Give customers what they need, not what they want…

In today’s column by Thomas Friedman "How to Fix a Flat" he eloquently (and passionately of course) speaks to the requested bailout of US auto companies and the tie to innovation (or “un-innovation” as he terms it). In setting out his logic for the “Big Three Failures” he states the un-innovation, “led to a situation whereby General Motors could make money only by selling big, gas-guzzling S.U.V.’s and trucks. Therefore, instead of focusing on making money by innovating around fuel efficiency, productivity and design, G.M. threw way too much energy into lobbying and maneuvering to protect its gas guzzlers.”

What Friedman says is all true, but the lingering question for me is “Why did they make gas guzzlers in the first place?” The answer to this, according to my marketing contacts in two of the Big Three, is, “We gave the customers what they wanted.” The American love affair with power and size drove the decisions made, and Detroit was not willing to challenge the customer mindset that desires the power and size that guzzles gas. Then, when the magic number of $4.00 per gallon came to be, customers stopped buying the guzzlers, and dealers were left with huge inventories of super-sized vehicles.

The fact is years ago trend research and future scenarios existed showing the $4.00 per gallon reality. In fact, at Launch Institute we played out this price scenario five years ago with Eaton Corporation’s Truck Division. Out of this work came the “Four Buck” Truck scenario resulting in the current Eaton Hybrid Electric Truck program, reducing fuel consumption for mid-sized delivery trucks (think the Fed Ex truck that brings packages to your door) by 35% and reducing emissions (another key innovation driver) by 45%.

At the time of this design work, fuel was under $2.00 per gallon, and the pressure to save fuel costs was not as intense as it is today. But at Eaton, under the visionary leadership of Eaton Truck’s President Jim Sweetnam and their Chief Technology Officer Tim Morscheck, the concept was incubated, prototyped and developed with several partners, included another visionary company, Fed Ex. Now the technology is being used in trucks, buses and will soon come to construction equipment.

If Eaton Truck had just listened to their customers they would have continued to make the same products and battled to keep the price for those products competitive. They were not satisfied to do this, and knew that their future lay would be built on ideas that met unspoken customer needs. Eaton takes the time to “play with” the future, and in this the see opportunities.

Back to Friedman’s point, what is the basis for Detroit’s un-innovation? I suggest it is two things; the lack of a capability to “play with” the future, and the absence of the anatomical parts to challenge their customer’s desires and by doing so ensuring a more successful future. They need to get it right this time, and we should demand this as criteria for any taxpayer dollars going to their aid.