Our Community Mission - Helping the Automotive Industry

DOING IT RIGHT! This blog is a community work focused on improving the automotive industry, specifically, but it is a "melting pot" of ideas that will help ANY enterprise. The "founding" authors have a combined total of 152 years of experience in improving quality, productivity, costs, and the Quality of Work Life on the plant floor for General Motors, Ford Motor Company, DaimlerChrysler, Honda, Toyota, and many others. Collectively, we have seen "Best Practices" at individual plants and headquarters around the world. And it amazes us how little these Best Practices have been taken up by other plants and other companies. The very things that would have averted the current crisis in the American automotive companies are already in their possession; in one form or another and in one plant or another, they have what it takes to win. Dysfunction in their cultures appear to prevent the deployment of the best. There are still "chimneys" in these companies that have endured all the "chimney breaking" programs of the last two decades. There are still "buzzword societies" flourishing within the companies. And we still see punishment meted out for unpopular successes and failure rewarded. This blog is NOT an indictment of the industry. This IS a collecting place for the Best Ideas for fixing what ails these companies! It is our hope that the best thinkers in industry will contribute their Best Ideas in one or more of our categories here and that the whole will be much greater than the sum of the parts. ......................................................................................................................................... This blog is copyrighted. All rights reserved. Small segments may be copied for either news articles or scholarly papers.

Tuesday, April 22, 2008

Earning Back Marketshare Using Variety as a Competitive Weapon

Variety Based Competition

Another area which would help win back some of the market share lost by our automakers is the use of variety as a competitive tool. Car buyers, today, differ by locale and even by individual in what they want in a vehicle. They may even be willing to pay a premium for a vehicle customized to their individual tastes.

It has been a trend among American automobile manufacturers to SIMPLIFY their product offerings in order to reduce the costs of complexity.

However, their are two elements of complexity and it's like cholesterol: there is GOOD complexity and it is called "Customer / Market Driven Variety" and then there is BAD complexity. If your simplification efforts cut both Good and Bad comlexity, alike, then you are probably cutting revenue and earnings opportunity and yielding marketshare to your competitors.

A Delloitte study has shown that companies which MASTER COMPLEXITY are 73% more profitable than their peers whereas "simplifiers" are only 19% more profitable than their peers.

Why is this? Because those whom Master complexity can hold the line on or increase price. A Harvard study at Allied Signal shows that a 1% change in price produces an 11.1 % change in earnings whereas reductions in either direct or indirect expense have far less effect on earnings.

So our auto companies can do one very important thing. If they bring technology to bear on Simplifying Bad Complexity and Mastering Good Complexity, they can both increase marketshare AND increase earnings and margins.

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