Synopsis

Session 1: Innovation in ActionPresented by

Main Speaker – Mr. Rohan PallewattaPanelist – Mr. B R L Fernando

Panelist – Professor Ajith De Alwis

Session (Number)The manufacturing sector has undergone a tumultuous decade: developing economies leaped intothe first tier of manufacturing nations, a severe recession choked off demand, and manufacturingemployment fell at an accelerated rate in advanced economies. Yet, manufacturing remainscritically important to both the developing and the advanced world. In the developing world, itcontinues to provide a pathway from agriculture to increased income levels and improved livingstandards. In the advanced world, it remains a vital source for innovation and competitiveness,contributing to research & development, exports, and productivity growth. Innovation involvesconstant rejuvenation and effective market creation. This session focuses on the evolution of themanufacturing sector, stemming from innovation, and how innovation could help Sri Lanka takeitself to the next level in terms of manufacturing.

TITLE

Synopsis – Session 1: Innovation in Action

Session (Number)

SESSION TITLE

INNOVATION IN ACTION

Presented by

ROHAN PALLEWATTA

Executive Chairman

Lanka Harness Co., (Pvt) Ltd

Session (Number)

SESSION TITLE

INNOVATION IN ACTION

A) INTRODUCTION

The presenter presently is the Executive Chairman of Lanka Harness Co., (Pvt) Ltd., situated at Block‘B’, Export Processing Zone, Biyagama, Sri Lanka. The core business of the company is themanufacturing of impact sensors for automobile air bags and seat belts. End users include Toyota,Nissan, Honda, Mitsubishi and Mazda of Japan, Ford, General Motors and Chrysler of USA and Volvo,BMW, Aston Martin, Opel, Renault and Volkswagen of Europe. During the last financial year thecompany recorded a turnover of US $ 38 Million. The presenter pioneered the formation of thepresent organization which was founded in the year 2002. The presenter will focus mainly on thebackground story of the organization and how he managed to race from zero to be amongst the topten companies of Sri Lanka.

The quality requirement of the product that Lanka Harness manufacture is 1PPM which means onlya single defect would be tolerated for a million produced. In theory six sigma equals zero defects butinfact it would tolerated six defects for a million produced. Hence the quality required of LankaHarness is that even zero defectsis not tolerated. The uniqueness of this product is that this is thefirst time that Sri Lanka has entered the international market with a 1PPM quality product

Session (Number)

SESSION TITLE

INNOVATION IN ACTION

Present markets include Japan, Germany, Romania, Poland, Thailand, India and Indonesia. How didall this begin? What were the drivers behind this business innovation? Any theory has no value perse. It is only action that would add value to any theory. The story of Lanka Harness the presentertrusts to be one of the finest ones in its class to highlight the importance of innovation in action andnot merely innovation in theory.

B). THE BACKGROUND STORYThe presenter believes that a story is better told than written .Hence the presenter will unfold the comprehensive background story at the live presentation.

Session (Number)

SESSION TITLE

INNOVATION IN ACTIONC).LEARNING OUTCOMES1).Throughout the story it was evident that the presenter did not race towards success on onestraight line. There were highs and lows .ups and downs. There was failure after failure .But asRattan Tata puts it “ups and downs in life are very important to keep us going because a straight lineeven in an E.C.G means you are dead”. Failure therefore should always be considered a symptom ofan innovative opportunity.ACTION POINT: Keep a careful record of innovation in your organization and periodically passessyour organizations innovative performance.

2).The presenter has created extraordinary value through his business innovation .The test ofinnovation is whether it creates value. Innovation means creation of new value and a new level ofsatisfaction for the customer. Organizations measure innovation not by their scientific ortechnological importance but by what they contribute to the market and customer. Social innovationfor example is as important as technological innovation. Installment selling may have had a greaterimpact on economics and markets than most of the great scientific advances in the past century.ACTION POINT: Identify innovations in your organization that are novelties versus those that createvalue. Did you launch the novelties because you were bored with doing the same thing? If so makesure that the next innovation is integrated to the product or service and that it meets customerneeds at a higher level.

Session (Number)

SESSION TITLE

INNOVATION IN ACTION

3). The presenter started his career as an Attorney at Law. He had no background in electronics.Don’t be a slave to the academic or professional qualifications that you have acquired. You mightgrasp the world changing innovative idea outside your area of specialization. Innovation thereforehas no boundaries. Many changes that have transformed enterprises have originated outside thespecific industry of that enterprise. For example

i). Zipper was originally invented to close bales of goods such as grain, Nobody thought ofusing it for clothing. The clothing industry did not think it could replace buttons. And the inventor ofzipper never dreamed that it would be used and be successful in the clothing industry.

ii). Fibreoptic cable, the invention that revolutionized the telephone industry did notcome out of the great telephone research labs in the US, JAPAN or Germany. It came rather from aglass company named CORNING.ACTION POINT: Identify at least one change that has originated outside your industry that either hastransformed or has the potential to transform your enterprise. Look for ideas in other industries thatcan be used profitably in your industry.

Session (Number)

SESSION TITLE

INNOVATION IN ACTION

4). The presenter has created an environment that is conducive to the generation of innovative ideasby accommodating even the most mediocre of ideas. Innovative ideas are like frogs eggs out ofmillions hatched only one or two would reach its maturity.ACTION POINT: Make a list of your three best ideas. Then make a list of the key pieces of informationyou need to know and the major work that needs to be done before these ideas can blossom into anew business. Now pursue that idea or if none is practical start again.

5). Quite contrary to the popular belief that entrepreneurs are risk takers the presenter establishedthat he is a risk averse person. Successful innovators are therefore conservative. They are not risktakers. Who said that entrepreneurs are risk takers?ACTION POINT: Determine which of your ideas presents the least risk and the most opportunity andfocus on them.

6). What is relevant today may become obsolete tomorrow. Most successful products of today maywalk towards exit tomorrow.ACTION POINT: Abandon what is about to be obsolete. Develop a system to exploit your success anddevelop a systematic approach to innovation

Session (Number)

SESSION TITLE

INNOVATION IN ACTION7). Every organization needs one core competence: innovation. Core competencies are different forevery organization, they are so to speak are part of an organizations personality. But everyorganization needs one core competence: innovation. And every organization needs a way to recordand appraise its innovative performance.ACTION POINT: The starting point is not the company’s own performance. It is a careful record of theinnovations in the entire field during a given period..Which of them were truly successful?ii).How many of them honestly belonged to the organization?ii).Is the innovative performance commensurate with?

a). organizational objectives? b). with the direction of the market?c). with the market standing of the organization?d). with the research spending of the organization?

iv).Are the successful innovations in the areas of greatest growth and opportunity for theorganization?v). How many of the truly important innovation opportunities did the organization miss?

a). why? b). is it because the organization did not see them orc). is it because the organization saw them but dismissed them

vi).How well does the organization do in converting an innovation into a commercial product?

Session (Number)

SESSION TITLE

INNOVATION IN ACTION8). The characteristic of an entrepreneurial innovator is the ability to envisage as a system what toothers are unrelated, separate elements. History it has been observed moves in a spiral path andreturns to the preceding position or to the preceding problem but on a higher level and by acorkscrew-like path. In this way organizations will return to innovative entrepreneurship on a paththat led out from a lower level, that of the single entrepreneur to the manager and now basicthough upward to innovative entrepreneurship again.ACTION POINT: Establish an entrepreneurial culture in your organization.

9). Whatever an enterprise does internally or externally it needs to be improved systematically andcontinuously. Production process, marketing, service, technology, training and development ofpeople, using information, all these areas need to be improved continuously. Continuousimprovement in any area eventually transform the operation. However continuous improvementrequires a major decision. What constitutes “performance” in a given organization? If performanceis to be improved we need to define clearly what “performance” means.ACTION POINT: Make systematic improvement a priority.

10). if general perception changes from seeing the glass as “half full’ to seeing the glass as “halfempty”, there are major innovative opportunities.ACTION POINT: Define a major change in perception influencing your industry. Exploit this change.

Session (Number)

SESSION TITLE

INNOVATION IN ACTIOND). CONCLUSION

Finding and realizing the potential of a business is psychologically difficult. It will alwaysbe opposed from within because it means breaking away with the old, established habits. It oftenmeans giving up what senior most people of an organization are proudest of. This will be resented byits most accomplished people as a direct attack on their position, pride and power.

Only the fairy story ends “they lived happily ever after.” You cannot innovate and relaxthinking that your innovation will pay you dividends eternally. New knowledge, technology, newperceptions might make it obsolete. Hence the individual has to awaken the innovative sprit withinand have a strong resolve to implement it. When an egg is pressurized from the outside and itbreaks life ends. But when an egg is pressurized from the inside and it breaks life begins. Hence allgreat things happen from within the individual.

As Mahathma Gandhi said when you try to do something different people will disagreewith you, they will laugh at you, they will ridicule you, then if possible they will try to fight with you,and then YOU WIN. THAT IS THE PATH.

Books referred to: MANAGEMENT: Tasks, Responsibilities, Practice Innovation andEntrepreneurship, Concept of the Corporation by PETER DRUCKER.

Session (Number)

SESSION TITLE

Synopsis – Session 1: Innovation in Action

Main Speaker

Mr. Rohan Pallewatta initiated his speech by performing ‘Ma Sanasa’ to underscore the theme ofInnovation in Action by highlighting the feelings of performing this piece of music is the same feelingas one would come across when trying to implement an innovative idea.

Mr. Rohan Pallewatta iterated on the speech he made last year during the conference and explainedthat for his business he manufacturers crash impact sensors signal the deployment of airbags formajor car manufactures globally, and mentioned the requirement of his business is one 1 PPM (onlya single defect is tolerated in one million opportunities). When Mr. Rohan Pallewatta embarked onthis business he was questioned on whether Sri Lankans would be able to manufacture a productwith such a low defect count, but when looking at all the great work made by his ancestors hethought with the correct leadership this was indeed possible. Most of the barriers that we face inembarking on new ventures are psychological, there are people that defy convention and throughthat can become pioneers in their field.

Session (Number)

SESSION TITLE

Synopsis – Session 1: Innovation in Action

(Contd.)He discussed the story of his company and how it became such a leader in this field. Soon after hisO-Level exams he was given a choice to study USA, New Zealand, England, Australia and Japan – hechose Japan because at the time he was fond of martial arts and wanted to learn another language.Part of this scholarship was the ability to meet with all the big conglomerates in Japan. The presentbusiness idea was generated from his visit to Toyota, during his visit to the factory he noticed thatthe majority of the processes are automated. When discovering the process relating to the impactsensor for the airbag he viewed that this particular process was highly labor intensive as it could notbe automated, when questioning the person guiding him on the tour of the factory on the salarycost of this process he found that, in comparison to Sri Lanka, this process could be viewed asexpensive on a labor cost factor alone. When asking whether this process could be outsourced theToyota representative said that as this process is critical this process could not be outsourced, at theend of tour he requested for a sample of the impact sensor and was provided these samples.

After finishing his A’Levels he was selected to join the University of Kelaniya, however as it wasclosed at the time he joined the Sri Lanka Law College. The samples he brought back from Japanwere dismantled by him to ascertain what the device consisted of, he procured some material fromSingapore and visually matched the samples to the material provided and dispatched the newlyassembled impact sensors to the person that gave him a tour of the Toyota factory.

Session (Number)

SESSION TITLE He never heard back from this gentleman at Toyota, however, he never lost his persistent and keptsamples. Finally, he contacted the gentlemen at Toyota and found that the samples were not evenbeing reviewed and the Mr. Rohan Pallewatta didn’t understand the business processes of Toyota –this particular factory is not geared towards manufacturing it was geared towards assembly and thecomponents are provided to this assembly plant from licensed manufacturers and therefore Mr.Rohan Pallewatta was advised to speak with those suppliers.

He immediately manufactured ten samples each for the ten identified suppliers and sent thosesamples across; as there was no immediate response from any supplier he continued this process foranother year. Finally he received a fax message from a supplier and it stated that the company hadreceived the 10 samples sent and out of the ten samples two were acceptable and provided himwith a defect report. He immediately rectified this mistake and sent across ten more samples; out ofthe ten samples he provided eight were acceptable. Once correcting these mistakes he sent anotherbatch of ten samples and was contacted by the company to manufacture 100 samples with theprovided material sent from Japan, he was later contacted to provide 1,000 samples and then10,000 samples. During the period of time when he was requested to provide 1,000 samples he wasable to meet that requirement by himself, however, when the requirement came for 10,000 sampleshe required outside assistance to meet this demand and therefore he contacted local companies tosee if they could manufacture this product.

Synopsis – Session 1: Innovation in Action

(Contd.)

Session (Number)

SESSION TITLE The response provided to him by each manufacturer was how much could he pay to them tomanufacture this product. Finally he was able to get in touch with one company willing to assist himfor this on a profit sharing basis if the provided samples resulted in an order, and was able to provide10,000 sensors. This 10,000 sensors within three years went up to 300,000 sensors for a month andthis was providing him a huge revenue stream.

There was a danger in this business model, the Japanese company were sending him material inorder to manufacture these devices, so therefore they could just stop sending him sensors. In orderto minimize this risk he identified that the Japanese company could locate its inspection facilities(the impact sensors provided by Mr. Rohan Pallewatta’s company were inspected in Japan afterunloading) to Sri Lanka – he was not able to initially get this commitment, however he persevered.During one of the visits of the senior management of this Japanese company the airport wasattacked, Mr. Rohan Pallewatta ensured that this was not known to the gentleman as knowledge ofthis attack would potentially ruin his business as his customer would view the risk of investing in SriLanka as unacceptable – this gentleman was informed of this attack when he reached Japan.

Synopsis – Session 1: Innovation in Action

(Contd.)

Session (Number)

SESSION TITLE After the attack on the airport in Sri Lanka, insurance companies imposed a huge levy on productsgoing through Sri Lanka’s ports and airports (after paying this levy an international business couldnot be profitable) and Mr. Rohan Pallewatta was requested to come to Japan for a meeting. On theday before the proposed meeting the Twin Towers in New York City were attacked by terrorists anddue to this terrorist attack the planned agenda regarding the security of Sri Lanka was a null point.The Japanese company shortly decided after that meeting to invest in Sri Lanka.

The key learning points from Mr. Rohan Pallewatta’s story are: 1) Throughout his story there wasfailure after failure, this is just part of life; 2) Remember that organizations measure innovation notby their scientific importance but by their value to society; 3) Don’t be a slave to the academic or theprofessional qualification you have acquired.

Synopsis – Session 1: Innovation in Action

(Contd.)

Session (Number)

SESSION TITLE

Synopsis – Session 1: Innovation in Action

(Contd.)Panelist – Mr. B R L Fernando

Scarcity can bring out new innovation and usher in greater ingenuity towards the industry was theunderlying message of Mr. B R L Fernando’s speech (cultivation of pineapples in the dry area,decrease of fertilizer consumption in order to reduce ground water contamination, the reduction ofpesticides and improving the efficiency of cultivation are examples highlighted by Mr. B R L Fernandoin his speech).

In the agricultural sector the challenges are different, we are living in a world where 1 billion peopleare undernourished and in the next 30 years the world will have to produce 70% more food toaccommodate the rising population. Food creation has to go up while the land size is decreasing,while people’s demands are leaning towards higher quality in what they eat. Mr. B R L Fernandoiterated on the green revolution and the changes it brought about to the utilization of water, land,pesticides and urea.

Session (Number)

SESSION TITLE Session (01)

Innovation in ActionPresented by

Ajith de AlwisProject Director, Coordinating Secretariat for Science technology and

Innovation (COSTI)

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Trade marking nature !

Session (Number)

SESSION TITLE

Session (Number)

SESSION TITLE

Synopsis – Session 1: Innovation in Action

(Contd.)Panelist – Professor Ajith De Alwis

Why do we need innovation in action? We see are exports are going down and imports are goingdown – Sri Lanka’s organization needs to allow for creativity to try reversing this deficit.We as a country need to allow for individual ideas to grow, we need to allow some risk taking tooccur and bring this into the corporate environment. The corporate worldProfessor Ajith De Alwis discussed that we have 21 million people in Sri Lanka and we as Sri Lankansfeel we don’t have a market here; however, why can’t we treat local people as our market. Weshould not further ignore the local market but really look at innovation to reach out to the market interms of price and product on offer.