Honda and the case for taking a step back

LBS’ Dr John Mullins makes the case for taking a pause

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Jeff Bezos - entrepreneur, media proprietor, investor, computer engineer – the founder of Amazon - once said, “sometimes it’s important to step back and reflect on the meaning & beauty of what you’re doing”.

This is of course a brilliantly poetic way in which to express the need to seek satisfaction and locate a greater perspective from one’s business endeavours. However, there are also myriad practical reasons for business leaders, and businesses as a whole, to take a step back from the front line and to reflect more deeply on the direction of travel.

Such is the case with Honda, the multinational manufacturer of automobiles, motorcycles and power equipment. In The Financial TimesHonda defies electric vehicle mania to bet on hybrid cars, the company has said that it will commit $40bn to the development of electric vehicles (EV) over the next decade, but has stopped short of throwing its full weight behind EVs as it bets on hybrid cars dominating in the near future.

In response to this news, London Business School’s Dr John Mullins has acknowledged “Honda’s carefully investigative and logical approach to electric vehicle production is a model that has stood the test of time”.

Responding to the news article in a letter published in the FT, Dr Mullins draws on a chapter of his book The New Business Road Test. There he refers to Hero Honda, a joint venture the company had with Hero Cycles of India.

In the late Eighties, the company undertook a large customer survey, which later revealed a surprising story: India’s consumers had changed their minds. “Scooters were no longer the vehicles of choice and motorcycles were to become the two-wheel vehicles of the 1990s.”

“It was thanks to that keen customer insight that the company — now Hero MotoCorp — eventually sold more than 1m motorcycles a year.”

Dr Mullins makes the point that by “resisting the siren call of EV”, Honda is once again demonstrating its leadership in the automotive market and is prepared to take a step back from the chorus of voices to reflect on where, and most importantly when, it wishes to take its EV business.

In The New Business Road Test, Dr Mullins writes: “Before putting pen to paper, you should step back and give your opportunity a road test. Find, if you can, the fatal flaw lurking in what looks like an attractive opportunity. Your prospective investors will be looking for it, so you’d better have looked first.”

Taking a pause to consider the business landscape is a lesson, it would appear, that Honda has long ago taken to heart and benefitted from.