Leader Volume 8, Number 10
Management Rules from the CEO of Honda
Smolowitz is Professor of Finance and Dean, Bureau of Business
Research at American International College in Springfield,
Massachusetts (phone 413-747-6369).
is the chief executive of Honda.
In a particularly insightful article in the Financial
Times (July 8, 1999; interview with Tim Burt), he describes
his management philosophy. Some
of his ideas appear counter-intuitive; however, they certainly
have led to Honda’s great successes.
I have taken the liberty of quoting segments of the
article, and am highlighting (in italics) what I believe are
critical management observations emanating from the interview.
The CEO of a
manufacturing company does not necessarily have to come from the
traditional corporate path to the top.
Mr. Yoshino was head of research and development at Honda.
Don’t worship market
share. He states:
“In today’s global auto industry many companies see size as
the key to survival. But
we believe that success has little to do with size….
General Motors is very big but is losing market share.
The issue is not size, but your ability to satisfy the
Unit sales are not to be
is “rolling out new, high-value products on a number of core
platforms, while squeezing production costs at 104 manufacturing
plants in 33 countries. In
spite of selling far fewer vehicles than GM or Ford, that strategy
has produced some of the highest margins in the industry, at
around 7 percent.”
Prepare for tomorrow.
“Mr. Yoshino does not want to be judged solely on past
performance--even though profits rose 17 percent last year to a
record Y305bn ($2.5bn). He also stresses future growth potential and product
company will be investing heavily in new technology and research
in engines and power transmissions.”
“...Honda is planning to launch a so-called hybrid car
this year that will marry traditional fuel combustion with
supplementary electric generators.”
Recognize the value of
brand management. “…Mr.
Yoshino has instilled in his management the idea that a Honda
motorcycle owner today is a car buyer tomorrow, and brand loyalty
must be cultivated. He
also applies that philosophy to Honda’s marine engines and other
products, such as agricultural equipment and generators.”
“If a customer is satisfied with our product, there is a
chance to win a customer for bigger products.”
Have a broad, yet
focused strategy. Mr.
Yoshino states, “We want to strengthen power products,
revitalize the motorcycle business and become more innovative in
Be obsessed with
Yoshino “…says he is continuing the mission set out more than
50 years ago by Soichiro Honda, the group founder who was famously
obsessed with customer satisfaction.
He maintained that every Honda product acquired by a
customer, however small, represented the whole company.
Sub-standard products were not tolerated, on the basis that
the customer affected by a one-in-a-million defect still had a 100
percent reject product.”
Recognize and respect
the organization’s culture.
“In the past year, we have recognised that our culture is
based on doing unique things, one of which is a changing
spirit,” says Mr. Yoshino. He points to Honda’s recent decision to develop engines for
Formula One motor racing as an example of such change, adding that
exposure to the grand prix circuit could prove a useful way of “forging and retraining our engineers.” There is no reason, he believes, why an engineer working on a
Formula One engine should not apply that experience to family
saloons or sports utility vehicles in the future.”
Corporations exist for
the customers. “Honda has always been obsessed with advanced
technology. But we
see the purpose of technology as serving the needs of the people,
“says Mr. Yoshino. “Thus,
the customer is our true obsession and the foundation for all
10. A corporate CEO should articulate and defend his/her corporate strategy.
In my opinion, Mr. Yoshino has done this, and in an