When the Competition Surprises You

Consider two surprises for General Motors (GM) and how they reacted, initially poorly but later quite successively.  Both illustrations involved Ford surprising GM. The first led to a major failure and the second to a substantial success.  Indeed, failures to achieve corporate objectives are quite common in the automobile industry.  Not every vehicle is a home run – far from it.

In 1981 General Motors began planning for a complete refresh of its intermediate size vehicles:  the front wheel drive A-Cars and the older rear wheel drive G-cars.  The GM10 program would yield vehicles badged as Chevrolets, Pontiacs, Oldsmobiles, and Buicks.  This program was to be the biggest R&D program in automotive history and with a $5 billion dollar budget, the most ambitious new car program in GM’s then 79-year history.

The introduction of the Ford Taurus in 1985 was a huge market and business success, and a complete surprise to GM.  It was one of the first projects in the U.S. to fully utilize the concept of cross-functional teams and concurrent engineering practices. The car and the processes used to develop it were designed and engineered at the same time, ensuring higher quality and more efficient production. The revolutionary design of the Taurus coupled with its outstanding quality, created a new trend in the U.S. automobile industry, and customers simply loved the car.   

The Taurus forced GM to redesign the exterior sheet metal of the GM10 because senior executives thought the vehicles would look too similar.  Many additional running changes were incorporated into the design in an attempt to increase customer appeal.  The first vehicles reached the market in 1988, ~$2 billion over budget and two years behind schedule. 

All of the first GM10 entries were coupes, a GM tradition for the first year of any new platform.  However, this market segment had moved overwhelmingly to a four-door sedan style. Two-door midsize family cars were useless to the largest group of customers in the segment — members of the Baby Boomer generation were now well into their child rearing years and needed four doors for their children.  GM completely missed the target segment of the market.  From 1985 to 1995 GM’s share of new midsize cars tumbled from 51% to 36%.

The Lincoln Navigator is a full-size luxury SUV marketed and sold by the Lincoln brand of Ford Motor Company since the 1998 model year. Sold primarily in North America, the Navigator is the Lincoln counterpart of the Ford Expedition. While not the longest vehicle ever sold by the brand, it is the heaviest production Lincoln ever built. It is also the Lincoln with the greatest cargo capacity and the first non-limousine Lincoln to offer seating for more than six people. 

GM was completely surprised by the Navigator.  They had not imagined that customers would want luxurious large SUVs.  GM responded with the Cadillac Escalade in 1999, intended to compete with the Navigator and other upscale SUVs.  The Escalade went into production only ten months after it was approved.  The 1999 Escalade was nearly identical to the 1999 GMC Yukon Denali, except for the Cadillac badge and leather upholstery. It was redesigned for the 2002 model year to make its appearance and features fall more in line with Cadillac’s image.

In 2019, 18,656 Navigators were sold, while 35,244 Escalades were sold. Escalade has outsold Navigator every year since 2002.   GM had clearly adapted to the surprise of the Navigator.   One can reasonably infer that the company learned from the GM10 debacle.  Surprises happen.  Be prepared.

The Taurus and Navigator were two of the best ten cars we identified in our study for GM, along with the worst ten cars.  Other winners were the 1955 Chevrolet, the 1964 Pontiac GTO and the 1964 Ford Mustang.  Interestingly the proponents of these cars were heralded as heroes but later demonstrated this accolade to be premature as Ed Cole advocated the 1971 Chevrolet Vega, John DeLorean failed with the 1981 DMC-12, and Lee Iacocca tried to kill the minivan program, which basically kept Chrysler in business.  The Vega and DMC-12 made our list of the ten worst cars.

What differentiated success from failure.  First, one needed to correctly predict what the market would want when the car rolled out several years later.  The 1957 Edsel suffered from an unexpected recession. Second, there needed to be a system development process that resulted in the intended vehicle.  This may seem obvious, but capricious decisions by top management were often associated with failures such as the 1982 Cadillac Cimarron and 2001 Pontiac Aztec.

We recently studied 12 cars withdrawn from the market in the 1930s, 1960s, and 2000s.  We leveraged hundreds of historical accounts of these decisions, as well as production data for these cars and the market more broadly.  We found that only one vehicle was withdrawn because of the nature of the car.  People were unwilling to pay Packard prices for Studebaker quality, the two companies having merged in 1954.

The failure of the other 11 cars could be attributed to company decisions, market trends, and economic situations.  For example, decisions by the Big Three companies to focus on cost reduction resulted in each manufacturer’s car brands looking identical, effectively de-badging them.  Mercury, Oldsmobile, Plymouth, and Pontiac were the casualties.  Honda and Toyota were the beneficiaries.

We worked with Rover on the initial conceptual design of the Mini Cooper, before Rover was bought by BMW, who then brought the Mini Cooper to market.  We considered four stakeholders: young women, young men, young couples, and young couples with children.  The design differences for each stakeholder were interesting.  For example, the back seat plays a different role for couples with children.  Young women and men differ in dashboard preferences.

The original design of the mini Copper broke the mold and revolutionized the auto industry in this segment. Its clever use of space, compact design and excellent road handling led to consumers judging it as a fun, affordable and classic sporty icon.  It moved far beyond its roots as a humble people mover.

Much more recently, attention has shifted to hybrid and battery electric vehicles (BEVs).  Our studies of BEVs have shown that the industry needs to move beyond federal and state subsidies to grow the market.  The increasing commitments of auto OEMs – original equipment manufacturers – suggest that electric drive trains will soon come to dominate the private vehicle market.

Driverless cars are waiting in the wings.  The marketplace for driverless cars has been quite complex and turbulent, laced with enormous hype..  All of the major automakers are working with a range of technology companies.  Investments have been huge, although aspirations have recently mellowed, exemplified by Uber and Lyft selling their driverless car units.  Here are the primary relationships (in alphabetical order):

  • Apple working with Hyundai and Kia
  • Argo AI acquired by Ford and Volkswagen
  • Aurora acquired Uber’s driverless car unit
  • Cruise Automation acquired by GM, Microsoft and Walmart
  • NVIDIA working with Audi, BMW, Honda, Mercedes-Benz and Tesla
  • Toyota acquired Lyft’s driverless car unit
  • Waymo (Alphabet) working with Fiat Chrysler, Jaguar, Nissan, Renault, Volvo and Magna

What surprises are ahead?  I think the main surprise is that all the hype was just that, nothing more.  Increasingly capable sensors and smart software will make your vehicle — that you will still drive — safer and more efficient.  Over time, perhaps a decade or so, your vehicle will become capable of driving itself, initially on open highways.  Driverless cars will become pervasive at the pace that unmanned elevators became predominant.

What can be done about surprises?  No amount of due diligence can eliminate them.  Fortunately, most markets are forgiving.  I cherish the Corvette but not the Vega, the Mustang but not the Edsel, and the 1959 Eldorado but not the Cimmaron.  We like to win frequently, but do not expect championship trophies every year.  Even the vaunted Apple had its Lisa and Newton.

Some surprises become market innovations; most do not.  However, surprises can also cause others to innovate.  Technology failures or shortcomings can prompt investigations of how such limitations can be overcome.  The only way for everything to succeed is for all improvements to be only incremental.  Personally, I am glad someone thought of indoor plumbing rather than improved outhouses.

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