Saturday, October 12, 2013

The Beetle-Ambassador Paradox: The Essence of Product Perpetuity

Beetle subcompact car produced and sold by Volkswagen of Germany worldwide is an iconic product that came to be timeless in its acceptability to the young and old alike across generations. First designed and produced by Porsche in 1934 as a family car, Volkswagen sold over 20 million Beetle cars until the mid-1980s. It was probably the first car with an air cooled rear engine.  Its peak production was 1.3 million units a year but dipped to 30,000 units a year, prior to its production halt. It also became a car that signified multi-country production and was ‘reverse exported’ from an emerging country to the country of origin, Germany. Beetle is now back again, evolving for the last several years as an urban car from Volkswagen for a fun loving modern generation of the 21st Century.   

Ambassador compact car produced and sold by Hindustan Motors (HM) of India is in its own humble way an iconic product in India that became synonymous as much with the inception and growth of the Indian automobile industry in the 1950s as the frustration of technological obsolescence in India. First made by Morris Motors Limited as Morris Oxford II model in 1956 in the United Kingdom, it began to be manufactured by HM in 1958 under a technical collaboration at its Uttarpara plant in India. From a dominant market share in a diminutive automotive market of India (30,000 cars per annum or so in the 1970s), Ambassador collapsed in output to just 2500 cars per year in a super grown contemporary automotive market in India (3.3 million cars per year presently).

Comparisons and contrasts

Beetle, doubtless, represents a product concept and a product profile that was timeless. Despite the plethora of manufacturers and car segmentations and designs that overwhelmed the world automobile scene from the 1960s, Beetle retained a niche. The car looked the same but continued to integrate internal changes. All said and done, the Ambassador also stayed on as a car mass-produced in India for the longest number of years on the same assembly line in the whole world. No other car made in the world has surpassed this record. In fact, as opposed to Beetle, there was never a long term break in the production of Ambassador. Strangely, Beetle and Ambassador share the rounded, curvy retro looks. The comparisons probably stop here.

Beetle evolved over the years, and reinvented in recent years, as a very modern design that integrated high end electronics with hi-precision mechanicals. In contrast, Ambassador continued to remain the same old car with minimal design changes, except the engines getting updated to newer emission norms progressively. Volkswagen, the producer of Beetle has been  marching on to become one of the world’s largest car manufacturer, with an output of       million vehicles, covering 10 global brands and 200 models, produced in nearly 100 factories and a global workforce of 500,000. HM, the producer of Ambassador has shrunk perilously down, with an output of only a few thousand vehicles of all types, and mounting losses, notwithstanding several product diversification moves based on further foreign collaboration arrangements.

The formula for product perpetuity can be gleaned from the positive profile of Beetle and Volkswagen as well as the negative profile of Ambassador and Hindustan Motors. Possibly, the history of both Beetle and Ambassador indicates that certain products can have a lasting presence, if the manufacturers set their heart on their retention, allied to or independent of product-specific viability, but mandatorily linked to technology, product lines can stay onto near perpetuity. Three critical aspects are discussed below.

Tradition with technology

Product functionalities may change or new ones may emerge but usage traditions remain. As far as automobiles are considered, while the basic functionality of movement or transportation does not change, several others have got added. However, the tradition of a family vehicle, an urban vehicle or urban vehicle remains. How an old basic design is updated to modernity retaining the tradition is the key to product perpetuity. While retaining the original “The Beetle”, new models such as GSR for sporty applications and Cabriolet in the 50s, 60s and 70s branding for lifestyle applications have been added. Power and safety options are offered at the level of a large sedan even though Beetle is a small car. As if it were an ultramodern car, both hard top and soft top variants are offered. All the trappings of a modern car, in terms of electronics and trim are offered. Even if the shell is of vintage design, elegant lines and accessories are used to add to provide a pleasingly modern but traditionally retro look to Beetle. Ambassador which got stuck with the design of the 1950s did nothing of that sort, and the negative results are obvious.

The concept of novel product development combining tradition with technology has wider applicability. The latest to emerge is the smart watch which redefines the traditional concept of wearing a wrist watch with cellular connectivity and communication. The traditional concept of handwriting has been restored with tablets and phablets that can accept writing and drawings while that of physical book reading has been revolutionized with electronic book reading, a few years ago. Many traditional practices like wrist bands and spiritual bands are modernized with healthful metals, elements and electronics, and made contemporary with designs. The concept of retrospective products with futuristic technologies has revolutionized food processing and lifestyle industries. There could be virtually no limits to this trend. Products and functionalities can remain in perpetuity so long as technology updates them to modern functionalities.  

Innovation with investment

Innovation cannot happen without investments – in people, assets and supportive infrastructure. However, investments need viability which in turn comes from a successful product portfolio. Volkswagen did not stop only with Beetle; it continued with aggressive additional product development for multiple segments in global markets. In contrast, HM did not, and could not, go beyond Ambassador for India. Though the company entered, from time to time, into collaborations with world class Japanese automotive giants such as Isuzu (for trucks) and Mitsubishi (for cars and SUVs), the company could not provide the requisite investments to support product diversity that could provide the scale and scope economics which could, in turn, support updating of an aged but popular niche product such as Ambassador. Probably, as a product that was for decades in a sub-scale automotive market of India which was no more than 30,000 cars per annum for 3 manufacturers, Ambassador probably lost the game of innovation from the start.

Innovation and investments, however, require a business sense. What Ambassador could not achieve in India, Maruti-Suzuki could achieve in the same Indian market with aggressive investments, innovative products and intensive marketing. Maruti 800 car was a path breaker. Though it was discontinued a few years ago it is slated for a comeback with more contemporary technological flourishes. Hyundai which blazed new trails, years later, with i10 car is set to keep up the product perpetuity with i10 Grand car. The ability to make timely investments and support product innovation is the essence of enabling product perpetuity. The task becomes complex as well as easy when a product has a number of outsourced components. There are several marquee products and brands in India which can be brought to contemporary standards (Leyland Comet truck, Tata Indica car, Bajaj Scooter, for example) while investing in new products. What Bajaj did not do for the perpetuity of its highly popular scooter (in fact, it killed the product), its originator Vespa has done.

Brands with brain and brawn

Products with perpetuity potential typically enjoy significant brand power, initially and for several years of growth. Ambassador had brand power in India as much as Beetle had in its global markets. Even when products go out of perpetuity, the brand pull remains. ‘s strategy of reinventing a new low cost car model, “Go”, for India and other emerging markets through the revival of Datsun brand is a classic example. Reliance brought out its clothing brand Vimal after several years of retirement. It goes without saying that if investments on popular products on the lines considered in earlier sections are accompanied by commensurate investments on brands, product perpetuity can be ensured. It implies that even when erstwhile popular products face temporary setbacks, it would be a futuristic move to keep the brands in public recall in gross or subtle ways.

For product perpetuity, brand building has to happen with both brain and brawn. The potentially perpetual brands get identified with native traditions in an intuitive yet refined way, oftentimes with emotionally identifiable icons. Air India’s Maharaja and Amul’s little girl are outstanding examples. However, for product perpetuity to occur there must be a one-to-one association between the product and the brand. When companies attempt to leverage popular brands across a product range it becomes difficult to support perpetuity of a product. The ideal conditions are that the product must have a distinctive, even if vintage, design and the brand must have a specific user association. Jeep, Land Rover, Innova and Sumo (all utility vehicles), Comet and Viking (truck and bus), and Lambretta and Vespa (two wheelers) are a few examples. Unfortunately, companies seem to be losing their interest and penchant to build correlated products and brands.

Product perpetuity could present an attractive fallback option for companies in a perpetual rush for product diversity in highly fragmented and intensely competitive markets. Products of vintage standing can be akin to family silver that could be worth a fortune when chips are down; such products need to be tended to technology, investments and branding in a manner exclusive to them, however. There is nothing to be bugged about dated models as long as they are cared for enough not to be outdated, as the classic example of Volkswagen Beetle (or “Bug” as it is also popularly called) demonstrates!

Posted by Dr CB Rao on October 12, 2013                            










1 comment:

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