How Porsche built Cayenne:
Let's move the clock back to 1990s.
Porsche wasn’t doing that well. Annual sales were 1/3rd of what they were in
1980s. The arrival of a new CEO brought in cost and process discipline. As a
result, cost fell and sales rose. The CEO knew that cost control alone wouldn't
win the future for them. He put a big bet to build a new SUV. Skeptics said
that customers wouldn't have the brand association as
Porsche
was known for speed and engineering and that it was not a family car made for
loading groceries. Porsche adopted an outside-in approach for building Cayenne.
If the
customers were not willing to pay for what they wanted in Porsche’s SUV, they
would walk away from Cayenne. The result was running extensive analyses and
validation cycles to gauge not only customers’ appetite for SUV but also their
willingness to pay the price.
They ensured that every single feature
stood trial before the customer. At every turn, they removed the features
customers didn’t value. Cayenne was a roaring success. Porsche’s famous six
speed racing transmission was not on the wish list of Cayenne. These
interactions convinced Porsche engineers to include a large cup holder, which
the customers weren’t used to. Over
time, Cayenne enabled Porsche to generate the highest profits per car in the
industry. 10 years after it hit the market, Porsche was selling close to a
100000 Cayenne’s annually - almost 5 times it did in the launch year!
How Fiat built Dodge Dart: Fiat
Chrystler had six times revenue that of Porsche. In 2009 they started the work
into getting the new segment: a reimagining of the classic 1970s Dodge Dart.
They wanted to get int compact car segment. Fiat Chrystler’s approach to
developing the compact car was totally radically different from Cayenne. Rather
than looking at a hard look at customers, they had a hard look at the product.
They came out with a marketing video- TV commercial and announced that their product
development way was:
Design
it -> Build it -> Rethink it -> Design it -> Build
it -> Rethink it -> Until engineering team felt the car was ready
to go. “Perfection” as defined by Fiat Chrystler and not the customer.
The
market performance was a disaster. Launched in 2012, the Dart sold about 25000
units- a quarter of the total predicted by the market analysis.
(Stories source- The Book: Monetizing
Innovation: How Smart Companies Design the Product Around the Price)
These 2 cases are contrasting in terms
of 1)Outcomes 2)Approach taken to deliver products. While Cayenne was built
with Customer Centricity at it's core, Dodge Dart was built with Engineering at
it's core. At the heart of the way Cayenne was built were the principles
of Lean Start-up (as it is known
in
today’s times), comprising of but not limited to the following concepts:
1. Validated
learning: learning what our customers want before building.
2. Build-Measure-Learn
cycle: More than a cycle, it is a mindset. Tackling the cycle backwards, it
is intended learning that drives the building cycle.
3. Pivot
or Persevere: Be ready to change direction if the learnings and measures
indicate so.
While
following these principles is no certain guarantee to success as the start-ups
can still fail for other reasons but these do increase your odds to attain
success.
Fiat
Dodge Dart’s approach was essentially engineering centric i.e. with focus on
engineering at its core without much involvement of customers in the process of
product development. One of the biggest disadvantages of this approach is that
it increases the feedback loop i.e. the late we show the product to the
customer and seek feedback, the late it is to gather any meaningful feedback
and make any changes. This is more so for design-heavy products like cars.
But
like with anything, there are exceptions to the rule. When Apple built say its
first iPod or iPhone, it did follow design-first approach, but the products
remained heavily engineering focused. Customers may have been involved secretly
but given the way Steve Jobs operated, most of validation remained a secret,
almost under-the-wraps till the product was released.
What is your preferred way of building
products ?
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