How to Make the American Dream Come True, One Little Bike at a Time

Howdy!

I want to give you a sneak peek at next week’s book, Contagious, by Jonah Berger. The song Friday by Rebecca Black went viral in 2011 to date, it has over 165M views on Youtube. The kicker, it keeps on raking in the views and listens simply because a lot of people play it on well…… Fridays!

It’s Friday, Friday, gotta down on Friday!

Estimated read time: 5 minutes

Oh wait. Before we jump in here is the link to our site where you can access more info on the books that we discuss. Feel free to check out our PAGE!

Now, on to the good part! 

HP - Giving small opportunities to small organizations

Let's start with HP, a company that has been at the forefront of technological innovation for decades. One of the key lessons we can learn from HP's experience is the importance of spinning out independent organizations to commercialize disruptive technologies.

In the mid-1980s, HP faced a dilemma in the personal computer printer business. At the time, the laser jet printer was their bread and butter. It was a massive success and had positioned them as a leader in the market. But when an alternative way of translating digital signals into images on paper (ink-jet technology) first appeared, HP knew they had to act fast.

Although inkjet printing was a disruptive technology, HP recognized its potential early on. They knew that if inkjets worked, they could probably meet the needs of personal computer owners. So, rather than placing their bet exclusively on one or the other, HP created a completely autonomous organizational unit located in Vancouver, Washington, with responsibility for making the ink-jet printer a success.

HP's strategy was brilliant. By letting the two businesses compete against each other, they were able to capture the best of both worlds. The laser jet division moved sharply upmarket, while the ink-jet printer business captured many users who were none consumers of laser jets.

But the most important lesson we can learn from HP's experience is the need to match the size of the organization with the size of the market. Growing companies need to add increasingly large chunks of new revenue each year just to maintain their desired rate of growth. This means that small markets may not be viable vehicles through which to find these chunks of revenue. Implanting projects aimed at commercializing disruptive technologies in organizations small enough to get excited about small-market opportunities is key.

Honda - Discovering New and Emerging Markets

What's up, Hustlers! Let's talk about Honda's journey into the North American market. At first glance, it seems like Honda's entrance was a shining example of strategic thinking. But let's be real, that's just hindsight bias talking.

In 1959, Honda was itching to break into the US market. So, they did what any good company would do: they did their market research. They checked out the motorcycle industry and saw that Americans were all about big, over-the-road bikes like Harley and BMW.

So, what did Honda do? They tried to compete by making larger bikes in Japan with cheaper labor costs. They figured they could undercut their competitors and make a killing. But customers just weren't buying it. They didn't see any clear advantage to buying a Honda and they didn't trust the brand.

But Honda wasn't going to give up that easily. They cut their teeth in Japan with the Supercub, a small 50cc bike that was a hit as a delivery bike. By 1959, they were selling 285,000 of them a year. So, they sent three employees to Los Angeles to market their products. To save on living expenses, the guys shared an apartment and each brought a Supercub with them. But, they were struggling. None of the dealers wanted to sell their products, and the few that did had a ton of oil leaks (remember, this was Honda's first time making larger bikes).

Meanwhile, Kihachiro Kawashima, the executive in charge of the North American venture, decided to take his Supercub into the hills east of Los Angeles to let off some steam. And you know what? It worked. He felt so much better after zipping around in the dirt. A few weeks later, he invited his colleagues to join him on their Supercubs. Their neighbors and others who saw them zipping around the hills began inquiring where they could buy those cute little bikes. The trio obliged by special-ordering Supercub models for them from Japan.

This private use of off-road dirt bikes continued for a couple of years until the US team realized the potential for a different market segment: off-the-road recreational motorbikes. Maybe, just maybe, the company's little 50cc Supercub was perfectly suited for it. It took some arguing and arm-twisting, but the Los Angeles team convinced corporate management in Japan that their large bike strategy was doomed to fail and a new market segment was worth pursuing.

But even then, existing dealers didn't want to sell the Supercubs because they were too little and too cheap. Eventually, Honda persuaded a few sporting goods dealers to take on their line of motorbikes. For these dealers, the bikes were a high ticket item with great margins.

And we all know what happened next. Once Honda had a strong foothold in the market, they kept improving their products until they could get them into traditional dealerships and meet the needs of high-end customers.

Honda didn't have a ton of money for advertising, but a UCLA student who went dirt-biking with his friends came up with the slogan "You meet the nicest people on a Honda" for a paper he wrote in an advertising course. The idea was sold to an advertising agency, which convinced Honda to use it in an award-winning advertising campaign.

So, there you have it, Hustlers. Honda's journey into the North American market was anything but straightforward. But by pivoting and pursuing a different market segment, Honda was able to carve out a niche for themselves and eventually become a powerhouse in the motorcycle industry.

Last thoughts

But here's the thing: managing better, working harder, and not making dumb mistakes isn't the answer. Say what?! That's right, folks. According to research reported in a book (that we won't name-drop), simply finding better people than your already super-smart managers won't solve the problem posed by disruptive technologies.

It's gratifying to know that because let's be real, we know some pretty smart and hardworking managers. If that was all it took to solve the innovator's dilemma, we'd be golden. But, as we've learned, even the best managerial techniques can lead companies down the path to failure.

So, what's the solution? Companies can't throw out their capabilities, but they also can't ignore the potential for disruptive technologies. The key is to find a balance between exploiting current capabilities and exploring new opportunities.

It's a delicate dance, but one that must be done if companies want to stay ahead of the game. So, keep managing well and working hard, but don't forget to keep your eye on the horizon for those disruptive technologies that could change everything.

Catch ya later,

Camillo