Is it Worth Investing in the Mitsubishi Brand? Some Alternative Scenarios For Nissan to Consider

Last week, Nissan announced that it will purchase a controlling interest in beleaguered Mitsubishi Motors, after Mitsubishi suffered a significant setback when caught cheating on emissions tests. 

'Nissan Chief Executive Carlos Ghosn said the two would now share and jointly develop technology, and could realize 'billions' in synergies by coordinating purchasing, plant utilization and cooperating in growth markets. (1)'

Mr. Ghosn also said, 'We are determined to preserve and nurture the Mitsubishi Motors brand. We will help this company address the challenges it faces, particularly in restoring consumer trust in its fuel economy performance.' 

Does it really make sense to 'preserve and nurture' the Mitsubishi brand? Is is just a matter of restoring trust in fuel economy? Or does the problem with the brand run much deeper? Does the newly formed alliance run the risk of squandering some of those 'billions' by investing in the Mitsubishi brand at all?

The fact is that Mitsubishi is a lackluster niche automotive brand  (FY15 global sales totaled around 1 million units) that has languished for years due to previous scandals and mismanagement. As a matter of fact, most analysts were sounding the death knell for Mitsubishi in the US market prior to the emission scandal. And even its purported strength in ASEAN is more than likely driven by the supply of low priced vehicles from its plants in Thailand and the Philippines, rather than real market demand. 

Source: Automotive News

So while Mr. Ghosn talks of brand value, his real motive is likely to give him a new opportunity to work his famous cost cutting magic to deliver shareholder value. 

And while the 'billions' in potential synergies make this deal attractive regardless of brand value, is there a way that this acquisition could help Nissan solve some of its own brand challenges? Could Mitsubishi play a completely different role in Nissan Motor Corporation's portfolio of brands?

A few thought starter scenarios:

1: A Jump Start for Datsun ?

Three years ago, Nissan re-launched the lower priced Datsun brand in India. Two years ago, it launched Datsun in Indonesia and South Africa. Sales have yet to meet expectations. By combining Mitsubishi and Datsun in these countries, could the existing Mitsubishi dealer body give Datsun a ready made distribution network? Could Mitsubishi's Kei Cars and inexpensive pickup trucks combined with Datsun's Go model create an 'instant' full line of low priced products to serve the market for which Datsun was created? Done well, a Datsun rebranding could help erase Mitsubishi's baggage while jump starting Datsun progress.

Datsun would be poised to fast track expansion not only in its current markets, but in other developing LatAm, Southeast Asia and African markets where Mitsubishi already has a presence. 

2: A New Eco Brand?

The Nissan-Renault alliance has been a pioneer in electric vehicles. But sales have ramped up slower than expected, and scale is the key to electric vehicle profitability. Given their small role in the larger Nissan and Renault portfolios, electric vehicles have not received the attention that they require from the sales and marketing organization to succeed. 

What if the Alliance was to launch an all-new, all-electric brand for the mass market? In this scenario, Mitsubishi's relatively small size can be turned into a valuable asset. Mitsubishi has fewer dealers who are very used to operating with limited product portfolios. This is the ideal situation for an all electric franchise. In addition, it plays to Mitsubishi's strengths in Japan as an eco-friendly fuel efficient brand. And by focusing all sales and marketing efforts on electric, Nissan Motor Corporation just might just be able to be the first manufacturer to deliver 1 million electric vehicles.

3: A Transformation Hot House?

Of course, the elephant in the room is that the car business is in the process of undergoing significant change. In as soon as 10 years, the business will likely look nothing like it does today. Car sharing, autonomous driving, new revenue streams will transform the business. Some pundits even suggest that as the industry transitions from a product to service oriented business, individual product brands will become irrelevant, much like aircraft brands are irrelevant to fliers. Instead, the differentiation will come purely from branded service offerings.

What if Mitsubishi became the Alliance's real time experiment for transformative business models? Could the Alliance pioneer a new service brand for which Mitsubishi plants become the exclusive supplier of vehicles used to test and fine tune new services and business models?  This would allow the Alliance the freedom to invest solely in developing and marketing the new service brand, rather than trying to build demand for Mirages or Pajeros.

While each of these scenarios come with their share of difficulties and risk, it's quite possible that the Nissan Alliance could achieve might greater ROI on it's investment in Mitsubishi by trying something new, than by trying to preserve and nurture the Mitsubishi brand.

(1) Source: Reuters

The Force Awakens: An Unlikely Leader of the Automotive Revolution?

For the past few years,Tesla has been the definitive poster child for automotive innovation. But lately, there is reason to believe that while Tesla may have started the revolution, the real winners might just be the same companies that have dominated the automotive landscape for decades and more. And the one best poised to lead the way may be General Motors!

From a business perspective, the winners of the revolution will be the ones who are first to deliver zero emission, fully autonomous transportation to the masses. But they will also need to be be the ones that are perceived as innovative, trustworthy leading edge brands.

The Business Case

For years, Elon Musk has been promising the $35,000, 200 mile range Model 3. Rumors suggest that he is getting ready to reveal it early this year. But Tesla has a history of revealing concepts up to 3 years before they are actually available in market. So it is unlikely that we will see a production vehicle until at least 2018.

And while everyone has been waiting for the Model 3, at this year's Consumer Electronics Show, General Motors revealed the Chevy Bolt ...an all electric, connected car with over 200 miles of range, and a starting price before government incentives of $37,500. It will be available for purchase before the end of this year, with transaction prices likely to be in the low $30,000's!

That's right, Chevrolet, the brand known for gas guzzling pickups and General Motors, the company that struggled with bankruptcy and massive recalls just a few short years ago is beating Tesla to market!

But just because GM and Chevrolet have won this battle, are they really equipped to lead the revolution? It seems much more likely than ever before. 

Consider the fact that General Motors has made a major investment in ride sharing company, Lyft. And last week, it announced the creation of a new, car sharing brand, Maven. 

Of course, General Motors is not the only car company experimenting with other mobility models. And while Lyft and Maven are steps in the right direction, car sharing as we know it today is still not the end game. Uber and Lyft rely on a peer to peer business model, with drivers responsible for car ownership and maintenance. 

But in a world of fully autonomous ride sharing, who will own the cars? Where will they be stored? Who will ensure that they are clean, adequately charged, and properly maintained? 

And while most conversations about autonomous vehicles center on urban transportation, Americans like their road trips. How will autonomous vehicles travel across the vast expanses between US cities?

A Secret Weapon?
Could the much derided dealer franchise system be the solution? After all, they have the real estate for storing vehicles not in use. They have floor plans to finance large inventories. They have service bays for maintenance, cleaning and charging. So repurposed dealerships could very well be General Motors real secret weapon. The fact is that ~25% of the 15,000 + car dealerships in the US are General Motors franchises...more than any other manufacturer. And these dealerships are not just in the large cities, but in virtually every small town in the US, in locations that can facilitate autonomous road trips.

The Brand Case

So now, the question remains, can General Motors be trusted? Can General Motors be seen as delivering products that are as innovative and desirable as Tesla, or even another likely competitor, Apple?  

They may have a good chance if they continue to use marketing and PR to leverage two of their biggest assets, Mary Barra and Chevrolet. Mary Barra has put a human face on General Motors...something that helps technology companies seem approachable and trustworthy. Her performance at CES left no doubt for her commitment to the future. And one might argue that her presentation skills are vastly better than Elon Musk's!

Chevrolet, at its core is a great American brand that suffered some setbacks in the dark days of General Motors. But Chevrolet today is a surprisingly innovative brand that's making great product again. Even its entry level products are sporting cutting edge safety technology...a precursor to autonomous driving. And this is why their 'focus group' advertising campaign is urging car buyers to rethink and rediscover the brand. In addition, as part of its partnership with Lyft, GM will allow drivers access to Bolts, raising Chevrolet's profile as an innovator.

So is General Motors a slam dunk for leading the revolution? No one is at this point. But even Elon Musk must be paying attention to this reborn competitor.

27 Years After Lexus - Can Hyundai's Genesis Challenge the Leaders?

27 years ago, Toyota successfully introduced the Lexus luxury brand to a new generation of American consumers. In it's 'relentless pursuit of perfection', it built great product at a great price. And, perhaps most importantly, it created a dedicated network of dealers who were committed to offering class leading customer service and experiences.  Lexus and its dealers pledge to excellence, the 'Lexus Covenant', drove the organization to always put the customer first. Today, Lexus consistently ranks within the top 3 luxury brands in the US.

Recently, Hyundai announced that they will be launching a new luxury franchise, Genesis in 2016. It will be the first time in over 25 years that a mainstream automotive brand will attempt a move up market. Unlike Toyota, Hyundai will not require dealers to build a stand alone facility, but rather, Genesis will use a 'store within a store' concept. 

Can Genesis establish credibility in the luxury space when their buyers are sharing physical space with Hyundai buyers? Can it credibly compete with established luxury brands like Mercedes, BMW and Lexus? 

Assuming Hyundai takes advantage of all that has changed since Lexus was introduced, the answer to these questions is likely yes. The three driving forces that will enable Hyundai's success are technology, an evolving competitive set, and a new generation of customers.

First, technology has enabled brands to leverage digital points of experience in ways never possible when Lexus was launched. Uber has demonstrated that pain points can be eliminated and value can be created strictly with the smart use of technology.

Digital Points of Experience?

Secondly competitive reference points have shifted. As automotive luxury brands continue to chase volume by reaching further and further down market, the definition of what luxury means has become blurred. How far can a badge stretch before it is devalued? And while these brands continue to tell the old luxury stories of craftsmanship and performance, Tesla has entered the market above them with a new storyline of innovation. Tesla's innovation permeates every aspect of the customer experience, and is creating a new luxury value equation that may very well appeal to a new generation of buyers.

New Luxury Value Equation?

Which leads to the third driving force, Millennials. Just like Boomers, aka Yuppies were entering their peak earning years when Lexus was launched, Millennials  are entering their peak earning years right now. And by 2018, Millennials are projected to become the largest generational segment in the luxury market.  

The Changing of the Luxury Guard?

Millennials have different expectations of luxury brands. They are less impressed with badges, and more impressed with the corporation behind the badge, and its commitment to society. For the 'we generation, luxury brands should be inclusive, rather than exclusive. Millennials expect that higher price points will deliver exponentially higher intrinsic value.


How can Genesis capitalize on these trends?

• Genesis can augment physical customer experiences with digital points of experience that will help them to achieve the deep one-to-one relationships that are hallmarks of luxury brands. With digital prowess and a customer orientation, Genesis could architect the premier automotive luxury experience.
• Because Genesis is not creating a dealer network that feeds on volume to cover its rent factor, Genesis has the luxury of supporting a premium-priced, higher profit per unit product line. This, in turn, has the added potential to raise Hyundai's price ceiling and profit, thought their close association.
• Genesis can advance its brand story along the lines of the new luxury brand equation by tapping into its parent company's roots to take the idea of 'New Thinking, New Possibilities' to a whole new level. Just like Hyundai raised the bar for mainstream brands with its 100,000 mile warranty, Genesis can raise the bar for traditional luxury marques with innovations in product, financing, service and ownership. They should look to technology companies and even ultra-premium automotive brands for inspiration in creating exponential customer value.
• In marketing, Genesis should position itself in a category of one, at the forefront of a new definition of luxury. It should create an inclusive luxury brand by encouraging audience engagement and participation at every step in the customer journey. It should develop and amplify strong CSR initiatives that contribute to the greater good of society. 

And, while creating a new luxury brand is a daunting task, if all goes well, sometime in the not too distant future, Mercedes, BMW, and Lexus, might need to begin their relentless pursuit of Genesis.

VW Lessons Learned: Why You Can't 'Position' Trust

Like everyone else remotely aware of the car business, I have been watching in shock as the VW emissions cheating scandal plays out. Suffice to say, VW Group has foolishly squandered the most important driver of brand equity and corporate reputation...it squandered years of hard earned trust. 

And it has done so at a time when corporate reputation is becoming almost as important as the efficacy of products and services in driving purchase decisions.

Consider these startling statistics from Cone Communications 2015 Global Corporate Social Responsibility Study:

• 80% of consumers would be willing to buy a product from an unknown brand if it had strong social and environmental commitments
• 57% would purchase a product of a lesser quality or efficacy if it was more socially or environmentally responsible

Moreover, in a 2014 study by Weber Shandwick, 40% of those who liked a product they owned and were were surprised that product came from a company that they didn’t like, stopped buying the product.

So, here is VW Group. Owner of some of the best known and loved automotive brands in the world, with one of the strongest reputations for quality caught lying about their environmental responsibility! How could this have happened??

While no one knows for sure, I decided to do some research on corporate reputation and social responsibility. Every year, the Reputation Institute publishes their 'Global Trak 100' ranking of corporate reputation.

Their methodology is quite simple with 7 factors including governance, leadership, and social responsibility comprising their ratings. And while some companies can be good in one or two areas, how do the top companies excel across the board? I decided to look at the stated commitments that the top ten companies on the Reputation Institute's list make to their stakeholders.

These top ten include companies like Google, Daimler, Lego, Apple, and Intel. Each one states a clear social purpose for their being that goes directly from their core business out to the benefit of society:

• Google: Organize the World's information and make it universally accessible and useful
• Daimler: Playing a pioneering role in the ongoing development of mobility, especially safety and sustainability
• Lego: Inspire and develop the builders of tomorrow
• Apple: (as stated by Steve Jobs): To make a contribution to the world by making tools for the mind that advance mankind
• Intel: Foster innovation worldwide

When I searched for a comparable statement from the Volkswagen Group, I found this: 

• 'To position the VW group as a global economic and environmental leader among automotive manufacturers.' 

This statement falls short of the leaders in 2 critical areas.

1) 'Positioning' is becoming an Obsolete Practice

First and foremost, in a post scandal context, the word 'position' jumped off the screen! Perhaps it was the most important word in the sentence. 'Positioning' typically involves the shaping audience perceptions by telling them how you are different and better than others. And the idea of positioning relies on the obsolete assumption that your audience will patently believe what you tell them. 

The fact is, brands and companies can no longer 'position' themselves, but rather audiences position them based upon the brand and company behavior. Take Audi's 'Truth in Engineering' tagline. While it told you Audis desired positioning, this has now been exposed as a blatant lie. Audiences will likely position Audi completely opposite from its stated position.

2) Social purpose is becoming corporate cost of entry 

Secondly, the statement references its desired outcome as a competitive benchmark, rather than a positive societal impact. In a global study conducted by Cone Communications, 94% of consumers expect companies to be in business not just to make profits, but also to actively support broader environmental and societal issues. 

Simply put, companies should be in business for a greater purpose that goes beyond profits. And that purpose should become the north star for everything that the organization does. And that's what the companies at the top of the Corporate Reputation list do.

For instance, Lego, is committed to inspiring and developing the builders of tomorrow. They deliver on that commitment in every corporate behavior..from their core business and theme park, extending through all of their CSR initiatives.

Only time will tell if VW Group can rebound from this current scandal. But is is probably time for some deep soul searching for VW to discover their purpose, make a public commitment to fulfilling that purpose, and behaving it every day in every corner of their company.

Car Dealers Beware. Why Protecting the Franchise System is the Least of Your Worries.

Much has been written about Tesla's challenge to dealer franchise laws. Most automakers don't think that Tesla's model is sustainable at high volumes. And while time will tell who is right, automakers and dealers might be missing the bigger disruptions that are about to rock the foundations of the dealership business model.

On the new car side, dealer profitability has traditionally been generated from the three fundamental components of most new car purchases: selling price, trade in allowance, and finance and insurance income. And a peek into the future suggests that all three components will be disrupted as technology and mobility continue to converge.

Let's start with the easiest of the three, price negotiation. While it is still a common practice, True Car has already leveled the playing field. Tesla has eliminated negotiation from their process. Even Lexus is experimenting with no haggle pricing. Expect this trend to continue until price negotiations are a thing of the past.

But that's only the beginning. What about trade-ins? This is a practice that is a vestige of pre-automotive horse trading. The fact is trading a car into the dealership results in higher prices for customers. While most buyers know they can make more selling their car to private parties, historically this has been a random, risky and time consuming process that delays the new car purchase. So most customers trade-in their car for the sake of convenience and expediency. 

But technology is about to change this. The recently launched Beepi, is likely the first in a series of technology enabled start ups that have the potential to do to the used car business what Uber did to the taxi business. 

Beepi has taken the risk and inconvenience out of private party used car sales. From a 30 day sales guarantee, at a higher price than dealer trade in allowance, to managing the payment process, registration and delivery, Beepi has created a viable alternative to the trade-in. And this creates the potential to finally de-couple trade-ins from the new car deal.

That, however is just the tip of the iceberg. What if used cars didn't exist at all? It's not as far fetched as it seems. Elon Musk has already stated his intent to re-use Tesla batteries to power the grid, so the idea that cars could be dismantled, repurposed and recycled is not so far out there. And like all technology products, cars can be modularly upgraded so that they are likely to last until they become obsolete, and unsellable. And a world without used cars will have a knock on effect to the third part of the transaction, financing. The first casualty will be leasing...as it will be impossible without a residual value.

In addition, as we move to fully autonomous driving vehicles, it is more likely that these vehicles will be shared than owned. In a scenario where there are no owners, only users, the idea of new vs used becomes somewhat irrelevant...as does the purchase transaction itself!

And of course, modularly upgraded cars and autonomous car sharing changes the dealership service business model as well.

So instead of worrying about whether or not Tesla will disrupt the franchise model, perhaps automakers and their franchisees should be thinking about what the new automotive franchise business model will look like post auto/tech convergence. For in the end, it's not about who owns the business, but rather what the business is.

Why Car Companies Shouldn't Wait For Autonomous Driving to Emulate Uber

Sometime in the not too distant future, your personal car experience is likely to be just like today’s Uber experience…you will pick up your smartphone and summon your car. Your phone will notify you when it is at the door, ready to pick you up. When you arrive at your destination, it will drop you off and go park itself.

And while autonomous driving will transform everything about driving and owning cars, car companies need not wait until then to look to Uber for ideas to transform their customer experiences.

Uber has been so successful, even in the face of regulatory challenges for one simple reason…Uber used insight and technology to create new and better digital points of experience to eliminate or augment significant physical pain points in the conventional taxi/limo experience.

And while the car business has come a long way from the days when dealers threw your car keys on their roof to force you to buy a new car, the automotive purchase and ownership experience is still fraught with more pain points than most other categories. And in some cases it has taken third party disrupters, like True Car to bring relief to an obvious pain point, lack of pricing transparency, that automakers easily could have eliminated themselves.

So what can car companies learn from Uber? How can they pre-empt third parties and fend off new competitors by taking back and transforming the customer experience? How can they leverage technology and customer behavior trends in their favor?

While most car companies have created a few customer apps, they tend to be 'one offs' such as captive finance apps that help manage payments, or electric vehicle apps that help monitor range and charging levels. Because Uber realized that the actual ride was only a fraction of the entire experience, they developed a seamlessly holistic app that guided their customers and drivers through the entire process, providing the right information at the right time.

A fresh look at the process in a holistic and empathetic manner will allow you to discover new opportunities architect an all-new, technology driven customer journey that will drive better and more frequent brand experiences that will engender greater customer satisfaction and loyalty. 

Some things to look for:

Address disconnects and pain points

Collaborate with your dealers to tackle the most brutal pain point of all…the F&I, (finance and insurance) process. Uber understood that cash was inconvenient; that tipping could be confusing; that splitting a fare could be potentially embarrassing; so they stepped in to address these issues. 

Today’s buyers are used to on-demand, transparent experiences, while F&I remains largely a mysterious, intimidating, time intensive process that can leave the customer second-guessing. The benefits of an app driven F&I experience that confirms approval and payment terms prior to stepping into the dealership include higher levels of customer satisfaction, increased captive finance penetration, better traffic quality and greater dealer operational efficiency. All of which can be accomplished without sacrificing dealer autonomy or F&I income. 

Other areas to consider: trade in valuation, service appointments, recalls, etc.

Look for new opportunities to add value throughout the ownership cycle

Automakers should view the entire purchase and ownership experience through the lens of their customer's world. How does your car fit in their lives? How can you help to create better customer experiences?

Should your app monitor gas mileage? Or better yet, should it anticipate when you need to fill up and direct you to the gas station with the best gas prices? 

Should it help you find a parking garage? Or better yet should it contact an on demand valet to meet you at your destination and park the car?

Ask customers  to rate every interaction with your brand and make the results public

While a few of your dealers might bristle at the thought, the good ones will view this for what it is...a marketing opportunity for their dealership to garner positive word of mouth and greater levels of trust. And that trust will halo back from the dealer to your brand. It will also finally force 'problem' dealers who are hurting your brand to raise their game or go home. This should eliminate the need for the age old 'come to Jesus' interventions that rarely yield positive long term results.

Think in the future tense

It is important to also remember that Uber is not only a technology play that eliminated pain points, but that Uber is also a lifestyle play that capitalized on the emerging sharing economy to develop a peer to peer business model. Automakers should be looking for insight into other nascent trends that will create new opportunities for their business, and allow them to be authors of history of the future.

Making a Dent in the Universe

'We're here to make a dent in the Universe'... Steve Jobs

Many brands have mission statements about 'enriching people's lives', 'making life better', or even 'changing the world'  but in most cases, it's about making things incrementally better in relatively small ways. But a select few have actually managed to do so on a scale that forever dents the universe.

What separates brands that make a true dent vs a repairable scratch? While there is certainly some magic, brilliance and luck to any success story, by looking at Apple and other brands that have dented the universe, four consistent patterns emerge. And while there is certainly more to it than these four principles, following them may increase a brands' chances to dent the universe.

1. Having a huge, future focused, and very concrete vision of what the end game looks like. 

When Steve Jobs came back to Apple in 1997, he began to imagine a digitally transformed world. By 2001, he spoke of the digital hub, and imagined a future where personal entertainment, information, communications, and images were all interconnected. While he didn't have all the answers yet, he had a strikingly clear vision of the end game.

Similarly, Google's ambition is to organize the world's information, and make it universally accessible and useful. While they started as a search engine, clearly, they were already headed down the path to be so much more. 

Tesla's vision does not stop at cars but rather endeavors to transform the economy from 'mine and burn hydrocarbon' to 'solar based electric'. 

Brands that can clearly articulate their end game are much more likely to deliver on their promises than brands that stick to nebulous promises of better living or better world.

2. Having a focused strategic plan that connects today's actions to tomorrow's vision.

While a concrete vision is the first step, a viable strategic plan that is connected to that vision is just as important. How are you going to migrate your product and service offerings along a trajectory that progressively marches towards your end game? How are you going to match that migration to available audiences along the way?

When Jobs first spoke of the digital hub, he'd already realized that there was indeed a real business opportunity, first by monetizing digital music, for 'music lovers'. and then by moving beyond entertainment to monetize other human passion points. He knew that Apple could build a sustainable business by connecting people to what mattered most to them. This idea laid the strategic groundwork for the success of iPhone, iPad, and even the Apple Watch. 

And while those products fueled growth, perhaps as important was that the plan gave Apple permission to eliminate products and ideas that did not fit with the end game.

Google may have begun with search, but quickly added images, maps, calendars, video, etc that would make them the 'go-to' source for all information, including user data that could be monetized to fund more and more new product development.

Amazon, in its quest to become a 'customer centric place where people can find and discover anything they want to buy online', started with books, but quickly migrated to DVD's, toys, and beyond, as they steadily added categories and customer services that aligned with their vision.


3. Creating your own inflection points

If you are going to dent the Universe, you can't wait for change, you need to create change. Brands must understand key barriers to, and accelerators of adoption, and be prepared to include those in their plan.

By offering iTunes with iPod, Apple used content to accelerate adoption. App availability was key in driving iPhone adoption.

By creating AdWords in 2000, Google was able to virtually own the nascent SEO category.

Similarly, Elon Musk knew that in order for electric to be viable, you needed a charging infrastructure...which, in addition to accelerating adoption of electric vehicles, also serves as another proof of concept of Tesla's broader mission.

4. Telling the story from day 1
Transformative brands need believers and evangelists to go with them, and spread their message. And they need that message to lay the breadcrumbs for the future through thematic messaging that can carry through the evolution of the brand, and ultimately pay off the end game.

Rather than focus on bits and bytes and category specific features, Apple's story has always been about seamless ease of use and personal empowerment. And every new Apple product introduction advances, rather than interrupts the story. And every Apple communication advances that same story.

And ironically, becoming a storied brand requires more than just telling stories. It requires turning every experience into media, and ensuring that those experiences pay off the larger brand story. Google's home page screams simplicity and access. From one click shopping, to Amazon prime, to same day delivery, Amazon advances their customer centric story.

And if brands follow these four steps, and surround these fundamentals with ground breaking innovations that serve universal unmet needs, they can truly dent the universe. 

And when they do, it will be as much of an 'Aha' as it is an 'Of Course!'.