Business schools are finding an unexpected upside in the crisis facing the auto industry.
The sector’s turmoil is proving to be a valuable teaching tool, and faculty are bringing it into the classroom to spark discussion about big issues like technological change, competition from emerging economies and the relationship between business and government. At the same time, many schools are trying to help car companies weather tough times by bringing managers into executive-education programs or working with firms one-on-one to think through big problems and hash out new strategies.
“From an academic perspective, failures are a great learning opportunity,” and the car industry’s woes have provided plenty of grist, says Carlos Cordón, a supply-chain expert at IMD business school in Lausanne, Switzerland. The sprawling network of dealerships in the American market, tensions between big companies and their suppliers and the snail’s pace at which many manufacturers develop new models have all been the subject of classroom conversation, he says.
The industry is sure to offer more teaching moments as companies struggle to remake themselves for a future likely to include tougher fuel-efficiency requirements and more competition from producers in China, India and other fast-growing economies, he adds. The pressures of the economic downturn are forcing bosses “to make big decisions that maybe they delayed for years, and to execute them very fast,” giving students the chance to observe an enormous transition and see which strategies work, Mr. Cordón says.
The auto industry has long played an important role in business schools, and not just because of its importance to North American, European and Asian economies. Until recently, it was known for pioneering production strategies and management concepts that were later adopted by other industries, from Henry Ford’s assembly lines to the “just in time” and “lean manufacturing” approaches honed decades later by Toyota.
“Traditionally, we’ve had a lot of best practices cases from the car industry,” says Matthias Holweg, an operations management expert at the University of Cambridge’s Judge Business School.
Now it is more often used as an example of how not to do things. In recent decades, Mr. Holweg says, many auto companies have focused on volume, using steep discounts and easy financing to get customers to buy the cars they were equipped to make rather than making what customers wanted to buy.
That approach “has been a worst-case study for many years,” Mr. Holweg says, and the industry is now paying for it. “The credit crunch killed the financing and that killed the volumes, and led to this very, very fast spiral” downward, he says.
Another widely cited “how not to” is the tenor of the auto industry’s relationships with its suppliers. Too often, the major players have pressured suppliers to cut costs, share technological know-how and expand into new markets, using their weight to extract concessions rather than cooperating with those who sell them equipment and parts, says Pedro Nueno, executive president of the China Europe International Business School, based in Shanghai.
As the threat of global warming grows and oil prices remain volatile, car companies have also been too slow to produce the smaller, cleaner cars likely to be the industry’s future, industry experts say. The importance the financial sector has placed on quarterly results has pressured American and British firms to churn out profitable SUVs rather than putting money into new ideas, contends Paul Nieuwenhuis, co-director of the Centre for Automotive Industry research at Cardiff Business School in Wales.
One lesson that’s not yet ready for the classroom, Mr. Nieuwenhuis says, is the impact of the U.S. government’s auto bailout. “We do have discussions about it, but we haven’t finished that chapter yet,” he says. “We need a few more years to see what the outcomes are.”
Business schools say they want to help the industry as it contemplates a future likely to be drastically different from its past. In executive-education classrooms, at gatherings of auto-sector experts and in one-on-one consulting sessions, they are trying to help managers chart a new path.
CEIBS, the China Europe business school, holds a conference for industry executives and experts every year in Shanghai, and another in Barcelona, Spain. At the Chinese meeting in mid-November and the European one near the end of the month, the role of electric cars and hybrids is likely to be a big topic, Professor Nueno says.
Also on the agenda is the fast growth of China’s car market and its manufacturing capacity.
In Belgium, the Solvay Brussels School of Economics and Management launched an executive-education program for auto companies and their suppliers early last year. Its academic director, Bernhard Adriaensens, says he had encouraged participants to use the course as a chance to reflect on long-term strategies instead of day-to-day struggles. “They feel an immense pressure,” he says.
Peter Vanstraelen, a Belgium-based BMW executive who recently completed the Solvay program, says hearing faculty and guest speakers discuss unfamiliar areas like retail and leasing had given him a useful new context for his work on the financial side of the company.
“It forces you to take one step backwards to look at things from a perspective which you wouldn’t do otherwise,” he says. Especially during difficult times, “It helps to really have a broader overview when you consider things, when you have to propose some decisions.”
But with money tight, many car companies see such programs as a luxury. At IMD in Switzerland, director of partnership programs Tania Dussey-Cavassini says that customized courses for auto companies were down about 30%, compared with a 20% drop overall.
For those still enrolling staff, keeping executives motivated amid layoffs and other cutbacks has been a top priority, she says.
Cambridge’s Mr. Holweg, who served as academic adviser to a recent British government effort to help the country’s car industry plan for the future, says companies had to accept that their hundred-year-old business model no longer works. Responding more nimbly to customer demands and moving toward clean technologies like electric cars are imperative, he says.
“What worked in the first automotive century clearly will not work in the second,” he says.
By : Beth Gardiner
Source : Wall Street Journal (12/11/2009)
Related post : How to build top performing Management in the automotive industry?
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©-2009 Marketing Automotive – Bernhard Adriaensens – International Consultant in Automotive Marketing and Management
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