How Long-Term is Your Strategy?

I was thinking about the automakers, and how they want many billions of $ from Washington (please, noooo). I don't know what their strategic planning is, but it seems not to have changed from the 1960's. Certainly, when I started buying cars in the 1970's, I could not afford the low quality/high price/low gas mileage. When we bought our minivan 11.5 years ago (yes, I'm still driving it), we did buy a Dodge Caravan, because at the time it was the best value for our money.

Now that I'm approaching the end of my minivan years, I'm looking for a relatively high mileage four-door sedan. I have a few other requirements, but if you look at the comparisons of cars, you still don't see US carmakers in the top tier for high quality/low price/high gas mileage. And if they are, the cars are not fun to drive.

I know enough about the car business to be dangerous, not to be helpful. But one of the reasons Detroit is in so much trouble is that they have such long cycle times. It takes any of the US automakers much longer to bring out a new model than any of the other non-US automakers. The longer it takes to finish a car (and let's not talk about what done means here)–the cycle time, the longer it takes to see if your strategy is right. If it takes you 2-3 years to take a car from idea to manufacturing, and it only takes your competition 1 year, who's more flexible? Who can react to a relatively changing market?

In my work with high tech companies, the organizations who can release faster (and I mean done, not releasing a product with major defects) have a variety of term strategies. The have near-term strategies, mid-term, and long-term. If you only have long-term, it's like a waterfall project; you can't get any feedback on the strategy until too much time has gone by. (Yes, their portfolio management does reflect their planning.)

To be honest, in this economy, everyone needs a short-term strategic plan that you can adjust frequently. Hopefully, you don't have to throw it out, but just adjust it. You also need a mid-term plan so you can keep your eye on the path you think you want to take. And, you need a long-term plan so you can understand and adjust the business you're in.

How to do this? Make your projects short, or at least, have them use an iterative/incremental lifecycle, so you can finish them at the end of a timebox if you need to. Now, at the end of each timebox, you can see progress and adjust if you need to.

I do understand that building a car is not like building software. The cost of the raw materials is huge, so the kinds of prototyping you do and the duration of the prototyping is quite different. But organizations who can successfully prototype quickly and move to manufacturing quickly have a marked strategic advantage over those who can't.

And that's true no matter what your business.

4 thoughts on “How Long-Term is Your Strategy?”

  1. Andy Wagner (TGI 2006)

    Johanna,
    You’re right on with this post. I grew up outside Detroit, worked in the industry a few years, and have been watching it closely ever since.
    Back when Toyota and Honda were develop cars in 36-months, Detroit was doing it in 48-60 months. When Detroit got it down to 36-months, the Japanese were doing it in 24-months. Now Toyota is introducing new models in 18-months!
    How do they do it? A major change to the expensive hard tooling might only happen once every 3-4 years. Between those expensive changes, they iterate once each year, gradually improving the product.
    Major changes are done using rigorous discipline, checklists and design practices that allow lessons learned to be passed down from one program to the next. Toyota tends to be very conservative as a result, but demanding design requirements continually push the product forward.
    I think most American industrial companies tend to breed fire fighters instead of farmers. Instead of thinking strategically and anticipating problem, they continually react, never getting ahead. It’s painful to watch and be a part of, knowing that there is a better way.
    -Andy

  2. A huge difference between developing software and building cars is not on the protyping stage but on the produtction stage. Cost of prototyping is really low when compared to switching whole production line to schemas of a new model teaching dealers about the car pushing significant effort into marketing etc.

    Actually when talking about protyping automakers have an advantage over software makers because relatively it cost them less to do that.

    The pain in the neck for automakers is lifecycle of a product. It most likely takes about 5-7 years before they switch to a completely new design (aka new model even if it’s called the same) and they can’t change iteratively module after module until the job is done. They have to change everything.

    Having said that I agree with your conclusion (shorter iterations and/or prototyping brings better and faster feedback about your work) however if you were to implement that strategy for car busienss it would have to be adjusted first to specifity of the branch.

  3. Before you condemn a bailout for the auto makers you should read this article from the New Republic. http://www.tnr.com/politics/story.html?id=a4893b49-36df-4784-9859-2dfa3a3211bf. Right now, the economic issues are far greater than whether Detroit is making the best cars in the best way. We are on the verge of a serious recession. The auto makers can’t get credit through normal channels. We need to step back and look at the big picture here.

    Your points about strategy and projects are right on target, as usual.

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