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In boom times, when demand is growing, it is no trick for managers to boost their top lines (revenues) and bottom lines (net profits). But in bad times, when demand is contracting, that indeed is a great achievement.  Let us therefore look more closely at Honda.

In America, where high oil prices and the housing bust have mangled consumer spending, GM Ford and Toyota report large sales declines: 18 %, 14% and 7%, respectively. (International Herald Tribune, August 26, 2008, p. 11).

Honda? Its U.S. sales are up 3% this year and it is struggling to maintain inventories, as its cars ‘fly out of the showrooms’. Its U.S. operations remain highly profitable.

Why?

A brilliant combination of what Jerry Porras and Jim Collins, in their classic 1991 California Management Review article, call: “core values and purpose”, and “dynamic change”.

From the time Honda’s namesake founder Soichiro Honda built a fuel-efficient engine with his own hands decades ago, Honda has stuck to its core values of fuel efficiency. When GM, Chrysler and even Toyota chased the high-margin market for SUV’s and trucks, Honda stuck to its core values. Its new FIT hatchback, which uses only 7 liters of gasoline per 100 kms., is a huge hit, and its sales are up 79 % this year! Honda’s CIVIC and Accord models are also selling well. 

I sometimes use a yin-yang diagram to illustrate the key management dilemma, of retaining core values while implementing radical change. This is one of the toughest dilemmas in innovation management: What to keep, what to change. Some companies innovate away their core values. Invariably they self-destruct – GM, once the world’s largest industrial corporation, is diving toward single-digit ($ b.) market value and may be approaching bankruptcy. 

Honda innovates within its core values. And its bottom line proves why this is wise.

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Urginea (“Hatzav” in Hebrew)

In large parts of Israel, a strange tall flower, whose botanic name is Urginea, is blossoming. Its Hebrew name is Hatzav. 

Wait. Run that by me again. Blossoming, during the driest season of the year, when no rain falls at all? In August and September? Flowers blossom in the spring, right?  

Not the Hatzav. Based on the principles discovered by Charles Darwin – natural selection, survival of the fittest — the Hatzav has discovered an evolutionary trick. If you blossom when no other flower does, you gain competitive advantages that help you survive and procreate. Bees and wasps fertilize your flowers, because there is little else around. When other flowers are more dormant, you get a bigger share of resources and groundwater.  

In innovation theory, we call this blue oceans innovation. Perhaps, viewing the fields of hatzavim, we should call it white oceans. 

Weird flower? Even Nature has discovered the value of being different, totally different – long long before human beings did.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital
August 2008
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