November 16, 2006

Small wonder

Poorly managed auto companies aren’t an American monopoly. Volkswagen – one of the companies I criticized in Bigger Isn't Always Better for strategic sprawl – has made several recent moves to start mending its ways. Its chief executive was replaced by Martin Winterkorn, the head of its Audi division. And Winterkorn’s first decision was to rethink the way VW groups its car units.

His plan is simple – often a good sign. Put the brands aimed at the high volume, mass market in one bucket (VW, Skoda and Seat), and those targeted toward luxury buyers (Audi, Bentley, Bugatti and Lamborghini) in another.

This adds a sense of customer focus to a company that had organized itself into “oil and water” combinations of Audi and Seat in one division, and VW and Bentley together in another. These illogical groups were a result of inward-facing factors: history, company politics, and attempts to share core competencies that really weren’t very shareable. They also reflected the model of General Motors in the 1920s – try to offer customers a broad choice of cars from cheap to luxury, all under one umbrella. It may have worked 75 years ago, but…

The new organization shows more willingness to group businesses according to common customer needs – always a good start down a path to real growth. VW was once the highly successful builder of the Small Wonder, my first car. Let’s hope this logic returns.

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