A news item was flashing all over the newspapers, news magazines and various channels of television screen. It read like this: “Finally, the local sleeping elephant has woken up and decided to venture into the rapidly expanding car market of the country. It’s very ambitious entry of Supreme Motor Company Ltd into a market that has already been captured by the foreign multinational companies. Their cars embody latest world class technology, contemporary style and excellent finish. Why should anyone buy the cars of Supreme Motor Company who has decided to make the cars totally indigenously?”
Only the hard core specialists knew that the only local company of the country that was capable of manufacturing the cars as good as the foreign cars was Supreme Motor Company Ltd. And the chairman of Supreme Motor Company carried this conviction too. But no one else did.
After a few months of this news, another news was flashed as breaking news: “Supreme Motor Company breaks all the previous records. It is going to launch the car four months ahead of the scheduled date. The company’s “time-to-market” a car is the new benchmark. The company has already opened up the bookings. Customers can book the cars of Supreme Motor Company right away by paying the booking amount.”
Another news item came in soon. “Unprecedented booking amount collections by Supreme Motor Company for their soon to be launched all indigenous car.”
Finally, the final day came and the cars were rolling out of the assembly line of the company’s car unit. The first customers felt proud of their prize possession.
But their joy and happiness of possessing the car lasted only a few days.
Very disturbing news of accidents of the cars just sold by Supreme Motor Company started appearing in the news columns. Automotive analysts were reporting car’s various defects by the day. They found that the car was infested with serious technical bugs- some of them even endangering the safety of car. The awful news and along with it hundreds of gossipy stories started circulating far and wide very rapidly.
And it all ended soon with one more breaking news: “Supreme Motor Company has refunded the entire booking amount to the customers who had booked the company’s car. The company has stalled the car’s production and sales. It will announce its further course of action later on.” The news editorials added: “In view of the heavy investments made by the company through various borrowings, the company is expected to reel through pretty good degree of losses for several years to come. The exact damage is yet not known. It was a bad dream of the chairman of the company.”
What led to this dismal disaster of an ambitious project of a competent local automotive company? Let us turn back the pages and read below the events that led the company to this type of catastrophe. Read on:
It all started around the time a couple of years before the above-mentioned fiasco took place when the world economy took a turn to globalization and liberalization. This particular country where Supreme Motor Company Ltd was located had no choice but to join the circus. So, the country was undergoing metamorphosis.
Many multinational companies or foreign companies had already an eye on this country for quite some time. They were already seriously planning to make inroads into it. This country provided them a promise of making enormous money for them due to various reasons. Now the opportunities had opened up. The initiatives taken up by the already well-to-do nations for free world trade had already resulted into opening up the doors of many countries of the world which were otherwise closed to them. So they started flowing into all those countries including the country we are talking about here. They made the entry via various economic propositions of producing and selling their goods and services in this country. They emphasized that it would create great employment opportunities for the citizens of the country.
Within two to three years, the markets of this country were glutted with foreign companies, multinational companies and their products. Brand new products started flashing in. These new products included cars, scooters, motor cycles, mobile phones, computers, refrigerators, televisions, washing machines, microwave ovens, fashion garment, beauty aids and what not.
With the advent of new investments by the foreign companies, the employment opportunities in the country increased significantly. More people got employed and the salaries shot up too. It created a new buying power that was never ever seen before.
A sense of competition could be felt everywhere. Consumers started having choices of products and services that were totally absent previously. Suppliers’ market turned into customers’ market. The monopoly of the local companies was rapidly petering out. They were left with no choice but to compete with the new entrants into the market if they had to survive. In the process many of the local companies fell by the side, many were limping and a few came out strong.
Considering this, one of the local companies was keenly studying the possibility of steering itself into this scene. This company was Supreme Motor Company Ltd. So far, it was into manufacture of commercial vehicles and it enjoyed a strong presence in that market. The chairman of the company assessed that the company should start manufacturing cars because the people were becoming more prosperous and they would need cars; it presented a big market for the cars. And he assessed that they should do so soon before it is too late since already couple of foreign companies had established their roots in the country and customers were already getting used to the cars produced by them. Their cars were like chick and smooth apparently with no flaw and incorporated the latest technology.
The chairman of the Supreme Motor Company was looking out for a right person as a leader to head the new car project. And who could have been the better choice than his deputy managing director Joe Peterson. He was considered the most devoted employee of the company. It was famous knowledge among the most insiders that he would go to any length to produce the existing products i.e. commercial vehicles well ahead of production and delivery schedules. Joe Peterson was heard many times saying, “I will do anything for this company. I am capable of murdering those who will come in way of production of the vehicles. People were in his awe and used to fear him a lot. He had also become management’s pet.” Since it was a sellers’ market, timely manufacturing or production was the focus of every organization and Peterson was achieving it. Nobody bothered whether he did so by hook or by crook- after all, it was immaterial in sellers’ market.
Due this very quality of Peterson, year after year, he used to complete the yearly production target well ahead of schedule and used to allow merry making to his workers right in the assembly line for two to three days at the end of every year. And for himself, he used to collect a very special award at the hands of the chairman of the company every year in addition to the frequent promotions he had got used to. He was the most and the fastest promoted employee of the company. Starting as a junior supervisor on the production shop floor, after taking a mere diploma in mechanical engineering from a non-descript institution, he rose to the level of deputy managing director in less than 20 years. People used to marvel at his meteoric growth in the organization.
So, Joe Peterson was the obvious choice of the chairman of Supreme Motor Company when it came to decide about the new leadership of the ambitions car project. Peterson promptly agreed; his eyes were fixed on taking over as managing director and he thought that it was the best route to reach there.
On the very first day of his appointment, as the head of the car project, he got busy and started slave driving his staff as per his native style. He was an out and out autocratic manager with a stick in his hand most of the time. Occasionally, at other times, he would patronize and distribute bribes to the people in his coterie- yours truly types. He sang songs of high class discipline and to him discipline meant total obedience. Those who asked questions or gave unsolicited suggestions, howsoever brilliant and creative, were the targets of his ire. Due to this many competent engineers and managers left the organization or took transfers. He was mostly happy dealing with the sycophants in his coterie who were by and large mediocre.
Joe Peterson committed a date of launch of their new car to his chairman. He wanted to maintain his reputation of delivering things ahead of schedule and made an announcement of that sort to the media.
He started exercising undue pressures on his suppliers and vendors. Under pressure, they started making deliveries of outsourced components in time but compromised on quality standards. Joe Peterson knew about this lacuna in quality but he was a past master in this game and closed his eyes to it. He was extrapolating his experience of the environment of sellers’ market of commercial vehicles into making of the cars. He ignored the fact that the car market was no more a sellers’ market. And customers demanded world class safety and quality standards in their cars and they were already getting them from the existing car manufacturers of the country by now.
One more thing he did was to bring in few of his relatives and friends as the vendors and obliged them though they were novices for the automotive industry He even financed them from Supreme Motor Company and that was not ethical. These vendors were utter failures.
In addition, he was not allowing adequate time for testing of the components, sub-assemblies, assemblies and the complete car. He just did not have time for complete and elaborate testing procedures that a car needed before sending it to a customer. His top most priority was meeting the deadline announced by him to his chairman and to the press so that he could steal the lime light as per his usual habit. So he started cutting corners on testing.
He started making all the people in the car team to work over time. They were made to work 12 to 15 hours a day and they were getting tired and making numerous mistakes. It resulted in heavy rework and the quality suffered seriously further.
And he rolled out the first batch of cars from the assembly line four months in advance of the official scheduled date. Among the thunderous applause from the audience consisting of the chairman of the company, guests, suppliers, vendors, employees and journalists, Joe Peterson's photographs were clicked a thousand times and he was all over the television and newspapers within no time. He had turned into a hero, a celebrity overnight.
And the bubble burst when this hour of glory was followed, after a few days, by this breaking news: “Supreme Motor Company has refunded the entire booking amount to the customers who had booked the company’s car. The company has stalled the car’s production and sales. It will announce its further course of action later on.” The news editorials added: “In view of the heavy investments made by the company through various borrowings, the company is expected to reel through pretty good degree of losses for several years to come. The exact damage is yet not known. It was a bad dream of the chairman of the company.”
Soon a high level task force was set up by the chairman of the company to find out the root causes of failure of the car project. Within a week the task force submitted a confidential report to the chairman with its detailed findings.
The next day morning, Joe Peterson was not allowed to enter the company’s entrance gate by the chief security manager of the company. He gave Peterson a formal letter of the company dismissing him from the services of the company. He got one more packet containing some more related documents and a check towards full and final settlement to him from the company. He did not utter a word and retreated towards his home.
(The company kept up its work of eliminating all the bugs in the car. That took the company some two more years. During this period, the company suffered huge financial losses. After perfectly testing the car for safety, overall quality and performance, it was re-launched and it became a big success and paved the way for its future cars).
Related Books
1. "Sensitive Stories of Corporate World" (available from Amazon, get it online as a paperback or an eBook)
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2. "Sensitive Stories of Corporate World (Volume 2)" (available from Amazon, get it online as a paperback or an eBook)
Read many more management anecdotes/management case studies in the eminent author Shyam Bhatawdekar's best selling book "Sensitive Stories of Corporate World (Volume 2)" available online from Amazon as an eBook as well as a printed book.
Other Related Reading
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For “out of box thinking” articles by Shyam Bhatawdekar, refer: (Out of Box Ideas) http://wow-idea.blogspot.com/
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