Peter F. Drucker grew up in Frankfurt just as the Nazis gathered power. When Hitler was elected Chancellor, the future business guru fled for England, watching the storm clouds of centralized power in his rearview mirror. No wonder the concept of decentralization became one of Drucker’s first and more useful contributions to American business theory. Drucker and his beliefs came to prominence with the publication of "Concept of the Corporation" in 1946. Hard to believe, but the landmark work was based on 18 months Drucker spent studying General Motors.
By 1950, Drucker decided that workers were assets and the corporation was a community. He asserted that humans– not machines, numbers, paper or parts– were the heart of the company. He eventually extended the perspective out of the factory doors out to the customer. Drucker spent a lot of time and other people’s money reminding executives not to forget the customer.
The nature of any business, he argued, is to create a customer. To hunt him or her down and serve them like… um… There is no good metaphor for hunting and serving. Maybe that’s why it’s such a tough dictate to follow. But according to Drucker, follow it you must: the customer is the essence of any successful business, including automotive. Following his logic, a car is the RNA to the essential DNA of those inside. In other words, it’s the people that matter, not the car.
Ironically enough, Volkswagen is a perfect example of a company founded on this “customer as essence” philosophy. Adolf Hitler decided that his working class supporters needed a “people’s car” that could take five passengers to 62 mph for under 1000 Reich Marks. He met with Ferdinand Porsche, owner of the design house Porsche Byro. The Beetle was born. The Beetle became a runaway success and an automotive icon.
Volkswagen’s customers, however, evolved. Post-war, family sizes increased. Consumers became aware of safety and environmental considerations. Volkswagen kept pace with their customers' expectations of performance, comfort and safety by shifting from the spartan Beetle to the increasingly luxe Golf (or Rabbit, depending on your county of origin). The two models have almost nothing in common– except the people you find riding inside. VW stayed true to its middle class customers.
Many decades later, VW re-launched a "new" Beetle. The model illustrates the company's ability to understand their "essence." Rather than create another utilitarian people's car, they released a horrendously compromised package wrapped in "cute" retro-minded sheetmetal. The result appealed directly and powerfully to their existing customers' sense of nostalgia, at a price they could afford. The new Beetle was/is a value-priced fashion statement– the exact opposite of the Bug’s original intent. And a solid sales success because of it.
It seems simple enough: build a car for your customer. Some companies do this very well. As wealthy consumers have children later in life, Porsche correctly figured that a fat, 911-nosed station wagon was just what the “new traditional” Porsche customer needed to cart their dependents and lifestyle equipment. Or, if you prefer, the Cayenne was exactly what their customers' wives wanted their Porsche worshipping husbands to want to buy for them. The Chevrolet Corvette is another machine that's faithful to its maker's essence. Although no longer as affordable as it was, the 'Vette still caters to its [increasingly wealthy] customers' desire for impractical, low-slung, all-American, V8-powered sex appeal.
Volkswagen also supplies us with an excellent example of the converse of the consumer-centric theory: the Phaeton. Though superbly engineered, VW's $70k luxobarge was an answer to a question that none of their customers asked. How far from the young, middle-class family did they park that thing, anyway? By the same token, Saab customers prize nimble driving, clever design and originality. Give them a warmed-over, rebadged Chevy Trailblazer and see what happens. Nothing. Observers of the automotive scene often see an automaker's essence denied (Cadillac BLS) or essence from another planet (Chevrolet SSR). These products– if not the companies who build them– are doomed from the start.
Which is the long way of saying badge engineering is the exact polar opposite of customer engineering. A company may like to build a certain type or style of car, it may be relatively cheap to manufacture. But if the company forgets its essense (i.e. whether or not its existing customers want to pay them for the result), they won't be building cars for long. In short, the person who should be in the driver's seat of any viable car company should be the person who ends up in the driver's seat: the customer.
In 1983, Drucker wrote this epilogue: "Concept of the Corporation had an immediate impact on American business, on public service institutions, on government agencies – and none on General Motors!"
“The new Beetle was/is a value-priced fashion statement– a solid sales success because of it”
I don’t know that that’s true. You can’t give ’em away right now and the Germans never could understand why they had to pay a premium for a Golf with a swoopy body.
The only retro that has any legs at all is the MINI and credit due to BMW, they dumped the losers and smartly retained the one real winner they gained from their sojourn as the owners of MG/Rover.
I beg to differ. The Bug is still selling in reasonable quantities stateside, despite the fact that it’s in desperate need of a refresh and has zero marketing effort behind it (Detroit disease?).
So was Porsche “build(ing) a car for your customer” when they developed the Cayenne; more specifically “their customers’ wives?”
Or was Porsche diluting their identity by building the Cayenne as was discussed in “Quintessence?”
That discussion argued that car manufactures with very specific images (Porsche, jeep) should stick to making vehicles that embody the brand’s essence, and that the Cayenne diluted Porsche.
So was Porsche serving their customer by building the Cayenne as this editorial, “Essence” proposes, or were they angering their customers as “Quintessence” proposed? Was the Cayenne a good idea? Is the prefix “quint” that powerful?
Philbailey: New Beetle sales are actually up 4% over last year, with the coupe and convertible making up 16% of VW's north American sales. Cowbell: The Cayenne may anger some Porsche fans – like the 944 did and the 928 did and water cooling, and so on forever. Luckily, the mavens of Porsche realize it doesn't matter nearly as much as it appears. The 911 fans are still going to buy 911s if Porsche makes hybrid delivery vans. The Cayenne appeals to a Porsche fan who can't have one of their other offerings at the moment. At first glance it might seem to dilute the brand, but after a second, longer glance, it seems to me to fit nicely.
All I could think of while reading this was “Bangle-butted -BMW”. The newly designed 7 & 6 series and to a lesser extent 5 & 3 are perfect examples of BMW parking too far away from their core customers. I’d like to think that BMW is slowly coming around to this realization.
I’ve always heard that Cayenne was so profitable, it allowed Porsche to continue development of the 911 line.
Now, I think the biggest mistake Porsche (and VW) made with the Cayenne/Touareg was that they (in typical German fashion) over-engineered the thing so it could actually go off-road. They ended up with a vehicle that weighs more than a Suburban, sucks gas like a Suburban, and required lots of work to make it handle rbetter than said Suburban
If the next-gen Cayenne can lose about 800 lbs, it might be more in keeping with the Porsche DNA.
Look, if people want a high-performance SUV (I know, an oxymoron), why shouldn’t Porsche meet their needs?
I’m reading Bert Levy’s latest installment of The Last Open Road series, and this discussion reminds me of the arguments about what a “real sports car” is. The auto business is a BUSINESS first and foremost, and Porsche can hardly sit back and stuffily deny their clients the vehicles they want. Whether we car guys think the Cayenne is A Real Porsche or not is immaterial. Porsche, and thier customers, think it is. And that’s all that matters.
The New Beetle is a different animal. VW built the show car (Concept One???), and the reaction was so overwhelming that they put it into production. Because it is such a narrowly-focused niche, I think VW would be best served by ending production and moving on to a new niche vehicle, like the Microbus, or the Thing. Witness what’s happened to the PT Cruiser craze. The hardest thing in this business is knowing when to cash in your chips and get out while the gettin’s good.
“If they’re not buying what you’re selling, start selling what they’re buying.” — Paraphrased Tom Reilly
I know you are not applauding VWoA but they are one of the first companies that comes to my mind who has forgotten their customers. See vwvortex.com for further details.
1. 5 cylinder noisy thirsty engine in the rabbit/golf/jetta as the base engine?
2. price reduction by cutting corners. 2007 models are cheaper because they removed a lot of stuff. No consumer wants to hear that the newer car has lesser features however negligible they might be.
3. jetta was a baby bimmer. They raised the price a lot to put it beyond its competition. ironically it is still a baby bimmer as bmw did the same with their 3.
4. where is my 4 door gti?
5. new golf/rabbit came to the usa after 3-4 years in the european market.
6. R36?
7. jetta wagon?
8. polo?
9. reliability and quality have gone down a lot. (wikiality)
viroe: I think you are wrong here, as BMW’s biggest year ever was 2005, and 2006 will probably see even more BMWs sold.
http://tinyurl.com/kbltu
My friend with a new 5=-Series never touches the iDrive and wipes the car down with a diaper every night. He simply loves it.
I have another friend with a 7-series. She thinks it is beautiful, loves the bangled butt because the trunk is so useful and is talking about getting an M4 for weekend hooning (she’s slightly loaded).
I think BMW is right on target.
I also think the 7-Series will go down as one of the greatest designs of all time, too, so…
How about a new Karmann Ghia?
Myself, growing up I always liked the 944 and 928 a lot better than the 911. I also think the 914/6 looks fun to drive, if you want to dismiss my comments. Maybe the non-911s just look more like what I want a car to look like. Not that I’d turn down a 911 if someone wanted to give one to me. I’d drive it at least once then sell it and buy something I could afford the insurance on.
Not to further kick the Big 2.5 but I think somewhere along the way the ghost of Henry Ford possessed them and they figured that the customer could have any car as long as all the cars were the same. You want style? Got different trim on the Pontiac, Oldsmobile and Chevy.
I don’t know. I’ve read elsewhere that American culture goes through periods of being monocultural and being multicultural, one size fits all and one size fits few. Clearly, as the comments to the podcast about Hannity show, we are in a multicultural period. Car manufacturers are going to have to find a way to be profitable selling smaller numbers of vehicles to semidistinct niches. Badge engineering isn’t the way to do it. Unfortunately the 2.5 are probably not nimble enough to cater to the niches. Almost everything about them is geared towards mainstream product whereas the mainstream is not what it used to be and might not ever be again.
As for the Quintessence vs Essence question, I think it is a fine line relating more to price and quality than anything else. Bargain Packards ruined the company’s image. Bargain Cadillacs nearly did. I don’t think it helped Porsche to build the 914 but it didn’t kill them, either. As long as the customer can say, yes, this is the kind of thing I expect from this manufacturer, the kind of thing I love, then offshoots won’t hurt the core. But any product that is shoddy and cheap will, maybe forever.
Car manufacturers are going to have to find a way to be profitable selling smaller numbers of vehicles to semidistinct niches. Badge engineering isn’t the way to do it. -NeonCat93
I come to the opposite conclusion. Like VW selling a hatch as the Rabbit [Golf] and a small sedan as a Jetta is a perfect example. Another example, sell the 350Z as a sports car and the G35 coupe as a classic GT. Use the platform and the engine in a couple of sedans, too. Another example, sell the Mazda3 as a hot hatch and the Mazda5 as a…[insert new macket niche here].
The economy gained from sharing platforms finances the further customization of said platforms. Its just that the domestics don’t always get the niche right.
An example is the Chevy SSR/Dodge Calibre duo. I think Chevy and Dodge have been trying to avoid competing head-on with some of the vehicles and niches that have developed over the years. The Toyota Matrix started the small cross-over market, but rather then competing the the Mazda3/Civic/Corolla/Golf/Jetta head-on the Big 2.5 have elected to side-swipe it by making a bunch of honey-I-shrunk-the-SUV cars that kinda do the same thing.
I don’t know if it is a smart strategy to abandon the core market spaces in an effort to avoid direct comparison to foriegn competitors, but it does appear to be the strategy the Big 2.5 have chosen.
I think a large part of the issue with essense with regard to car companies is knowing what it is that is essential about your brand and having your customer know what is essential about your brand (and hopefully in agreement).
A good car company knows who they are and who their customer is and they build accordingly. BMW is a good example of this. Their marketing says that they build the ultimate driving machine, and while they have been pushing the envelope on this with the addition of SUVs, I don’t believe anyone would disagree that BMW SUVs are driver’s machines and ultimately fit under the expanded umbrella of the company’s essence.
Similarly, Porsche builds high performance automobiles… The Cayanne fits under that umbrella.
GM, on the other hand…. may know who their customer is (or at least who they were), but have not done a good job of identifying what their brand’s essences are and therefore the customer is unsure as well. If Pontiac is the performance brand, why was there ever a Pontiac minivan? Is Cadillac a luxury car or a performance car? Why does Buick need to exist?
Cars are largely fashion statements. If they weren’t, then we could all get from point A to B in a Ford Fusion and all wear the same clothes and we would actually have to talk to someone to know anything about their personality. When people spend large chucks of cash on an automobile, they usually want that automobile to say something about them… and if the message is unclear and muddied by years of marketing and manufacturing missteps, then the buyer will move on to a car with a clearer message.
The proliferation of new models is driven by two factors: capability and demand. The capability comes from the IT evolution — it is quite a bit easier to design and manufacture multiple models off the same platform.
The demand comes not from customers, but rather than from dealers. Whereas 30 years ago, GM had 5 car brands targeting customers as they moved through their lifestyles (Chevy for modest-budget youth up to Cadillac for wealthy older buyers), now the pressure is for every dealer to be able to satisfy every potential customer.
I wish carmakers would focus on making a few products that are best in class rather than dozens of nameplates that are also-rans.
I guess i just have to disagree with you, adya, about VW.
the “thirsty, loud” 5 cylinder base engine – let’s compare it to VW’s last base engine, the 2.0L 8v. It’s got 35 more bhp, 55 more lb-ft of torque, still runs on 87 octane, and gets slightly better fuel mileage. Gosh, how terrible. Next?
Price cutting – while no one wants less equipment, there are people who want more choice. Price cutting on base models doesn’t mean that equipment isn’t available any more. By expanding the price range of their models down (albeit marginally) they are opening up more market. Problem?
Jetta as baby bimmer – are you actually forming an argument here? i’m confused.
Where is your 4 door GTi? Why, it’s at your friendly local VW dealer. it has been for going on 2 months now. Good job.
MKV Delay – yeah, you’ve got me there. We had to suffer through the ignominy of the MKIV, which wasn’t selling very well… oh wait, yes it was.
R36 – myth. 3.6 doesn’t fit in the Golf engine bay.
Jetta wagon – next year. If you remember, there was a delay between the MKIV sedans and wagons as well.
Polo – do Americans want a smaller car than a Golf? more importantly, would VWoA be able to turn a profit on it? Consider that pricing for the Rabbit starts at $15,000 (approximately) and hte polo would have to be considerably cheaper than that, i doubt it.
Reliability – problems with VW’s are overblown and overhyped. The most common problems on MKIV’s were tihngs like failed window regulators, which is hardly a disabling malady. There is simply to much to go into here, but i just don’t agree that VW’s are unreliable cars.
I am SO tired of VW haters.
NeonCat, Audi has the TT, that’s about as New Karmahn Ghia as you’re going to get
Jonny: BMW’s profitability does not necessarily mean that they are in step with their core customers. If you told me 10 years ago that the future 7 series would have a transmission stalk on the steering column I would have called you crazy. Why the quick redesign of the 7 and the gradual move away from the Bangle-butt in the 5 , 3 and especially the new coupe. Evolution or realization that the design is awkward and ugly?
Why would BMW shove the SMG tranny into the M5 & 6 as your only option?
I wipe my M3 down with a diaper ….you got a problem with that?
Long have I wanted a VW New Thing.
The potential is out there, its called the Concept T. There’s also the Concept A, which appears to be a more reasonable offering than the T.
Then, there’s the return to a sport coupe ala the Scirocco or the Corrodo, the IROC.
They did have a face lifted Transporter on the board as a New MicroBus concept, alas, its been cancelled. A shame, it would’ve cleaned up for well heeled soccer moms and neo-hippies.
The New Beetle is pending an change up as the Beetle Ragster.
The four door GTI had always been avaible in the mk4 line as the Golf 1.4t. I’m not aware that the Mk5 four door GTI is being sold in the US, but it wouldn’t surprise me.
The 2.5 engine in the new VWs may not be as fuel efficent as what the Asians are making, but VW engines have always been producing far more torque across the range than the Asian products. Different emphasis, but as the owner of one of the older 2.0, 115HP New Beetles (and a 1.8t 180HP GTI), I have to say that while I may not be winning any races in that NB, its a pleasure to drive, gets me where I need to be with a smile on my face, and is known as a highly reliable powerplant.
viroe:
I think that profit, and continuing profit and market share means they are in step. I mean, their target market is wealthier people. And they are selling more cars than they were. And Merc and even Toyota copied the bangle-butt with the new S and the Camry.
And the new 3 is 100 times uglier than the 7, especially as a coupe.
Sorry to drag this into an argument Mrboost but
1. Compare the engine against competition not against its old engine. I think VW can do better thanthey have thrown at us. Really is this the same company that makes the fabolous 2.0T ?
2. Feature cutting doesnt makes sense to me. It is all those cool little things that maketh a VW. Rubber bottom cubbies, headlight washers etc.
3. Polo – Ask the Fit/Yaris/Versa salesman why we need more subcompacts.
I agree with you on the GTi, Wagon and R36. Rest I guess we will agree to disagree.
Disclaimer – I dont hate VW. I wish they did better.
“And Merc and even Toyota copied the bangle-butt with the new S and the Camry” -Jonny Lieberman
I agree that the bangle butt is here to stay. But I shy away from ‘blaming’ Chris Bangle entirely for this trend. I think it can be traced back to the stepped (albeit, horozontally rounded) butt of the Volvo S80. And the Merc is more in line with its rich Arabian cousin twice removed, the Maybach. The Maybach may even be leaning on a design trend first found in the Rolls Royce line of cars dating to the 1960’s, at least.
The new 3 series works as a sedan, and probably will work better as an M3 sedan (if they make one). I think the 5 has to be the biggest dissapointment. The proportion of the design cues to the overall size of the car just doesn’t work, at least not for the US market.
i have no trouble comparing the 2.5 against its competitors. competitors like the Civic and Corolla get significantly better mileage on the highway cycle
but they don’t have the torquey, smooth delivery of the 5 cylinder in the Jetta.
honestly i think the 5 cylinder gets a bad rap because of whatever Car and Driver said about it when it tested it. Which would be because they tested it in combination with the six-speed tiptronic trans, which is a total slushbox – it’s a dog. My Jetta 2.5 has a five speed manual (with a few modifications) and i personally think it’s a wonderful engine for daily driving. Plenty of overtaking power, lots of low end torque, decent around town fuel mileage (my worse around town tank has been 22mpg so far.) it never feels short of power and has a nice sound to it. Which is something you can’t say of a base model Civic.
So sure, my fuel costs are more expensive than a comparable civic. But that doesn’t bother me terribly; my insurance is considerably cheaper.
Anyways, i’m rambling, i just wish people would give the 2.5 a chance rather than judging it off of what the magazines have said about it. For a base engine, it’s really quite good. Of course it’s not the 2.0T – if it were that good, why would they have a 2.0T?
i agree, the cool little things make a VW a VW but i think there are some people that would sacrifice a few of the littlke things to be able to afford a VW. I think shifting the base line down makes sense as long as those niceties are available if you want them.
Polo – yeah, good point.
“Where is your 4 door GTi? Why, it’s at your friendly local VW dealer. it has been for going on 2 months now. Good job.”
Um… then why doesn’t the VW website, or any of their dealers’ websites show that configuration?
I think the point that everyone is missing here is that Drucker talks throughout his many books about businesses as communities. Irrespective of the marque or even the product, if a manager understands that he is part of a community, he will be able to build and sell the products the community wants and needs.
Drucker had a deep seated sense of ethics about business. His “community” was one of what we now call “stakeholders”. This would include customers, workers, shareholders and the physical community in which a business operates. Drucker always talked about the responsibilty of managers to the total community.
Businesses start to lose ground when they stop understanding when they lose track of any part of that community.
“Where is your 4 door GTi? Why, it’s at your friendly local VW dealer. it has been for going on 2 months now. Good job.â€
Um… then why doesn’t the VW website, or any of their dealers’ websites show that configuration?
Could be a Canada only model maybe? I saw one in person a few days ago here, and last time I was at the VW dealership (spring, after the 2 door GTI came out) they did mention it was coming around August.
September Sales: Volkswagen –Down 10.79% at 20,082 (9/05: 21,646) – A lot of Beetles in there, Mr Farago.
>>“The new Beetle was/is a value-priced fashion statement– a solid sales success because of itâ€
Well they lost me. I looked at it when it first came out, and figured, with a trunk like this, I’d just as soon have a roadster.
VWoA’s website is always slow to add new models, i don’t know why. it’s one of their weak spots.
But you can buy a 5 door GTi in the US. Just try going to a dealership and looking/asking for one. They’re for sale.
There’s another company that lost track of its “essencee” and found it, when new owners took the helm: Nissan. Back in 1999, Nissan’s situation didn’t look much better than the General’s (although admittedly, Nissan didn’t have all those pensions and health care costs to contend with, that GM does). Nissan had foolishly dumped the “Z” car which made them distinguishable from Honda, Toyota and certainly, Mitisubishi.
I never realized how much pent-up demand there was for the Z car – dropped by Nissan in 1996 – until I started working for Sport Z magazine in the winter of 2000. (Sport Z magazine has suspended publication; however, there is now a magazine called Nissan Sport, being put out by a contributor to Sport Z, who became a publisher, and with Dave Bexfield, former editor for Sport Z, now as managing editor.)
Carlos Ghosn – yes, the same man that Captain Kirk wants Rabid Rick to partner with – not only authorized production of a concept Z car (shown in late 1999), he had people who figured out a way to use that same platform, complete with engine, under an exciting new line of cars and SUVs (which can, on occasion, be exciting – when taken off road). The engine – the venerable “VQ” V6 was even used in the Nissan trucks, albeit usually at 4 liters, up from its usual 3.5 liters.
While Nissan sales have dropped a bit recently – about 8 to 9 percent – it is still doing much better than it was 6 years ago.
GM needs to build a vehicle that draws from its heritage and does it in a manner similar to Nissan’s Z, or the BMW Mini. The unlamented SSR was a floop due to pricing, which was correspondingly due to a retractable hardtop the truck it was meant to copy – the 1949 through’54 Chevrolet and GMC pickups – never had. Instead, they should have offered a fixed roof and three or even five-window versions, as the originals did. But that opportunity is lost.
The best concept vehicle that GM should likely make is the Nomad sport wagon. They could use the same version of the Eco-Tec that is in the new Pontiac Solstice XP (or whatever the turboed 260 HP variant is called).
Carlos Ghosn understands all this better than I think Rick Waggoner does. However, I don’t know if Mr. Ghosn understands Peter Drucker’s concept of “the people are the company.” But hey, I haven’t heard any complaints in that regard, on or off the record, in my work for Sport Z or Nissan Sport.
Ed S: Agreed on the 5 for the most part. However, in black with the chrome deleted (my friend has that model) it is fairly menacing looking.
And the M5… despite not being pretty, looks the part, especailly with those foot wide tires.
But if you want to talk about goofy proportions, the 3-Series coupe is the worst of the bunch. Just a misfire.
Whereas I am fairly certina that in time, the 7-Series will go down as a landmark design breakthrough, the new 3 won’t even be worth discussing.
Hi guys. I just got back from tearing around Auburn Hills in a 5 door GTI DSG a minute ago. they are 2007 models, so VWs site won’t list them yet. emphasis still on remaining 06’s. But they have been selling off the list from the factory. Haven’t had one here last more than a couple days without being sold at sticker. Not bad for Detroit.
And the 2.5 is a good engine. Its a far better engine than the one it replaces. VW problems here in the US are due to the beauracracy of VWAG. Remember, we have to deal with the GM of Europe, so a lot of our products, while very good, are plagued by stupid decisions in both design, marketing, and a gross misunderstanding of the american car buying market.
Now here is something fun that VW has just done in Canada.
VW has taken a page out of the GM Handbook by hedging thier bets with old product while moving new product upmarket i.e the Cavalier staying on for a bit while Cobalt starts up and Venture/Montana hanging about while Uplander and Montana SV6 are introduced.
With that, VW has introduced the City Golf and City Jetta! The City Golf starts at $14900 CDN and the City Jetta at $16700CDN. Yes, that is in Canadian dollars. Now, this is the base and I mean BASE (no side airbags, no air conditioning, no power mirrors etc),but if you load it up, it is only $21000 CDN approx.
So, I imagine if you will, I bought my Jetta/Golf MK4 last year, paying WAY more than that. My resale value of my car, which is one of the selling points of a VW, has just gone down, since a new one is available for a LOT less than a used one. I would be a little pissed off. And, I work for a leasing company, with a lot of nice little Jettas and Golfs on our books. Save for the TDIs, our end values that we have set will be out of line now.
VW could have brought out a Polo to compete with the Honda Fit, et al, but instead they decontented and undercut their Golf and Jetta values. On the face of it, its a lot of value for money, but in reality, they are regurgitating thier old product for North America while everyone else gets the cool stuff.
Here is the link http://www.vw.ca/vwca/models/build/0,2264,154,00.html
and you can see the cheap car I just built.