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Posted: June 05, 2012

Building a better bug

Why VW is conquering the car world

Todd Ordal

I have a thing for Volkswagens. When I was in high school, my friend, John, tore out the backseat of his VW Beetle to put in two large speakers the size of tugboats. We cruised around listening to KC and The Sunshine Band (“That’s the way, uh-huh, uh-huh, I like it, uh-huh, uh-huh”), Pink Floyd and Lynyrd Skynyrd. This was detrimental to our hearing and, if you remember these VW Bugs and lived in a northern state (we were in Minnesota), you likely recall that the heaters were nonexistent. Frozen and deaf, we drove with the windows open (what the heck, it wasn’t any colder outside than inside the car!) looking very… cool.

Two other reasons I love Volkswagen. One, VW owns Bentley, and I recently rode in a Bentley Supersport ($300,000 price tag and zero to 60 mph in 3.7 seconds). I used to fly airplanes, and this thing had a better dashboard and was darn near as fast! Two, how could you not love perhaps the best Super Bowl commercial ever with the pint-sized Darth Vader pitching the Passat . Viewed nearly 80 million times on YouTube as I write this!

I was therefore excited to see the recent stellar financial performance of Volkswagen. The company — which now owns Audi, Bugatti and Lamborghini in addition to Bentley — was hugely successful in 2011 and is on track to eventually become the largest car company in the world.

Why? Here are some compelling lessons.

• A new CEO in 2007 brought an audacious, measureable and emotional goal, “ … better than Toyota!” and stuck with it. As Bertel Schmitt, editor in chief at The Truth About Cars website, noted, “According to an old in-house rule in Wolfsburg (VW’s headquarters), grand announcements from the top are to be ignored for at least a year, because they are usually followed by new and different ones.” Do you have a clear, compelling vision or goal that allows you to rally the troops?
• VW has a long-term strategy (Strategy 2018) that guides the company. You’ll find some good tidbits in managements’ discussion in the company’s public announcements, including: building on competitive advantages; product offerings that play to environmental concerns; value-based, high-end products with high margins; etc. Can you describe your strategy?
• A bit of luck — both GM and Toyota fell on hard times, though they’re both currently still larger than VW. Are you ready to take advantage of opportunities that come your way?
• VW has had many hit products, including the Passat, which was 2012 Motor Trend Car of the Year. VW’s roots are of manufacturing expertise from its early days in the 1930s. The company built on that expertise and became product-driven. Although a few companies such as Apple and VW can build sustainable expertise in these two areas, it’s not easy. What are your core competencies? Do you have processes and systems in place to reinforce them?
• VW is applauded for many elements of its execution, ranging from supply chain management to labor relations. As you may know, Germany’s view of industry ensures that management and unions work together.  Are your employees aligned with the company’s vision? Are there compelling reasons for them to stay engaged?

I read a recent article about business leaders trying to emulate Steve Jobs, right down to wearing black turtlenecks every day. Although there are many things to admire about Apple, you might be better off studying bugs!
 

Todd Ordal is President of Applied Strategy LLC. Todd helps CEOs achieve better financial results, become more effective leaders and sleep easier at night. He speaks, writes, consults and advises on issues of strategy and leadership. Todd is a former CEO and has led teams as large as 7,000. Follow Todd on Twitter here. You can also find Todd at http://www.appliedstrategy.info,  303-527-0417 or todd@appliedstrategy.info

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