Professional Documents
Culture Documents
G
Cathleen Benko is a Deloitte lobally, the automotive industry is transforming itself ± from the design studios of
Consulting partner and Germany to the modular assembly of cars in Brazil to the new relationships with
e-business leader suppliers in Detroit to the factory ¯oors of Japan. Three trends standout:
(cbenko@dc.com).
Warren McFarlan is senior (1) the manufacturer's changing relationship with its customers;
associate dean and professor (2) new partnerships with suppliers; and
of business administration at
Harvard Business School. This (3) the reinvention of the factory ¯oor.
article draws on the research
They represent a convergence of progressive thinking from major players around the globe.
and insights in their new book,
During this period of uncertainty and discontinuity ± in which entirely new ways of doing
Connecting the Dots (Harvard
business are emerging ± it's important to understand the context and nature of the changes
Business School Press, 2003)
that are underway in the industry, and focus some attention to organizing an intelligent
www.connectingthedotsbook.com.
response (see box ``Setting the response agenda'').
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Setting the response agenda
In order for the auto industry to accomplish the fundamentally new approaches recounted in this
article ± such as altering customer relationships, adopting customization technologies, and embracing
collaborative strategies ± the mindsets of its leaders and line managers had to undergo radical change.
As evidence of these new mindsets, our research discovered a pattern of emerging managerial traits
companies as different as GM and BMW are exhibiting as they begin to understand new realities and
implement an effective response to market discontinuity.
Our research has identi®ed four traits ± common across a wide variety of industries ± that exemplify the
radical shift in mindsets needed to effectively respond to such market upheavals.
Although the term ``trait'' may not be part of strategic managers' usual lexicon, no evolving industry is a
stranger to the concepts that lie behind it. Traits are the trend-identifying-and-response activities that
emerge as managers' mindsets adapt to profound change in the environment.
This raises the question, how can CEOs in other industries experiencing rapid evolution effectively lead
and coordinate their organizations' response to new market realities? A promising best practice is to
establish explicit ``trait objectives'' as part of a plan to coordinate an effective response. The set of traits
our research found common to leading edge ®rms taking charge of their transformational process is:
J Eco-driven ± a process of effective collaboration that seeks to convert supply chain and channel
relationships (the ecosystem) into corporate assets.
J Outside-in ± setting the goal of being the best company to do business with.
J Fighting trim ± training to be agile, to be coordinated, and to maintain your options so that the
organization can take advantage of opportunities, respond to a changing environment, and contend
with unpredictability.
J House in order ± developing and maintaining an ef®cient, collaborative intra-enterprise that makes
cross-enterprise cooperation highly effective.
Adopted as a set, traits help managers express, formulate, structure, and measure the effectiveness of
their responses to the exigencies of continual transformation. Managers in a number of evolving
industries are successfully using this set of traits to align their projects with three types of objectives ±
operational, strategic, and transformational. Here's how these traits can be converted into an agenda:
# Alistair Davidson. www.alistairdavidson.com
J assess how effectively your organization is adopting its own version of these traits in response to
today's uncertainty and discontinuity;
J specify traits as a third, explicit objective (in addition to operational and strategic objectives);
J use trait objectives to articulate and convert the distinctive aspects of the current business context into
tangible initiatives your organization can undertake; and
J gauge progress through measurement.
Cultivating traits as conscious, deliberate intentions of the organization allows managers to produce a
potent, concerted response to the rapidly evolving market conditions they will likely face as the twenty-
®rst century continues to unfold.
successful, the right parts in the combination the customer wants arrive on the right line at the
right time, and the customer never notices the logistics behind it. The key for a global
production network like ours is a standardization process for the supply chain, which we
develop along with our manufacturing plants and our suppliers so that the logistics process is
the same wherever we operate''[1].
Customers are not only looking for customization, they also want speed of delivery. The interval
between when an order is placed to the time the car is delivered ± commonly referred to as
``order to delivery'' ± is steadily shrinking. BMW, for example, currently requires about 12 days.
In the near future, they plan to further reduce order-to-delivery time to ten days[1].
In a sense, the production process is shrinking. And of necessity, so is the design process,
which is compelled to keep up with the velocity of consumer trends. Today, instead of taking
• Forge partnerships
with suppliers.
• Joint product design
and assembly on the
factory floor.
• Become more
customer-centric.
• Enable buyers to
customize cars.
• Build customer loyalty.
• Modular assembly.
• Rapid factory
reconfiguration.
more than four years to design a new model, manufacturers take less than 18 months. GM, for
example, plans to roll out one new model every 27 days. The result is more car choices so
Keeping in touch
customers can buy more of what they like (and manufacturers won't be stuck with inventories of
Subaru has launched a series of
outdoor-oriented Web portals
unwanted cars that can be sold at discounts). In sum, providing customers with the vehicle they
designed to provide Subaru want when they want it is a strategy for greatly increasing pro®ts[3,4].
owners with up-to-date Today there is opportunity for a relationship that extends far beyond the car purchase as cars
information on a host of outdoor evolve into electronic appliances. Currently, Delphi Automotive Systems estimates that 22
activities. The sites also give percent of a car is electronic content. They expect this to increase to 40 percent within ten
drivers the ability to purchase
years. In the near future, via wireless Internet connectivity, the car, its owner, and the
special products and services
manufacturer will be in continuous communication. That is, these electronics will both monitor
from Subaru and its partners,
the car's vital systems and deliver information services to the driver. An example, GM's OnStar
such as L.L. Bean.
service, today has some 2 million subscribers and executes approximately 14 million
transactions a month. The availability of wireless connectivity (or ``telematics'', as the industry
calls it) will only grow. The Japanese Ministry of Posts and Telecommunications estimates that
42 million cars in Japan will be equipped with online navigation systems by 2015 ± up from 5.5
million cars today[5,6].
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Connectivity will shape the form and function of future cars and promote extended relationships
with auto owners. From design and ®nancing to maintenance, manufacturers are building
relationships that foster a customer-centric focus.
Acknowledgment
Photo credit: The photographs of automobiles in this special issue are by Alistair Davison
(www.alistairdavidson.com); e-mail address, alistair@eclicktick.com
References
1. Parker, J., ``Delivering drivers' dreams'', Traf®c World Magazine, 8 October 2001, available at: <http://
nl3.newsbank.com/nl-search/we/Archives?p_action=doc&p_docid=0EF3C51865282C0F&p_docnum
=1&s_username=ellee> (accessed: 26 August 2002).
2. Taylor, A., ``Finally GM is looking good'', Fortune, 1 April 2002, available at: <http://www.fortune.com/
indexw.jhtml?doc_id=206909&channel=artcol.jhtml> (accessed: 26 August 2002).
3. Konicki, S., ``Time trials'', Information Week, 3 June 2002.
4. Miller, S., ``BMW focuses on top line to boost pro®t: car maker banks on success of its redesigned
7-series'', The Asian Wall Street Journal, 21 March 2002.
5. Deloitte Research, Automobile Digital Loyalty Networks; White, G., ``OnStar renewal rate is 56%, GM's
®nancial chief says'', The Wall Street Journal, 19 March 2002.
6. Butler, D., ``On the road'', paper presented at the CTIA Wireless Conference, Las Vegas, NV, 2002.
7. Deloitte Research and Stanford University Research, ``General Motors: integrating demand and supply
chains ± building a digital loyalty network'', unpublished research, Deloitte Research and Stanford
University Research, New York, NY and Palo Alto, CA, 2002.
8. McAlinden, S.P., Smith, B.C. and Swiecki, B.F., ``Michigan Automotive Partnership, Research
Memorandum No. 1. The Future of Modular Automotive Systems: Where Are the Economic Ef®ciencies
in the Modular Assembly Concept?'', University of Michigan Transportation Research Institute, Ann
Arbor, MI, November 1999.
9. Slater, D., ``GM proves e-business matters'', CIO Magazine, 1 April 2002.
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