson. Every single Disney theme park uses Harman audio systems, as do some of the world's best performing arts venues like the Lincoln Centre and the John F Kennedy Centre, and massive indoor arenas like the Madison Square Garden. The world's biggest broadcasting units use it.The Grammys is done end-to-end with Harman.

And it's the infotainment system for 80% of t h e world's luxury cars ¬ Lexus, BMW, Audi, Daimler, Mercedes, Bentley, Aston Martin, Ferrari, Porsche. This last space of cars is the US company's biggest business, accounting for almost half of the approximately $6.7 billion revenue it will have in the year ending June this year. And it is in this space that the India centre, started soon after Dinesh Paliwal took over as Harman CEO in 2008, has made a dramatic difference.
Crazy cost structure
Paliwal had seen India closely. He had grown up here, had done a Master's in chemical engineering from IIT Roorkee between 1976 and 1979, and then moved to the US, where he did a Master's in engineering and MBA from Miami University .He joined power and automation technologies major ABB soon after, and remained there for 22 years, rising to be the global president and board member. As president, he established ABB's largest R&D centre ¬ in Bengaluru, with some 1,200 people then. “It was one of the best things I did in ABB,” Paliwal said.
So when he moved to Harman and found that 90% of the world's cars could not afford a Harman system, he saw an opportunity to try and change the “crazy cost structure” using India's software expertise.
“If you challenge Indians and say, here's the product, take this, reverse engineer it, bring down the cost to a third of what it is, give me the same features but you can take out one or two useless features that cost too much, but give me five extra features that people would like, they will do it,” Paliwal said in an hourlong conversation with TOI on a recent visit to Bengaluru. But he said the teams needed to be given full responsibility. “Don't control them (the teams in India) because they're creative geniuses. Empowerment is my key word. And that's the difference between Harman and other MNCs in India. And it happened because I have been a part of the DNA of this country and I can see how Indians work,” he said.
The strategy worked like a charm. The first platform that came out was aimed at B and C segment cars and was called Saras, the Sanskrit word that means passionate or elegant. When launched in 2009, the first customer was Toyota, the first time that Toyota had awarded its infotainment system to a non-Japanese tier-I supplier. Today, the platform is on numerous brands globally, including Fiat Chrysler, General Motors, Volkswagen, Hyundai, Subaru, Kia, Tata Motors and even Harley Davidson.
In an article titled ‘A reverse innovation playbook' published in the Harvard Business Review in 2012, Harvard professor Vijay Govindarajan noted: “As of late spring 2011, 18 months after launch, Saras had generated more than $3 billion in new business ¬ a good chunk of its five-year target of $5 billion --during one of history's most hellacious economic periods. Harman's share price rose nearly fourfold from 2009 to 2011.”
In 2010, Harman's India team started development on another platform aimed at A-segment cars and they called it Nalanda, after the ancient Indian university. That platform's customers include Tata Motors and Fiat in India, and Volkswagen globally.

Tata Motors uses Harman in its entire line of products, including in its subsidiary Jaguar Land Rover. Girish Wagh, head of project planning and program management at Tata Motors, said Harman understood the requirements of Indian consumers and brought global technology with the most relevant local customization.
Indian Architecture
Arvin Baalu, vice president of Harman's centre of competency in platform software, said nearly half of all infotainment systems shipped by the company to all global original equipment manufacturers (OEMs) have some flavour of Saras or Nalanda in them. “Some of the work we have done, in areas like smartphone integration, is even finding its way into our top end platform,” he said.
Baalu said the ideation, the architecture, the systems engineering were all done in India. The team here designed a more cost-effective hardware by consolidating features on a higher powered microprocessor. This allowed Harman to reduce the size cost and weight of the hardware while increasing the processing power. They designed a simpler software architecture that embraced more open source technology. The approach allowed Harman to fit more features into a reduced memory footprint and consume less CPU. And they focused on leveraging the smartphone capabilities and application environment.
The resulting solution is what Harman today calls the next-generation scalable infotainment platform. Paliwal calls it the brains of the car. It's the central computer that interfaces with other sub-systems in the vehicle. “It does your navigation, voice control, it does your audio management, it does your tuner technology (there are 20-30,000 audio and television station stunners that all need to be integrated into the car). It manages all the apps, the networks, the safety elements, be it camera-based or laser-based, collision warning, lane departure warning, night vision, and what is becoming mission critical now cyber security,” he says.
Govindarajan, one of the top management gurus in the world, noted in his article that when a multinational corporation learns to generate successful innovations in emerging markets and then exports that knowledge and those innovations to the developed world, new business possibilities suddenly burst forth. But few companies, he says, experience this kind of renaissance, because reverse innovation poses immense challenges. “It requires a company to overcome its dominant logic, the institutionalized thinking that guides its actions. Typically that involves major changes: throwing out old organizational structures to create new ones from scratch, revamping product-development and manufacturing methods, reorienting the sales force,” he said, and added, “That is why the reverse innovation in the automobile-infotainment division of Harman International is so impressive.”
Harman's sales growth in the past few years suggests that the strategy is continuing to pay off. In 2014, year ended June, it grew 24%, in 2015 it grew 15% and this year in the first three quarters it has done 12% (18% excluding currency changes).
Extending to new areas
Paliwal now wants the India centre to do in the professional audio business what it has done in the car infotainment business. “We have people here who have taken up work on massive sound mixing controllers, massive audio-video broadcasting consoles. That development will take 30-40% cost out,” he said.

And last year, Harman acquired Symphony Teleca, an IT services company helping clients manage the global convergence of software, cloud and mobility, and which has 6,500 of its 9,000 employees in India. “It's a transformational acquisition, because everything today is based on data management and analytics over the cloud,” Paliwal said. He plans to use the connected services provided by Symphony Teleca in Harman's existing divisions, but he sees opportunities to expand into a host of new areas.“They are already doing a lot of services for fraud detection systems for retail chains like Target,” he said.
India looks to be becoming, literally, the centre of Harman's growing ambitions.