Friday, September 5, 2008

Business is about today and tomorrow

Sole focus on the "here and now" can hurt in the future.

Premise #1
Businesses need products and services that are attractive to consumers in the "now". If a firm cannot sell enough in the "near-term", the "long-term" may not arrive for that organization.

Premise #2
Businesses cannot be so focused on their current product offerings that changing trends and consumer preferences are not recognized and acted upon.

Premise #3
Successfully balancing both premise #1 and #2 is difficult.

The example of the parking lot
While sitting outside a Starbucks in Burbank, CA (see 8-29-08 entry), the issue of balancing the near-term with long-term business perspective was parked right in front of me. Literally parked.

There were 24 vehicles in the parking lot on this Saturday morning at 7AM.
- the largest 11 vehicles were all from US automakers
..(12 SUVs/vans/pickups and 1 very large car)
- the remaining 13 smaller vehicles (all cars of various sizes)
..were from non-USA automakers

With gasoline around $4 per gallon, Toyota and Honda reported vehicle sales at very high levels during the summer of 2008. During the same period, American automakers' sales were poor. What caused US automakers to be in the position of not offering more fuel efficient vehicles when US consumers were craving them?

The lure of the high profit margins from larger vehicles (per unit profitability of pickups and SUVs have been - until recently - very high) was too tempting and became the prize of American automakers. Such a limited focus blinded executives from American automakers from possible opportunities and threats -- including the prospect of high fuel prices and the increasing green attitude of American auto buyers.

The impact of higher prices of fuel is not unprecedented. One only has to recall the high priced gas (with accompanying long lines at service stations) of the 1970s. Since such uncontrollable variables impacted the auto industry before, why were they missed by American automakers just 30 years later? The answer: too much focus on the "here and now" to the detriment of watching for (and reacting to) events and issues that would shape future consumer behavior, wants and needs.

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