Catering to more hedonistic customers

Roy Goni, Contributor, Jakarta

For almost two decades, American car manufacturers have been struggling to narrow the quality gap with their competitors.

A consumer report in Auto Survey 2001 revealed that the level of the defect ratio in the American automotive industry from 1980 to 2001 had reached an alarming figure of close to 80 percent.

The Big Three of the country had been facing tough competition, especially from Japanese car manufacturers from almost every quality aspect.

Although American car manufacturers have taken a number of strategic steps, such as making improvements to built-in quality at the shop's floors, elimination of extravagance during new product development and speeding up its process, they still fall behind their Japanese counterparts in certain aspects, such as speed to market, design quality, product design manufacturability, various costs and better productivity.

Many analysts and observers have time and time again reminded these giant-sized manufacturers that the competitive edge lies in the integrated and holistic process of product designing, manufacturing, marketing, financing, purchasing and the other business functions.

Some American car manufacturers have tried to solve problems related to quality defects by using the Quality Function Deployment or the Taguchi Method.

In the 1990s, Chrysler even restructured its manufacturing organization by combining a functional team with a number of project specialists to overcome some of the functional problems. Some substantial improvements were made, but due to the limited time contributed by each member of the new team, other problems emerged, such as the depth of knowledge and its ideal fusion within the team.

Meanwhile, General Motors (GM) made a breakthrough with its six steps during new product development. The first step was the creation of a new electronic database for new ideas, which was evaluated by a team of specialists from various functions in the company. Once the idea was approved, the engineering team was then assigned to conduct the relevant tracking and follow-up.

The second step was "internal selling". Here the inventor was required to convince the decisionmakers in the corporation about the viability of his idea.

GM's third step was the creation of a new department: Design and Technology Fusion, which was needed to narrow down the available new ideas to match with the required manufacturing technology and to follow them up further.

The fourth step was the physical production of a prototype of the approved and evaluated idea.

The fifth step was media coverage during this development stage, which, obviously, was meant to communicate the company's upcoming new product, including its unique or superior features while at the same time enhancing the company's image.

The sixth step, which resulted from the previous step, was analyzing the consumers' reactions as well as observers' comments, preparation of cost estimates, sales figures and a forecast of profitability.

The seventh step consisted of further improvements to the first prototype, which was again followed by media coverage and other promotional efforts that included the physical appearance of the product in specially organized exhibitions for final input from the market prior to actual mass production.

Japan's car manufacturer, Toyota, also relies on a highly integrated process of its new product development, which consists of six mechanisms or, in simple terms, six steps. Every precaution is taken to keep the entire mechanism at a high degree of flexibility.

The first step, called mutual adjustment, is a coordination that includes written communication, meetings and personalized "face-to-face" discussions.

The second step is direct supervision, which includes mentoring supervision by the working engineers who also have an important role in the coordination.

Third is integrative leaders where chief engineers also act as lead designers. These first three steps are also part of an integrative social process that is stable and offers long-term employment in characteristic.

The fourth step is standardizing skills that are enhanced by intensive mentoring. Job rotation at regular intervals is part of this step.

The fifth step is standardizing the entire work process among all related departments to produce consistency and keep hindrances to the minimum.

The sixth step is the design standards that include a checklist of every new finding by the engineer for future application in new product development.

The main spirit of these six steps is a continuous high level of standardization that indirectly also makes it possible to gain new knowledge and profit from new discoveries.

The coordination mechanism at the Toyota Production System is entirely focused on consumers' tastes and requirements, while internally, great care is taken to keep communication and transfer of knowledge much smoother.

The above examples serve to illustrate the differences in how American and Japanese car manufacturers approach new product development.

Based on the consumer report in Auto Survey 2001 in relation to the currently more competitive Japanese car manufacturers in comparison to their American counterparts, the American producers certainly have to pay attention to certain areas.

Today, the word "quality" in consumers' minds covers more than "defective products". It is interpreted to include more attributes, such as greater comfort, better performance, tangible amenities, a sense of esthetics, just to name a few.

Like most consumer goods, the prerequisites cater to more than the basic human needs, and also appeal to other human traits, such as status and perhaps a kind of sensuality as well.

In this context, automobile manufacturers in Japan seem to be more responsive to today's more hedonistic customers.

The writer is a lecturer on marketing at the school of economics of Unika Atma Jaya University, Jakarta.