Wednesday, December 5, 2012

Risky Biz

Yeah so I changed the title to avoid either Scientological or commercial (same thing really) liability.....

Soon, unless you like the same boring crap as every other automaton, your favourite thing is going to be cancelled. This is not a new development. Anything remotely defined by being different, is living on borrowed time and it is because of that ominous monstrosity called risk.

Used since the dawn of litigation to not only put a value on fun, but also to quantify how much you can have, and, how much it will cost to have more, risk is the financial impact of a failed plan.

That's the business related definition anyway and that's the aspect (the dominant influence at least) currently pointing a loaded calculator at the head of your favourite product.

If you've seen those stories about Gen Y or Z or whatever being more interested in mobile technology than mobility technology, and the associated cacophony from the automotive opinion-o-sphere, then you have also seen a prime example of how obsessed modern business has become with risk.

Now, any automotive product developed with Gen Y in mind is less likely to succeed (unless it's a rectangle with round corners and we know that can't happen without a lengthy patent war). Therefore, making products for these yoofs is a riskier form of product development. Even worse, these young adults (which have barely experienced life mind you so are hardly in a position to determine what it is they actually want) could reduce demand for automobiles in the future, causing total collapse of car culture and the industry as a whole!

It really is best if everyone just invests in mobile technology and spends all their development cash on thinking of new and exciting apps......

Or, of course, you could do what happened waaaaay back in 1995. I was a mere 20 years old and didn't even want a mobile phone. What I wanted was something that scared the shit out of me, and I got it in the form of a 1988 NSR 250 motorcycle (which I ended up crashing.... often). One thing I had no interest in was Japanese sedans or 5 door hatchbacks. Then this happened:

I was in the back seat (sideways mind you as rear seat leg room wasn't a strong suit for the Impreza) as a friend of mine took the first WRX in Toowoomba for a test drive. The dealer, sitting in the passenger seat, offers some vague permission "it's only just arrived so feel free to make a little noise".

Two seconds later, I'm airborne over the Herries Street railway crossing.

Now the WRX was not the first vehicle of its kind. In fact another workmate had a Mazda 323 Turbo AWD but that was quite soggy and slow in comparison, and when was the last time you saw one of them or a Ford Laser TX3) on the road? Subaru had a hit on their hands which redefined their reputation beyond dependability (which came from their other segment maker the Brumby/BRAT) to a haven for enthusiasts.

Now this may sound counter-intuitive so take a deep breath, 2 bravery pills and try not to sprain your heartilage:

You do not mitigate risk by making a product that is the same but ever so slightly different to the competition. You mitigate risk by making a ground breaking product.

 What seems to be happening lately is that companies try something briefly, accept the outcome of a focus group as representative of society as a whole and decide it best to direct development funds to the current growth segment.

When it comes to growth segments in Australia and the North American market, SUVs are the strongest, which in one dimensional world says "low risk", but you know what? There will never be another ground breaking SUV (I can't remember the first or last one) and it seems that they have become as good as they can get. Where, then, is the room to improve, to become the standard bearer. SUVs are now so similar in specification, and function, and economy, and price, that every single one of them has a higher proportion of direct competitors. That makes every single one of them HIGH RISK with LOW RETURN!

Want more risk? Where do your peers go when they want to know about new cars? Since everyone likes to be perceived as a know it all these days, they head on line. And what type of car creates the most content on line? The kind of car that car lovers love.

The Subaru BRZ sold out in Australia in a single day and it didn't even get as much coverage as the Toyota FT 86. The non-turbo twins are run away hits and it's not because they copied anyone else in their segment. (are they even in a segment with anyone else?)

It was high risk from a one dimensional focus group point of view. Who would want a sports car with meagre torque and cramped accommodation and it doesn't even have a turbo!?! Everyone it seems. It was low risk to anyone who knows anything about car culture and the current state of the industry.

Now forget for the moment, development costs and consider the value of the product. What has it done for Toyota and Subaru as brands?

Toyota has recalled MILLIONS of cars over the last 3 years and Subarus last WRX was such an under-steery porpoise that it had to go back to fat camp before being allowed back out into the public.

All is forgiven because someone finally made something to rave about and it's not even very fast.

Get out of the box and build something different. It's too risky not to.

I know there will be a million risk specialists that will pick at this post because you need to specify the risk in order to attribute appropriate mitigation, but I am referring to net product risk which is a term I just made up especially for this disclaimer. 


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