More Short Term Thinking

When pickup sales dived, automakers changed plans – Yahoo News

A couple of interesting things about this article. The first is that there is no mention of the other major player in this market – Toyota. Maybe that is because, inexplicably, they manage to continue to make a profit, and are executing their plans.

Sure, their big truck sales have tanked. Last week a friend of mine went shopping for a mid-SUV and got such a good deal on a full size Tundra that he bought that instead. The dealers are looking to unload them. But the same dealer told him there is a 10 year plan to be #1 in trucks with a 15% market share. As an interesting sidebar, this long-time loyal Ford customer (he has an F-250) said “As soon as they make this in a diesel, I’ll buy it.”

But that isn’t the story here. The story is the difference between quarter-by-quarter thinking which catches leaders flat footed vs. having a 10 year plan. With a 10 year planning horizon, these are things which can be adjusted for. With a 3-12 month planning horizon, these are major disruptions that require changing everything.

The analogy – one strategy is looking at climate, and knowing that there will be storms, the other is looking only at tomorrow’s forecast and trying to cope.

Oh – and just to be sure everyone understands, the Toyota Tundra is not “imported” in spite of what the marketing people in Detroit want you to think.

4 Replies to “More Short Term Thinking”

  1. Are you suggesting that having a longer range plan can help a company through a short term downturn in the market? It does seem possible.

    Do you have any ideas on how running lean could help a company make quick changes. Because Toyota runs lean, maybe they can make a quick change from building X amount of big truck to building X amount of smaller trucks and cars instead. And then when needed, easily switch back again. I’m just speculating here…..

  2. I think the long range plan helps the leadership keep their eye on the compass, even if they need to take a detour.

    I don’t have any idea how flexible Toyota is about switching between models. But I do know they have not had any layoffs since 1947 or so, and yet have been consistently profitable.

    I don’t believe there is any definition or such thing as “running lean.” Rather, there is a robust leadership process that keeps their eye on the long-term objectives… and (so far) consistently hits them. This leadership system is pervasive. Of course they have problems, everyone does. But, overall, the organic structure of the organization makes them very flexible by removing the need for the top leaders to control every detail.. plus it gives those leaders the confidence to know they don’t have to.

  3. Point well made Mark. Many a good company has stumbled from a series of “knee jerk” reactions in response to market changes (forseen and unseen). If you walk staring only at your shoes, you’re more likely colide with a tree even if its existence is known. From observing only headlines, one can tell Toyota holds its head high and stares straight ahead, sometimes identifying what’s beyond the line of sight.

  4. I’ve been wondering whether a privately owned company or a publicly traded company that has the vast majority of shares in the hands of the very few selected has a better chance of having a long term vision and a 10-year plan than the rest. Ford would tend to disprove my point but then, each generation of owners dramatically changed the focus, so it was not passed on from generation to generation.

    Or is it just a chance that Toyota got it right, making the right decisions? On the other hand, we all knew that sooner or later oil will be an expensive commodity, yet they reacted the earliest. Maybe it’s safe to assume that their success came based on their need to fulfill a need that went contrary to mass production, so GM and Ford would have done it too given different circumstances they were operating in.
    Ooops, too many ideas thrown back at you!

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