Recently, there has been a lot of discussion about US auto manufacturers and what, if anything, should be done to save them. I am not going to get into the politics of it, but it strikes me that there are some valuable lessons to learn from their troubles.
This week, after many delays, Tata Motors finally launched their Nano, the so-called “people’s car” intended to make cars accessible to the masses at a price point of about $2,000. While in this economy, it may make sense to copycat the Nano, and I won’t be at all surprised to see that happen, I think that looking in the rearview mirror, if you will, of the past years of the US auto industry, they failed to do something that Tata Motors has done with the Nano, and I would argue that most of the big German automakers have also done well, and that is to say “no” to specific sets of customers.
The Nano isn’t trying to be any more luxurious than it is. The makers of the Nano decided very clearly that there is a segment of the car buying market that will buy a car that is “just” transportation and nothing more. Many of the big German automakers went the other way with luxury cars from Porsche, Audi, and Mercedes and while they have some more affordable models, they are unambiguously, unapologetically, luxury cars. The US automakers lost their way because they tried to be all things to all people, and in the process didn’t really do a good job of meeting the needs of any one segment, be it price, quality, big, little, you name it.
I don’t claim to have the answers to solving the global auto industry’s problems. My point instead is that right now most companies are in more of a retraction mode than a growth mode, so right now is a perfect time to be very specific about who is, and who is not, your target customer. Stay away from the gray areas of what they value, and make that what you value, and if there are things that don’t directly link to that value set, look at them and ask if they can be cut or outsourced (many cannot, but it’s worth asking). Eclipse Aviation is an interesting example of a company that went with one-size-fits-all luxury in the private jet world. Their customers like the luxury, but their customers don’t mind giving up choices in the luxury, because what they really value is a cheaper private jet for their transportation needs and stripping out all of the personalization time and cost is a big part of where Eclipse cut their costs.
So rethink who your most valuable and profitable and loyal customers are, and think seriously about saying “no” to some of the others like Tata Motors and Eclipse Aviation have done, and look at the impact that can have on your costs and your overall operating model.