Donald J. Patti

Posts Tagged ‘Business’

From Chaos to Crisis to Calm – 9 Tips to Recover Troubled Projects

In Business, Entrepreneurship, leadership, management, project management, Small Business on 8 February 2010 at 9:00 am

Dan Moore, a fellow Principal at Cedar Point Consulting, recently reminded me that, “You can’t manage chaos, but you can manage a crisis.” These are very wise words, but they reminded me of the early stages of a trouble project — one which is far behind schedule, well over budget, not delivering results, or all of the above.  If anything, a troubled project is chaos waiting for a strong leader to transition it to crisis, and then ultimately to calm.

Whether you’re a C-level executive, an entrepreneur or a project manager, you may not have encountered very many troubled projects in your career, so you may not be familiar with how to transition from chaos, to crisis, and finally to calm. We consultants are often brought in to deal with just such problems, so I have a few tips that should help:

  1. Don’t Panic! Douglas Adams references aside, you may have just learned that a key project is in trouble, but it’s important that you not panic. First of all, panic spreads, so you create chaos from crisis, and it won’t be long before your co-workers and your subordinates are panicked, too.Second, panicked people don’t reason effectively – they make “fight-or-flight” decisions instead of rational ones, so you’re far more likely to make a bad decision or push others to do so.
  2. Be Methodical. At Cedar Point Consulting, we have a 5-step process that we follow to recover projects – Review, Recommend, Respond, Transition, Close. While this is not the only way to recover a project, it does consistently work – by step three, the project is making progress once again. Regardless of the technique or methodology that you choose, don’t attempt to solve the project’s problems until you have an understanding of their causes. Do take measures to stop the bleeding, until you’ve effectively identified root causes.
  3. Read the Tea Leaves. Whether well run or not, nearly all projects have documents that tell you where the weaknesses are and whether they are being managed well. At minimum, even the smallest project should follow a standardized process ( project methodology); a charter (with a project goal); a project plan that includes a schedule, a budget, and assigned staff; regular meeting minutes and regular status reports. If these exist, review them to assess where problems are occurring. If they don’t, find out why.
  4. Be From Missouri (“Show Me”). Reading current project documents is a good start, but what if someone is fudging the numbers or painting a rosier picture than reality? For select documents, like staff hours, project schedule and project budget, confirm that they are reasonably accurate independently. Which brings us to the next tip…
  5. Use an Independent Third Party. Whether you hire a consultant or have someone in another part of your business lead your project recovery effort, they should be an independent third party. Having a friend of the Project Manager, the Project Manager’s immediate superior or one of their subordinates jump in to help is unlikely to be successful.
  6. Change Leadership or Change Process. At the most basic level, projects most often fail because either the project manager is not up to the task or the project management process is preventing them from succeeding. A good project manager controls time, scope, cost and quality on a project. If they don’t control at least two of these and influence all four, then they are likely to fail. Conversely, if they control all of these but the projects headed off a cliff, you probably need to switch project leadership.
  7. Increase Communication. When you’re trying to identify problems with a project, it helps to increase communication within the team. Schedule and require participation in regular meetings – daily, if necessary, like Stand-ups or Daily Scrums. Finally, increase the frequency of status reports to key parties, such as the client, the sponsor and key stakeholders, even if the reporting is informal.
  8. To Thine Own Self be True. There’s always a need for optimism in every situation, but good leaders are also honest to themselves and to others about the current state of a project. Depending upon how far behind the project truly is, consider reducing scope or resetting the schedule. Failing to do so may doom the project and the project team to yet another failure – one from which they may not recover.
  9. Start Small, Review Frequently.  After you’ve planned your recovery, be sure to start with small deliverables and shorter milestones, reviewing the project’s progress frequently to make sure the conservative short term goals are being met. While this is not normally the best approach with a project, starting small enables the team members to practice working together as a team before they have to tackle the larger, more challenging deliverables of the project.

The list above isn’t a comprehensive recipe for solving all the problems of a troubled project or for complete recovery, but it is a good start.  In a subsequent post, I’ll provide a list of ways to minimize the possibility of troubled projects altogether.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

New Decade, New Venture

In Entrepreneurship, management, Small Business on 31 January 2010 at 3:02 pm

There’s an old saying that the happiest days in a boat owner’s life are the day they buy the boat and they day they sell it. Never having owned a boat larger than a canoe, I’ve always chuckled when I’ve heard this truism, particularly as I watched my nautical neighbors in Annapolis clean, paint and other-wise maintain their boats.

One would think the same truism would apply to running a business, particularly when building a business from the ground up. As many entrepreneurs and small business owners know, it’s not uncommon to work 60 or more hours a week when starting a business; customers and clients will come calling at all hours of the day and night; and, sometimes you have to stretch more value out of a few bucks than a third-world soup kitchen. Even when the business is stable, vacations are never truly vacations – there’s nearly always a crisis that requires your input, which prevents even three-day weekends from being work-free.

So it may surprise some of my friends and business associates that, after running a business for a little over five years in the first decade of the 21st century, followed by roughly five years working for others, I’ve decided to start another business again in 2010. There are a few reasons I’ve decided to do this, but here are the most significant:

  • Running a business enables me to pursue my passions. As with any consulting business, your client is your first priority. However, after all of the client’s work is done, there is still time to improve your own business, to research new innovations in your industry, and to help your co-workers to learn and grow, too. Along the way, if you identify a new market or business opportunity, it’s yours to pursue – no approvals necessary.
  • Running a business enables me to consult in multiple areas, preventing me from being typecast as solely a “strategist”, a “technology expert” or a “project management guru”. If you are both a voracious reader and an experienced practitioner, it’s amazing how effective you can be in many disciplines, not to mention the synergistic benefits of being knowledgeable in many areas. As an entrepreneur, you aren’t bound by the practice area or job title that someone else gave you – you are bound by the knowledge and experience that you truly hold.
  • Running a business enables me to live according to my own values. A number of years ago, a former PR Manager for an energy company told me why he’d moved out of PR and in to HR by saying, “There was an incident at one of our plants where an employee of our company had made a mistake. I was head of Public Relations, so I wanted to say to the public, ‘We screwed up, we’re sorry, but here’s what we’re doing to make sure it won’t happen again.’ Instead, I was told to deny that the incident ever took place, which was a flat out lie. I did what was asked, but I couldn’t bear the thought of the next time an incident occurred and I’d have to cover for our mistake.”
    While few events in business pose moral challenges as great as what he faced, there are day-to-day decisions that may help your business but harm your soul. As a business owner and a Christian, I can say how nice it is to be able to do the right thing should the need arise, yet not have to worry about whether I’ll land in the unemployment line.
  • Running a business adds weight to my advice. It’s one thing to say something because you’ve seen it work for others, and an entirely different thing to speak from firsthand experience. As a consultant, so much advice is based on observation, but as a business owner, you not only speak your advice you live it and breathe it. Your clients know this, so they respect your advice even more.
  • Running a business enables me to balance work, family and charity. There are many myths about running a small business versus working for someone else that I’ve uncovered during the past ten years, but the most important factor is this: Never was I more able to meet my clients needs, to arrange my schedule around family activities, and to put in time to perform charitable work than when I ran my own business.

I can safely say that I have met many wonderful people while working for other businesses, I have served a number of clients that were well worth the time and effort expended, and I have worked with some very talented leadership along the way. In addition, I have served more than a few Fortune 500 companies and managed more than a few multi-million dollar endeavors in the process.

However, I’m looking forward to living the life of a small business owner once again. I know it’s considered by many to be one of the hardest jobs to hold. But it’s also a very fulfilling life, one that holds the most promise for me to positively impact others – and it’s nothing, apparently, like owning a boat.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in strategy, process improvement and project management.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Failed Pilot? Chalk it up as a Win!

In Business, E-Business, management, project management, Software Development, Technology on 14 December 2009 at 8:30 am

You’ve just had a failed pilot, followed by a quick meeting with the Project Management Office (PMO).  Your project was killed and you feel like a failure.

What should you do next?  “Celebrate,” I say, “then chalk it up as a win.”

What? Not the answer you were expecting?  Let me explain…

I spend quite a bit of time in a classroom, whether its to teach a subject or to learn myself.  During one class, the oft-cited Standish Group statistic that measures projects successes reared its ugly head once again, this time citing a roughly 30% project success rate with roughly 45% qualifying as challenged (Standish Group 2009).  Per Standish, roughly 70% of projects fail to meet expectations – a sobering statistic.

A project manager sitting behind me who specialized in pharmaceuticals shocked me when she said, “Gee, I wish our numbers were that good [in our industry].  The odds of a clinical trial resulting in the drug reaching market is 1 in 20, and this is after its cleared a number of internal hurdles to justify a stage I/II trial.”  (A stage I/II trial is early in the process and serves as a pilot).  While I laughed at her comment, I also considered how it related to the Standish statistics and definitions of project success.

By her definition, success meant bringing her product all the way to market, an unlikely outcome by her own estimation and by those of my fellow health sciences colleagues.  But, what if success was defined as, “Accurately determining whether a product should be brought to market,” or “Successfully determining whether a project should continue past the pilot stage”?  Suddenly, many of her projects would be considered successes.  After all, how many drugs don’t work, have ugly side effects, or have the potential to kill their patients?  Isn’t she and her team successful if they keep bad drugs off the market and aren’t we better off for it?

In the software industry, good software methodologies use pilots, proof-of-concepts or prototypes to determine whether a software product is worth fully developing and fully budgeting.  In the Rational Unified Process, the rough equivalent of a pilot is called the Lifecycle Architecture Milestone and its purpose is to confirm that the greatest technical and design hurdles can be overcome before additional funding is provided to the project.  In Rapid Application Development prototyping is embedded in each and every iteration (cycle), while paper prototyping is a part of Agile development.  Regardless of the methodology, these steps are designed to provide results early, but they are also designed to confirm that a project is worth completing, providing an opportunity to change course or shut down the effort when it’s not.

So, maybe it’s time for those of us in the PMO and portfolio management to change they way we measure project success.  Right along side the “projects successfully completed on time/on budget” statistic, there should be two others — “projects successfully killed because their pilots proved they simple weren’t viable,” and “dollars saved by ending unfeasible projects early.”  Because in the end, a pilot’s failure is just as good as a pilot’s success, as long as you listen to its message.

When Taking Over Means “Steady as She Goes”

In Business, leadership, management, project management, Small Business on 15 November 2009 at 8:00 pm

You’ve taken a new leadership position, so you’re ready to take charge and make your mark. There’s just one problem – all’s well. The division you’ve inherited is running smoothly, or the project you’ve taken over is on target. What do you do? Here’s how to tell you’re in this leadership situation, and what to do if you are.

Confirming All’s Well

Because leadership changes usually occur when change is needed, it may be difficult to tell that nothing is wrong. But there are a number of indicators that appear when everything is just fine. If you answer “yes” to most of these questions, you’ve probably inherited a steady ship:

  1. Your predecessor retired. While some people are forced in to retirement and not all recent retirees were good leaders, it’s a good sign that all was managed well if your predecessor retired in the position.
  2. Your predecessor held the position for more than 10 years. Particularly in disciplines like information technology and marketing, ten years is a mark of seasoned leadership. While times may have changed and forced a change in leadership, it’s a good sign that your predecessor enjoyed the position enough to stay in it for a decade or more.
  3. Turnover was low. You’ve talked to the staff below the prior leader and they average five years or more with the company. This means the prior leader knew how to hire and retain the right people for their positions.
  4. The numbers are good. Whether the key performance measures for the division are customer satisfaction, profit-per-unit-sold or days-ahead-of-schedule, the key measures all look good, especially after some independent validation confirms they’re accurate.
  5. You’re allowed to phone your predecessor. When both sides haven’t parted on good terms, it’s rare that you’re allowed to pick up the phone and call your predecessor. When you ask, “Do you mind if I give the prior manager a call?” an answer of “yes” with no cautions or caveats is a good sign.
  6. The echo of kind words. In initial conversations about your predecessor and their work, co-workers and subordinates speak fondly of them and readily point to past successes.

If you’ve responded, “yes” to 4 of 6 of the indicators above or more, there’s a very good chance you’re inheriting a well run division or team that needs few short-term changes. The next section describes how to lead in this situation.

An Even Keel

Once you’ve confirmed that all is well, you have quite a management challenge ahead of you. (Yes, that’s correct – a challenge). Your predecessor was well liked, the team performed well, and you have to do at least as well for the transition to be considered successful. Here’s what you should and should not do:

  1. Give credit. Once you’ve confirmed prior success, give credit to your predecessor and the team, noting that you respect what they’ve already accomplished. This is more than phony ego-stroking, it’s confirmation for your staff that you knew can properly assess a business situation and take the correct actions moving forward. They’ll appreciate that you’re recognizing them, but they’ll respect your business intuition even more.
  2. Avoid radical change. While it’s very tempting, do not try to transform the organization to suit your own management style and don’t attempt a major reorganization. It’s likely to cause resentment by your co-workers and subordinates who were very happy with the way things were. Even worse, it may turn a productive team into an unproductive one.
  3. Make change slowly. An obvious converse of the prior point, if some changes are necessary, make them slowly. This will give people an opportunity to know and trust you, but it will also give you time to understand why the team was so successful in the past. After a little wait, you may find that some of the changes you’ve planned aren’t needed and it will definitely put the distance of time between you and your predecessor.
  4. Learn from the management style of your predecessor. They were successful sitting in the same chair you now hold – who better to study than them? Review old reports and deliverables, review performance results going a few years back, and see how the division ran in the past.
  5. Give them a call. Invite your predecessor to lunch and ask them what worked so well. What management style did they use, what methodologies or techniques. Also, if possible, ask them about your staff – what are their likes and dislikes, what makes team members tick, who doesn’t get along with whom? In a couple of hours, you’ll be a lot closer to making a smooth transition.
  6. Review goals, then consider more ambitious ones. It’s possible your predecessor already set some pretty solid target for the team, but there’s also a very good chance that the bar has been a little too low most recently. If this is the case, raise expectations a bit, work with the team to identify new opportunities to excel, then add them to your strategic plan. By doing so, you’re most likely to add value to an already good situation.
  7. Adjust. While it may not be YOUR management style, your predecessor’s approach worked well. Consider adopting all or part of it, even if it’s a stretch for you. You may find that you grow as a leader by adding arrows to your quiver in this way.

Same Crew, More Knots

As a manager and leader, taking on a successful team may be the most challenging experience you ever face. It’s likely you’re a leader because you can take charge in difficult times to steer a new course, but the winds of change simply aren’t blowing. In this case, the most prudent course is to learn from the successes of the past and adapt to the new team. It will take longer, but eventually your team will improve upon past successes. If nothing else, resist the temptation to immediately set a new course – ironically, you’re far more likely to fail.

Challenges Managing in the Knowledge Economy? The Answer is Beneath You

In Business, management, Technology on 10 August 2009 at 8:45 am

As children, many of us grew up with a vision of the manager as “the boss” – a key source of authority in the business who knew the answers, told others what to do and led with a firm hand.  As adults, many of us move into management and try to live that childhood vision – with disastrous consequences.  Why hasn’t the “boss as manager” model work for us today? What’s changed?  Surprisingly, the answer is beneath you.

To understand what this means, consider, first, the era when management as profession came into vogue – the industrial age.  The emphasis had shifted away from the craftsman-apprentice model before mass production, where individuals passed on knowledge one-on-one.  Instead, the secret to success in the industrial age was mass production, which required the standardization of business processes and simplification of tasks so that unskilled workers could more easily complete the work.

A manager’s primary responsibilities were to coordinate the efforts of large groups of people, so a highly regimented top-down management style fit best. The 24-hour day was broken down in to two or three shifts, people were assigned to shifts and they generally completed their assigned work. During this age, a manager’s biggest challenges were employees who didn’t show up on time, who left early or who didn’t complete their fair share of work.  A firm hand was required to prevent abuse and keep productivity up; the “manager as boss” excelled in this world and this management approach flourished.

On to the knowledge age, where knowledge is the key tool used to create products as well as the product itself.   For the first time, many products — semi-conductors, computer hardware, software, even modern phones — rely heavily on knowledge as the key inputs to their creation.  In the knowledge economy, the highest single cost in creating the product is the labor of experts – not manufacturing labor or raw materials.  In turn, making the most of the knowledge of these experts is the key to success – not necessarily making the most of their time.

With the shift from industrial economy to the knowledge economy, the storehouse of knowledge and authority are no longer in the same hands.  In the industrial age, the boss knew best; in the knowledge age, you, as a manager, still have the authority, but the knowledge is beneath you, in the hands of the experts.  To adjust for this, a change in management style is needed.

Based on my conversations with respected managers in the age of knowledge and my own experience, here’s how to succeed as a manager in the knowledge economy:

  1. Ask the experts.  This sounds simple and straightforward, but it’s rarely followed.  Because many of us are former experts who moved in to management, we consider ourselves experts still.  Yet, how long does it take before our expertise becomes out-dated when we don’t use it?  As little as six months? As much as a couple of years?  Consider this: If your subordinate knows all of the features of the latest version of your software, but you know all the features of the last one, whose knowledge is more valuable?
  2. Facilitate – don’t order.  As managers, we all know that the experts around us are extremely bright – in many cases brighter than we are.  How condescending it must seem, then, when we managers order our team members to execute our instructions.  Instead, help them to identify the problems together, then assist in developing a methodical approach for solving it.  In the process, it will become clear which team members should tackle each step in solving the problem.  No orders necessary.
  3. Coordinate – don’t control.  As former experts, we’re acutely aware of the challenge of being “stuck in the weeds” – that desire to keep your head down and focused on solving the problem in front of you.  As much as that tendency toward isolation grips our fellow experts, we should coordinate their efforts and encourage them to work together as a team.  Coordinating the team means bringing them together, discussing key challenges and asking one expert to help another to achieve breakthroughs when addressing a challenging problem.
  4. Serve as a knowledge bridge.  In many cases, the specialized knowledge of one expert on your team is very different from the specialized knowledge of another.  For example, one person may specialize in database design, while another specialized in user interface (screen) development.  Because of this, they are often working on very different tasks, even though one person’s knowledge may be needed to solve another person’s problems. As the manager of this team, we know what each team member is tackling and we should know whether they have solved past problems.  It’s our job to connect the dots across the work of our teams, to point out patterns in problems that we see, and to bring together the experts to share their relevant knowledge, solving each other’s problems more quickly and efficiently.
  5. Set challenging (but realistic) goals.  Knowledge experts like challenges, so work with them to set short term and long term goals that are SMART – Specific, Measurable, Attainable, Relevant and Time-specific.  As part of the process, be certain to set goals to be a little more challenging than the person believes is possible – but not so difficult that the person ignores the goal because he or she thinks it’s impossible.
  6. Value the individual.  In the industrial age, the loss of an individual team member was disappointing, but it wasn’t likely to cripple your business, your division or your projects.  In the knowledge age, there are people who are so essential that their departure could force the business to crumble.  While I would argue that it has always been important to treat people well, in the knowledge age, it’s even more important to treat each individual with respect and consideration.

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In many respects, the knowledge economy has made managing more challenging.  In many management positions, “people” skills are more important than analytical abilities.  Even more challenging, your position as manager often makes you more expendable than your subordinates.  Combined, it’s critical to your success as a manager to look beneath you for the knowledge and expertise for you and your organization succeed.

With Goliath Incentives for Others, Seven David’s Need Stimulus, Too

In Business, Finance, Politics, Small Business, Uncategorized, United States on 29 January 2009 at 12:05 pm

Last Saturday, I received call #7 from a friend or associate starting a business in one of the gloomiest climates since the Great Depression.  Never mind that these seven individuals are figuratively “spitting into the wind” (Jim Croce) by spending time and money in such difficult economic times, their efforts are a telling example of how the U.S. economy recovers time-and-again from recessions.  Despite big businesses shedding jobs and shuddering their windows until the economic climate improves, individuals like you and I come to the rescue with innovative ideas, hard work and untiring faith to renew growth in the most impressive economy the World has ever seen.

Given the repeated successes of America’s Davids (and Davidettes, ladies), I’m surprised and disappointed to see that President Obama has left sizable incentives for small businesses out of the economic stimulus package before Congress.  With mass transit and benefits extensions for the unemployed on the list, there’s definitely been some careful thought put into the plan about who needs help and where future growth should occur.  However, there’s little to nurture the efforts of the seven fledgling businesses contained in President Obama’s package.

Knowing the business models the seven David’s will use to grow, I’ve thought of 5 ways the 2009 stimulus package could be modified to help small businesses get America back on its feet.  These should be targeted at businesses under $5 million in annual revenue and owned entirely by individuals (sole proprietorship, partnerships, S corps, small LLC’s) to prevent larger businesses from launching subsidiaries just to take advantage of the situation:

1. Give a Three-year Tax Holiday on Income Increases to Small Businesses.

Description: Give a three year tax holiday at the Federal and State level for income growth when compared to 2008.  If you made $100,000 net income in 2008 and $250,000 in 2009, the additional $150,000 in income would NOT be taxable.  If you lost money in 2008, then any earnings in the next three years would be untaxed.  The same should apply to 2010 and 2011 when compared to 2008 earnings.

Reason:  This rewards small businesses for taking risks in 2009, 2010 and 2011 to invest in activities that increase growth, which will increase spending and employment throughout the economy.  The alternative is to NOT do this, not see the growth and not collect the tax revenue, anyway.

2. Reward Small Business for Going Green.

Description:  From buying energy-efficient equipment to purchasing fuel-efficient cars to reducing energy consumption to installing solar power, small businesses should be rewarded for finding ways to run lean.

Reason:  An immediate capital investment will boost the economy short term and reduce our dependence upon unstable energy sources long term.  Even better, getting small businesses to think green will encourage them to build this mindset into every avenue of future business, yielding gains decades ahead.

3. Give Incentives To Hire.  Big business is cutting back big time on head count and small businesses will likely follow suit.  Give small businesses 10% of each employee’s salary – up to $10,000 –  as incentive for bringing on new people. Decrease the incentive to 5% in 2010 and 2011.

Reason:  Small companies hiring in 2009 should be rewarded for bucking the trend.  While big businesses could potentially receive the same incentives, small businesses are far less likely to find loop holes in the law to exploit the tax benefits without truly bringing on a live body.

4. Encourage Small Business to Advertise.

Description: For every small business in America, give a 50% tax credit for $ spent on marketing and advertising in 2009 up to $25,000 in total benefits.  The money must be spent outside the business to either market or advertise the company’s products and services and must result in a bulk e-mail, a website banner ad, a radio ad, a newspaper listing, a cable TV ad or something similar that was not done in 2007 or 2008.

Reason:  If there’s one place I believe small businesses chronically under-spend, it’s on marketing and advertising.  Even worse, advertising is often a hit-or-miss endeavor and it takes a few tries to be successful before the appropriate channel is identified.  This type of advertising incentive encourages small businesses to consider how they can grow and the $50,000 investment required to gain the $25K in tax credits will have an enormous impact on the sales of a small business.  That same $50,000 would do little for a big one, which is already advertising at a level well-above $50 grand.

5. Provide Easy Access to Working Capital Loans for Small Businesses.

Description: Through the SBA, triple the number of $25,000-$50,000 loans to small businesses and ease up on the credit restrictions.  Advertise the avalable loans; guarantee the loans issued by banks; and, issue the loan directly if the banks won’t.

Reason:  Many small businesses aren’t expanding because they simply can’t get a hold of the capital necessary to run their current operations on a day-to-day basis.  Working capital enables small businesses to pay employees, cover rent and buy raw materials up front until their clients pay them for services or consumers buy their goods. Yet, banks have shut off the tap to their lines of credit and many aren’t issuing any new credit at all, even if the borrowing business has historically been successful.  Increasing the number of Working Capital Loans will prevent contraction among small businesses and can enable them to grow, once again.

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I’m not a professional economist (though I have an Econ degree and an MBA), so I honestly can’t tell you how much money, in billions of dollars, these incentives would cost.  I don’t have access to the modeling tools economists use and my pencil isn’t that sharp.  But I can tell you that small businesses have historically led economic recoveries, that a little money goes a long way in a small business, and the seven David’s have some good ideas that will need a break if they are to succeed in 2009.

Chrysler & Fiat — The World’s First Happy Shotgun Marriage?

In Auto Industry, Business, Trends, Uncategorized on 23 January 2009 at 10:49 am

It was not long after I posted my “10 Steps to Save Chrysler” blog that I began hearing rumors about a Fiat/Chrysler merger, which intrigued me.  Autosavant, one of the best auto-industry blogs on the ‘Net these days, scooped many of the traditional media outlets by reporting talks on the 19th in this blog entry by JS Smith that’s well worth reading:  http://www.autosavant.com/2009/01/19/chrysler-may-survive-by-fiat/.

Forced together by anemic – no, paralytic –  auto sales, the global credit crisis and some key strategic mis-steps, this engagement between two auto giants may well turn out to be one of the industry’s happiest marriages.  I decided to look back at my article from last week and see which of my “10 Steps” the Chrysler-Fiat partnership helps to address to see whether this isn’t one of the wisest merger opportunities we’ve seen this decade.

Based on a quick tally, a Chrysler-Fiat merger could effectively address these steps:

1. Original Recommendation: Stop building engines.  Analysis: Initially, I recommended that Chrysler stop building engines because of the enormous development costs associated with engine development, the uncertainty around which powerplant would drive growth in the next decade and my past experience seeing how well engine vendor relationships can work.  While a Chrysler-Fiat merger would by no means outsource engine development and production, it does enable Chrysler to share the economic burden of engine design and development, while giving Chrysler access to some of the smaller, more efficient engines that Fiat has dropped in to their European and South American products so effectively (See JS Smith Article).

2. Original Recommendation: Share platforms.  Analysis: This is also a big win for Chrysler and Fiat because the two can share platforms during design and lower overall product development costs.  Suddenly, Chrysler has access to smaller-framed vehicles at a low cost, while Fiat can eliminate some of their larger platforms and adopt similarly-sized Chrysler platforms.

4. Original Recommendation: Focus on the brand(s).  Analysis: Here’s another big success.  I mentioned in my previous blog that Chrysler lost its brand ladder when it dropped Plymouth, then diluted Dodge and weakened Chrysler.  Consider the brand ladder potentially created by a Chrysler – Fiat merger:  Fiat (small, fuel efficient cars), Dodge (mid-range, family-oriented vehicles), Jeep (off-road, rugged), Alfa Romeo (sporty, high-end, high-performance) and either Lancia or a resurrected Chrysler (luxurious, well-appointed, full-featured).  Positioned effectively, the brand ladder would be complete in a matter of 3-5 years instead of decades.

5. Original Recommendation: Dump the Dealerships, not the Dealers. Analysis:  Another big win, because it addresses the fact that Chrsyler’s dealer network is far too large given it’s product lines and likely future sales. Remember, I said that declining product sales continue to put strain on Chrysler dealerships and it’s time for Chrysler to reduce ranks so some dealers can survive the downturn.  If some Chrysler dealerships are transitioned over to the Fiat brands, this effectively reduces the number of Chrysler dealers and gives Fiat products access to an enormous U.S. Market.  I still believe it’s important for Chrysler to look at other sales channels, including shopping malls (read my original blog) and the Internet, but a merger addresses half of the problem.

Of note, I would caution Chrysler against creating “Fiat/Dodge” or “Fiat/Chrysler” dealerships.  This merely increases brand confusion and makes it difficult for the dealers to cater effectively to their customer niche.  Better to offer Dodge dealerships the opportunity to convert over to Fiat.

For the remaining six recommendations in my previous blog, a Chrysler/Fiat merger does not prevent a merged organization from addressing these issues, but does little to help them.  Chrysler would still have to address quality perceptions, needs to change the underlying philosophy of leadership and explore new channels for delivering its products to customers.  Given this, a Chrysler/Fiat merger has the potential to be a very happy marriage, but it would be unwise for  Chrysler/Fiat leadership to stop there.