Essence

Peter F. Drucker grew up in Frankfurt just as the Nazis gathered power. When Hitler was elected Chancellor, the future business guru fled for England, watching the storm clouds of centralized power in his rearview mirror. No wonder the concept of decentralization became one of Drucker’s first and more useful contributions to American business theory. Drucker and his beliefs came to prominence with the publication of "Concept of the Corporation" in 1946. Hard to believe, but the landmark work was based on 18 months Drucker spent studying General Motors.

By 1950, Drucker decided that workers were assets and the corporation was a community. He asserted that humans– not machines, numbers, paper or parts– were the heart of the company. He eventually extended the perspective out of the factory doors out to the customer. Drucker spent a lot of time and other people’s money reminding executives not to forget the customer.

The nature of any business, he argued, is to create a customer. To hunt him or her down and serve them like… um… There is no good metaphor for hunting and serving. Maybe that’s why it’s such a tough dictate to follow. But according to Drucker, follow it you must: the customer is the essence of any successful business, including automotive. Following his logic, a car is the RNA to the essential DNA of those inside. In other words, it’s the people that matter, not the car.

Ironically enough, Volkswagen is a perfect example of a company founded on this “customer as essence” philosophy. Adolf Hitler decided that his working class supporters needed a “people’s car” that could take five passengers to 62 mph for under 1000 Reich Marks. He met with Ferdinand Porsche, owner of the design house Porsche Byro. The Beetle was born. The Beetle became a runaway success and an automotive icon.

Volkswagen’s customers, however, evolved. Post-war, family sizes increased. Consumers became aware of safety and environmental considerations. Volkswagen kept pace with their customers' expectations of performance, comfort and safety by shifting from the spartan Beetle to the increasingly luxe Golf (or Rabbit, depending on your county of origin). The two models have almost nothing in common– except the people you find riding inside. VW stayed true to its middle class customers.

Many decades later, VW re-launched a "new" Beetle. The model illustrates the company's ability to understand their "essence." Rather than create another utilitarian people's car, they released a horrendously compromised package wrapped in "cute" retro-minded sheetmetal. The result appealed directly and powerfully to their existing customers' sense of nostalgia, at a price they could afford. The new Beetle was/is a value-priced fashion statement– the exact opposite of the Bug’s original intent. And a solid sales success because of it.

It seems simple enough: build a car for your customer. Some companies do this very well. As wealthy consumers have children later in life, Porsche correctly figured that a fat, 911-nosed station wagon was just what the “new traditional” Porsche customer needed to cart their dependents and lifestyle equipment. Or, if you prefer, the Cayenne was exactly what their customers' wives wanted their Porsche worshipping husbands to want to buy for them. The Chevrolet Corvette is another machine that's faithful to its maker's essence. Although no longer as affordable as it was, the 'Vette still caters to its [increasingly wealthy] customers' desire for impractical, low-slung, all-American, V8-powered sex appeal.

Volkswagen also supplies us with an excellent example of the converse of the consumer-centric theory: the Phaeton. Though superbly engineered, VW's $70k luxobarge was an answer to a question that none of their customers asked. How far from the young, middle-class family did they park that thing, anyway? By the same token, Saab customers prize nimble driving, clever design and originality. Give them a warmed-over, rebadged Chevy Trailblazer and see what happens. Nothing. Observers of the automotive scene often see an automaker's essence denied (Cadillac BLS) or essence from another planet (Chevrolet SSR). These products– if not the companies who build them– are doomed from the start.

Which is the long way of saying badge engineering is the exact polar opposite of customer engineering. A company may like to build a certain type or style of car, it may be relatively cheap to manufacture. But if the company forgets its essense (i.e. whether or not its existing customers want to pay them for the result), they won't be building cars for long. In short, the person who should be in the driver's seat of any viable car company should be the person who ends up in the driver's seat: the customer.

In 1983, Drucker wrote this epilogue: "Concept of the Corporation had an immediate impact on American business, on public service institutions, on government agencies – and none on General Motors!"