This American Life: Nummi and Brand Value

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Another good listen from This American Life. I'd read probably 10 books and 100 articles on American Auto-business (I seem to remember that one of our modules for my MBA had something to do with it as well). I always found what happened interesting.

This is an interesting listen. It only has an hour, so they wildly skim over some parts. (Focusing on the personal interest over the data or history in some points). It makes the story enjoyable, but to me, the backstory they don't have time for, is critical to getting some depth of understanding how companies and countries got in their positions. (You walk away thinking, GM management was dumb -- when it was far more nuanced). And the stories were great, but told from the side of Union Workers, and a couple managers that were a pinch disgruntled (or trying to explain things for why they were under-appreciated) instead of more neutral.

America teaches Japan

One part of the story they missed was Japan was in bad shape after WWII. They could do rote repetition on things -- but change is hard for Japan. So this guy (Demming) an academic engineer with a focus on Quality Control, was one of MacArthur's helpers, and spoke and taught the Japanese some ideas on American Quality Control. Basically, small change, continuous improvement of the product and production lines. The idea of little provable improvements worked to help make up for Japan's resistance to change (and disruptive changes). Japan adopted the American ideas, and added some of their own spins, and that became Kaizen.

But these ideas weren't new. Americans had been doing variants for generations. Measure twice, cut one. Catch things earlier in manufacturing is cheaper than fixing it later. Continuous improvement was something Henry Ford had been a fanatic on, in his factories, just he was focused on time and cost improvements (rather than pure qualitative improvements on the end product).

The difference is when Japan catches an idea, it can become a religion. (They can fully commit to a philosophy). Whereas Americans can get more distracted and try different things and adapt more. But in this case, that adaptation meant they took their eye's off the prize.

Japan re-teaches America

Anyways, Toyota came back to re-teach GM what GM had known and mostly forgotten. And there was an arrogance at GM, because they knew this stuff before Toyota existed -- they just couldn't implement them because of Union work rules. They'd sort of given up hope of changing the Unions -- and they needed bankruptcy and closures which came later, to be the impetus they needed to get concessions from the unions. (Even then, many plants had to close first, because they could get them). But they miss this part of the story: it wasn't Toyota wasn't teaching GM something new -- it was reminding them to get back more towards things they'd once done (though the teamwork concept was a different way to approach that old problem).

So this story tells you of sort of how Toyota saved GM, with little whiffs of how GM helped Toyota. But the truth is more how Toyota took American ideas, extended them, and brought them back to America. And it took GM almost being destroyed by unions, before they could re-implment them. But remember, GM got nothing from Toyota that they couldn't have learned from Demming directly (as Ford had), or they couldn't have gotten from watching what Ford was doing at the same time. It was just the example was stark seeing it in action, and how to turn bad UAW workers into mediocre ones. It also taught Toyota that if they put their plants in the South (non-Union areas) that they could beat the quality of UAW workers, which would always hold Ford, GM and Chrysler back.

But it gives you a feel for some of the systemic problem. When a company is making money (even losing marketshare) they can be very hard to change course. Management was far from innocent -- focusing on profits instead of brand. Operations instead of product. And it almost destroyed the company.

Told from a Japan-centric point of view

Another part I wasn't thrilled with this excellent story on, is it misses how spotty quality was (for both). Japanese cars were better on average in defects than the Average American cars. But the top end of American cars were beating the Japanese -- it was just hit or miss by product line. Which kills your brand. The worst Japanese car was better than the worst American car, but the best Japanese car wasn't better than the best American car. But customers remember the lemons, or the bad experiences. Japan's pride and focus on face, meant they would go to extreme measures to keep from losing face. They'd bury and hide recalls, they'd do more to keep customers happy if they did have a lemon, and so on. In the end, and there were complications of Union rules that made their resale value better (which made Americans think that they held up better). It was complex. But there's some great lessons in there about how a company is not remembered for their best product, it's remembered by their worst. So even though Americans made much better cars than anything out of Japan, they also made a lot worse ones -- and all the American brands got slaughtered by that perception.

That's one of the things that I admire Apple most on. They're not going to chase the bottom of the market, because if you do some products well, and others half-assed, people remember the half-assed. Thus, when you think of Android or Microsoft, I'm always reminded that their worst products are worse than Apple's worst. While it might be true that their best is better than Apple -- Apple has the far better brand overall. So Apple makes decisions not based on a single product -- but on what it does to the brand. I think too many companies forget that, and milk their cash cows, or even try to squeeze every penny out of dying product, instead of thinking how much brand value they're losing by doing so.


Written: 2015.07.22