50 Years of Honda in the USA

The new issues of Automobile Magazine just showed up, and in it is an article about the 50th anniversary of Honda arriving in the USA. Honda had a presence as a motorbike company in the US long before it was a car company. How it was able to create a toehold that blossomed into an industry-changing dominance - essentially killing the British motorbike industry in the process - is the stuff of business school legend.

I wrote up a version of this story for my book (which is coming along nicely, by the way), but it didn’t make the cut. I was going to use it as an example of how companies which are adaptive to the changing environment, and their unfolding understanding of the market context, will be able to jump on opportunities as they arise, rather than sticking doggedly to a pre-ordained strategic plan. Here it is below.

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In the late 1950’s Honda contemplated a bold move: entering the motorbike market in the United States. We all know how this story turns out — today Honda is a dominant player in the US, selling a wide range of models in large numbers. But its start could not have been more improbable or less likely to succeed. It was only by staying flexible to an emerging understanding of what the problem — and the opportunities — were, that Honda succeeded in its long shot.

Honda had done well in its native Japan, leaping in a short amount of time to the number one position largely on the strength of its Super Cub model, which was based around a new lightweight, 50cc engine that Honda had developed. The engine was inexpensive which allowed the bike to be sold for a low price, an important factor in Japan’s struggling post-war economy. The Super Cub had also been designed with close attention to customers’ needs such as the ability to drive it one-handed to facilitate carrying a package in the other arm.

At face value, the Super Cub had little appeal for the American buyer. The motorbike market in the US at the time was quite small and dominated by entrenched players such as Harley Davidson, Indian, and imports like Triumph and Moto Guzzi. There were only 1,000 full-time motorbike dealers in the entire country (compared to some 10,000 today), and most bikes were either in the mold of Harley-Davidson — large, heavy, and built for noisy cruising, or were sportbikes made for performance, exemplified by Triumph. Motorbike riders were generally seen as nefarious outsiders, clad in leather jackets and riding in packs to terrorize small towns and cause trouble at funfairs, an image played up by Hollywood — think James Dean, Marlon Brando in The Wild One, and Easy Rider. Furthermore, Japanese products with funny names were looked upon suspiciously by American consumers.

In 1958 Honda dispatched Kihachiro Kawashima (who went on to become president of American Honda) and his assistant, to spend time in the US and scope out the market for Honda’s bikes. Honda had no market research of any kind, and in fact knew very little about America at all. Kawashima’s reaction upon arriving in the US was, “How could we have been so stupid as to start a war with such a vast and wealthy country?”

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Focusing a product portfolio

Another work-in-progress book sneak-peak here. As always, comments and feedback welcome, either through comments on the form on right side of the About Me page.

I’ve been thinking about how companies focus their product portfolios so that they do not run into the peanut butter problem that Yahoo infamously was accused of. One company that has successfully managed to maintain a quite diverse portfolio that also hangs together nicely is Logitech. Logitech must constantly enter new product categories as every category it goes into get commodified fairly quickly.

Having as diverse portfolio as Logitech can lead to a company becoming unfocused. John Hagel and John Seely Brown argue that, “Without some sense of long-term position, movement rapidly degenerates into random motion… Companies lacking a sense of direction usually fall into reactive approaches, pursuing too many options at the same time. The result is that resources are spread too thinly and performance impact diminishes because all the initiatives are under-resourced. In times of increasing uncertainty and rapid change, reactive approaches can become significant traps.”

Logitech’s success shows that it is important to have a clear understanding of your values, your priorities, and what you bring to the table. Logitech’s product line is diverse but looking at it we can see some clear criteria that have guided its expansion:

• Focus on products that involve human interaction. Hands-off products like wireless routers, for example, would not be a fit for Logitech.
• Look for categories that are just emerging from the bottom of the S-curve and are poised for mainstream growth and maturity. Logitech is not a pioneer of categories, but is very good at sensing early possibilities and getting in early. It can also use its design, manufacturing, distribution and marketing prowess to thrive once the category gets mature and margin-squeezed.
• There must be opportunities for innovation, particularly in the areas of customer experience, design, ergonomics, and technologies that Logitech is familiar with (optical, ASICs, sensors, microcontrollers) or unfamiliar ones that do not require large R&D investment (e.g. software design)
• Not every category has to be a mass category. Logitech has some fairly exotic products, like specialized devices for controlling 3-D computing environments. But Logitech can make them work if they fit the criteria of demanding users who will pay a price premium, the product life-cycles are not annual or fad-driven, and there is enough of a market to support them without requiring large marketing effort.

Did Logitech start out years ago with these principles? Unlikely. It takes time to discover one’s strengths and weaknesses as a company through a process of trial and error. Just as customers have a hard time abstracting their unmet needs, companies have a hard time abstracting what they do well or not do well. It is often not until a portfolio expansion works well or fails that a company discovers where its true competencies lie. Like a rock climber, you have to fall off before you realize your limits.

Some of Logitech’s divergence guidelines could be considered core competencies, such as knowing how to spot a promising new product category and jump in at just the right time. This doesn’t involve technological competency, but it is valuable capability nevertheless, and Logitech’s consistent success at it cannot be just chance.