A bad color choice for the Honda Civic

This story is from Honda designer Margo Beylen, from the Honda "Power of Dreams: Failure" video. 

One of my worst ideas happened the very first week I worked at Honda. My boss said, "I'm going to Japan in a couple of weeks and I need proposals for new colors for all the 1996 models." This was Civic, Accord, Accord Wagon.

I completely panicked. I was asked to do more in my first week at Honda than I had done in 4 years at my previous job.

I had been really wanting to do an orange car. Really wanting to do orange. And decided: OK, 96 Civic, we're going to do orange. Without doing my homework, completely, I proposed this color. I get into this big room. Sales, engineering, design, the balance of powers, whoever makes this decision to go into mass production. They're all looking at this new person, this new designer, saying, "Well, maybe we should trust her." So they went ahead and put the orange into production. And the dealers flipped. It's like, "What is this hideous, hideous color?Stop production of this immediately!"

You take chances. Everybody in that room understood they were taking a chance, but they were willing to take that chance.

Honda shares failure stories

A very cool video from Honda, "Failure: The Secret of Success." It focuses on their racing experiences, but also includes manufacturing and engineering anecdotes.



Hat tip to What's the Pont.

"Better Place" bankruptcy as a component of broader trial-and-error process?

There has been much written on the recent bankruptcy filing of A Better Place, a company proposing to drive adoption of all-electric cars by creating a battery-swapping infrastructure - extending the range of electric cars without a lengthy wait to recharge.

Is Better Place's demise the end of the story? Saul Kaplan doesn't think so. In his post at Fortune Magazine's site, Kaplan discusses what the company's failure means, and answers the company's many after-the-fact critics:

The "I told you so crowd" immediately started taking shots. New York Times columnist David Brooks took a swing directly at Agassi calling him a "brilliant technology entrepreneur" but implying that he was among "conference circuit capitalists who give fantastic presentations but have turned out to be marginal in history." Ouch. Easy for David Brooks to criticize others for sharing their point of view at conferences when he leverages a New York Times platform to do the same thing.

He points to Tesla's announcement of battery-swapping trials as evidence that the model is far from dead:

Tesla is going to test stations where Model-S owners can swap batteries in 90 seconds for $50-60, less time and money than filling up a tank of gas. Bold business models don't die; they just get reinvented. If we want to go from best practice to next practice we have to try more stuff. We learn more from efforts that don't work than from those that do. So instead of piling on those that try to do bold things without initial success or criticizing those that share their paradigm shifting ideas publicly, we should thank them for pushing us forward and providing the knowledge to try again, only better the next time.

As we've discussed here, trial and error is not a random process; within a constrained problem definition, failures reduce the subsequent exploration that's needed to solve the problem. A Better Place didn't work, but that's not the end of the story. Battery-swapping may very well work, in time.

Nirmalya Kumar and Nader Tavassoli of London Business School: "Product Failure Is a Moment Of Truth"

This post was written by Nirmalya Kumar and Nader Tavassoli, professors at the London Business School, and originally published on the LBS Business Strategy Review website. Kumar is the co-author of "Private Label Strategy: How to Meet the Store Brand Challenge," among other books. Tavassoli and Kumar wrote this on the day that Toyota announced a recall of 3.4 million cars due to issues with airbags.

Today’s news is compounded by the fact that globally, Honda is recalling 1.13 million cars, Nissan almost 500,000 and Mazda 45,000. The internet has added a new layer of visibility, speed and culpability to mass product failures and ensuing product recalls. You could say that social media can make or break a company in crisis.

Companies need to realise that such crises are about more than simply minimising legal liabilities. The challenge is not to allow a product recall to threaten the entire brand or company. Research indicates that negative news is devastating; on average, the media impact of negative news has quadruple weight when compared with positive news. Intel’s 1994 Pentium microprocessor recall allegedly cost $500m alone. Coca-Cola posted a 21 per cent drop in income linked to its European contamination scare and recall of 17m cases of Coca-Cola from five countries in 1999. Firestone’s Ford-related tyre recall is estimated since 2001 to have wiped out more than half its parent Bridgestone’s profits and dragged down the share prices of both companies. But product recalls need not turn into a brand crisis. They can even be an opportunity to build the brand, provided they are handled appropriately.

A mishandled public response can cause more damage than the problem it addresses in the first place. Remember, Bill Clinton or Three Mile Island? On the other hand, a well-managed corporate response, such as Tylenol’s handling of the terrorist capsule poisoning incident in the early 1980s, can leave the brand even stronger. Similarly, Lexus’s handling of a recall immediately after the launch of the brand in the USA generated tremendous customer goodwill and positive press for the new brand. Our research has identified “four Cs” of product recall management that should guide companies in troubled times: be candid, contrite, compassionate and committed.

Being candid implies addressing the problem openly and head on. Unfortunately, hope often trumps reality. Many companies wish their problems would stay under the radar screen, they stonewall the public, or even worse, issue outright denials. Exxon famously responded with “no comment” in wake of the Valdez oil spill. Merck went as far as instruct its sales force not to disclose information over the Vioxx crisis. Understandably, companies may feel threatened by a deluge of press inquiries, but speed and clarity of response is essential. The media may be converted into an ally, and internally, it is vital to maintain staff morale.

Being contrite starts with assuming responsibility. Johnson & Johnson immediately took responsibility over the tampering with Tylenol, even though it was hardly to blame. In contrast, Exxon confused the issue of taking responsibility with taking blame. The level of contrition expected by the public varies with whether the recall is an outcome of a malicious attack, accident, or an internal quality failure. Of course, culture matters here. After the Japan Airlines crash that claimed 520 lives in 1985, JAL’s chief executive publicly apologised and tendered his resignation. While, ultimately, it is important to ascertain where responsibility for the failure lies, the burning need of the moment is that the company is seen to take responsibility.

Being compassionate requires being personal. Press releases simply will not do. Johnson & Johnson managers were seen weeping on television cameras as they attended victims’ funerals. In contrast, Lawrence Rawl, Exxon’s chairman, waited two weeks after the oil spill to fly to Alaska. Sadly, all too often the only personal attention the affected receive is being ambushed by company lawyers and photographers.

Being committed requires a cross-functional response team with top management and should not be a public relations exercise. This team’s priority should be immediately to assess the source and potential impact of the crisis. Who was hurt? Does it require free servicing, partial recall or total recall? Once the program is announced, how will the company wholly commit itself to making the process as customer friendly and effective as possible? Obviously, preparation helps. A well prepared company goes beyond buying crisis insurance. It has mechanisms, people and policies to help avoid and manage crises. The brand also needs to consider how to get back on its feet. J&J introduced triple tamper-proof seals on its packaging, coupons and deep price cuts to win back the market, and seminars by its sales force to doctors. Goodwill still has to be converted into sales.

The product failure is a moment of truth. A poorly-managed response can unmask a brand promise as a hollow boast. But a well-managed product recall converts the crisis into a chance to demonstrate a company’s regard for its customers. Business as usual rarely offers such opportunities.

It’ll be interesting to see whether these Japanese car firms will seize the opportunity or crack under pressure.

Reposted by permission of the author.

CEO Sergio Marchionne: Fiat 500 launch "poorly executed"

Fiat & Chrysler CEO Sergio Marchionne explains why the US launch of the Fiat 500 undershot company projections. "Speaking bluntly," he says, "the launch was poorly executed." He doesn't say "I screwed it up," but he doesn't give excuses or deflect blame. This is showing a sense of agency. Marchionne also doesn't overreact to this data point, and takes the long view - this is the first step in reintroducing Fiat's cars to the US marketplace. It's a great 2-minute lesson in how a CEO should talk in public.



(Hat tip to Stephen Wunker)

Renault and Daimler, partnering, take lessons from prior failures

In announcing their partnership, Renault CEO Carlos Ghosn and Daimler CEO Dieter Zetsche made fascinating reference to prior automotive alliances they've been part of (including, without mentioning by name, DaimlerChrysler) - and how this one would be different. From the New York Times:

The two executives spoke glowingly of the partnership they began last year, comparing it favorably to less successful alliances they have been involved in before.

"Often your failures help you more than your successes," Mr. Ghosn said, mentioning a previous partnership between Renault, based in France, and Volvo in Sweden.

"I fully agree," Dr. Zetsche said. Without actually mentioning Daimler's ill-fated 1998 acquisition of Chrysler, he added, "What we did then is the exact opposite of what we are doing now."

Instead of deciding to merge and then figuring out what to do together, Renault-Nissan and Daimler started with specific projects, among them the development of 3- and 4-cylinder motors for small cars, and a light commercial vehicle for urban areas to be introduced next year. The partnership works because it is based on pragmatic goals rather than a grand strategy dictated from above, Dr. Zetsche and Mr. Ghosn said.

Their advice in a nutshell - alliances shouldn't start conceptually, from the top and then be made concrete. They should include, out of the box, an initial, real, grassroots project that delivers value to both sides and shows them they can work together.

Toyota acceleration incident report cites company's "skepticism and defensiveness" to customers and regulators

The Toyota "North American Quality Advisory Panel," put together in the wake of the sudden-acceleration incidents in 2009-2010, has released its report, and it's fascinating reading of how a large company's strengths can turn into weaknesses under stress. [A copy of the full report is available at this link.]

The panel cites several factors that contributed to the crisis, including Toyota's centralized reporting structure, which led to miscommunication and delayed responses, and an unwise policy of categorizing safety as a subcomponent of quality. But most striking to me was a lesson that can apply to many companies I'm familiar with: they didn't take seriously complaints and feedback from customers and regulators - until it was too late to stave off a full-fledged crisis. To use John Kotter's term, they did not "let the outside in" at Toyota, which led them to minimize and push back against unintended acceleration complaints. Here are several excerpts from the report:

Truly listening to customers requires carefully considering, processing, and internalizing their feedback, even when it may be inconsistent with the company’s instincts....

The Panel has observed that Toyota did not adequately apply the key principles of the [Toyota Production System] and the Toyota Way to its management and decision-making practices. The Toyota Way is founded on the core pillars of continuous improvement and respect for people. A fundamental principle of continuous improvement is genchi genbutsu, which means that one must “go and see” the source of the problem in order to determine its root cause. The Panel feels that Toyota applied this and other aspects of the TPS and the Toyota Way too narrowly in two respects.

First, while it is clear that Toyota applies the [Toyota Production System] process and the Toyota Way to problems or flaws found internally, Toyota does not appear to treat feedback from external sources, including customers, independent rating agencies, and regulators, the same way. For example, it doesn’t appear that Toyota applied genchi genbutsu as quickly and thoroughly as it could have in investigating and seeking out the root causes of customer complaints regarding issues such as [Unintended Acceleration].

Second, Toyota did not apply the principles of TPS and the Toyota Way adequately to identify and avoid repeating management decision-making errors with the same thoroughness and dedication with which it applies them in its manufacturing process. Although Toyota is in the car manufacturing business, it—like most modern corporations—is also a decision factory. Toyota’s reputation in North America increasingly will be based as much on the quality of its decision making as on the quality of its vehicles.

It seems to me that Toyota has a tremendous opportunity to learn from this situation, to become more open to feedback and critique, and to, as the panel recommends, bring the power of the Toyota Way and the TPS to improve its management and information-sharing processes. Will they take that opportunity?