Is your company under "competitive pressures"?

One industry these days reflects the work of all change drivers at once: technological, government, social and competitive drivers.

I am talking of course about the Automobile industry. Yes, it is in a global turmoil. Still, the most surprising failure to heed strategic early warning comes from the Lords of Auto Engineering and Performance: the Germans.

Where was their CI? Oh, sorry. They are German companies. German companies are well known to lack CI. This is not just my assessment, but their own analysts’.

?“Volkswagen is not only an icon of the entire German economy, but also a symbol of the decline of the whole industry,” says Carsten Brzeski, head of macroeconomics at ING. The company’s crisis “shows that a series of bad management decisions, coupled with a certain arrogance and underestimation of new technologies and competitors, as well as the changing role of China in the global economy, are taking a huge toll on the entire German industry,” he added in statements to EL PAíS. VW is not alone, of course. “The crisis in the sector is essentially due to German carmakers resting on their laurels, says Ferdinand Dudenh?ffer, founder of the Centre for Automotive Research (CAR) and one of the leading experts in the sector. German brands have lagged behind [the competition.]

Underestimating competitive pressures is the norm among complacent executives. Still, they have no effective and honest early warning process.

The auto Parts industry in Germany naturally follows suit.

Marcel Fratzscher, president of the DIW Berlin economic research institute, says that the German economic model is still valid, “but needs to be reformed.” He too attributes Volkswagen’s problems, which are shared by the majority of German and European industrial companies, to the “intensification of competition and the rise of protectionism.”

“The German economic model has been based on openness and the promise of globalization and is the basis for economic success and high-income levels.”? Says Fratzshcher. “It still works, but it needs to adapt to new technological developments and tougher competition.”

Must be a surprise to the German CEOs.

Not just the Germans

Lest you think I am anti German (I am not), my friend and CIP-III?, Nick Rassios of Australia, sent me a file on the looming demise of Nissan. In my experience, Japanese firms have not fared much better than Germans in fostering a CI capability. Apparently, the lure of China was too much for them to resist, as well, and now that China is kicking ass, Nissan’s sales are down, it’s profits are way down, and its debt is up. It might seek government help.

Silly me. I though everyone understood the complexity of competing in China and with China. Even an idiot like me warned years ago about the folly of investing billions in a country that thrives on stealing IP and then kicking out foreign owners.

How blind can one be? It depends on who might be blamed for the blind spot

During China’s rise, the reality at the C-Suites of many global brands I worked with was straight forward: We must go into the Chinese market in a big way; this is where the money and growth is.

One needed steely resolve, and true sense of strategy to say “no” to China’s lure.? Frankly, I don’t know if I would have been able to resist. The mantra I heard – half jokingly- was “if only every Chinese bought one unit of our…”.

Can you imagine if every middle manager in China took our CIP? program? Let me calculate: 200,000,000X….

For Western firms milking the China’s market, the profit from 20 years might still be larger than the current loses, but not for long. Retreating with your tail between the legs, and then losing the global market to China looks so short sighted that many of the executives seen as responsible for the decline will lose their jobs. Ahh… but they may have already retired with golden parachutes, leaving the current cadre of executives to be roasted.

Market battles are not very different than other battles. Trump made a decision on Afghanistan, but it was Biden who took the bad rap for the execution.?

Did someone say competitive pressures?

Didn’t they hear about scenario-based war games in these almighty companies? Do they even try and understand their Chinese competitors beyond lip service to “competitive pressures”? Wettbewerbsdruck, anyone? 競争圧力? I have no idea if these google translate are the correct terms. Looking at Nissan and VW, they don’t either…

Wettbewerbsdruck, anyone? 競争圧力?

Have any of these high powered, extremely well compensated CEOs stopped, for a second, to ask his or her Big Crony Consultants and Masters of the Universe investment bankers, about predicting China’s market evolution beyond simple linear growth projections? ?

Hey, McGoldman, can you run a 5-force, fast forward exercise for me?

As the WSJ says in a recent article, “The foreign brands were taken by surprise at how quickly EVs and their plug-in hybrid cousins took off in China in the span of four years.” Is that’s why CEOs and their army of crony MBA consultants are paid the Big Bucks??

What do you call a commander going into enemy territory without an exit plan?

Surprise! It’s not me, it’s the customers

If German bosses should hide in shame following the decline of their mighty companies, at least they don’t blame the consumers for losing the competitive race. Some CEOs, though, do exactly that.

According to an article in USA Today, box-office revenue in North American theaters between January and October decreased by 11.5% compared to the same period in 2023. Some of the bigger losers have been Spider-verse pictures Kraven the Hunter and Madam Web, both backed by Sony Pictures Entertainment company. Tony Vinciquerra, chairman and CEO of Sony Pictures Entertainment, had an “explanation” which is the epitome of executives who are blind and deaf to change drivers: "For some reason, the press decided that they didn't want us making these films out of 'Kraven (the Hunter)' and 'Madame Web,' and the critics just destroyed them."

Dakota Johnson, the lead in Madam Web had a different perspective: "My feeling has been for a long time that audiences are extremely smart, and executives have started to believe that they're not."

The problem with Mr. Vinciquerra’s perspective is that critics hated most superhero films in 2024, but audiences loved two (non-Sony) films (Deadpool and Venom series). More than anything, his competitors heeded the signs of audience fatigue from marvel-type universe. Disney's Marvel Studios and Warner Bros' DC Studios changed strategy and released just one film each in 2024. ?But Sony’s boss sticks by his strategy: "I don’t think we need to rethink it.”

Mr. Vinciquerra is leaving his job on January 1st. Maybe Dakota Johnson should take his role. At least she still believes in change-drivers (in this case, the change is a social/demographic change (the IQ of the consumers.)

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Alternative perspective

One of my dearest friends worked for many years at Porche. He left when it became clear the company was not going anywhere.? He tried to bring war games to German companies, to no avail. They are now paying the price. In Yen.

Entertainment companies are among the biggest spenders on market research and ultra-sophisticated analysis of social trends.

But CI is a superpower they never developed. ?

At least Crunchyroll – an anima-focused streaming service acquired by Sony from ATT is making money. I am waiting for a version that introduces Levi Ackerman- the first Jewish hero of the Titan Wars- as a CI analyst.