The Honda-Yamaha Wars
In 1981 Yamaha launched what became known as the Honda Yamaha wars. In the battle for supremacy in the motorcycle market place, Yamaha challenged Honda’s leading position by opening a new factory that made Yamaha the world’s largest motorcycle manufacturer. The economics of this war seemed tilted in Yamaha’s favour, a large modern factory enabled to Yamaha to exploit economics of scale, reduce per unit costs and flooded the market with motorcycles. Honda did not respond by creating an even larger factory to compete with the lower cost structure and battle Yamaha in a war of attrition. Rather, with the battle cry “Yamaha, wo tubusu! ( we will crush slaughter Yamaha) Honda rapidly increased the rate it changed its product line and used variety to bury Yamaha. George Stalk offers his account of the Honda – Yamaha war….
“At the start of the war, Honda had 60 models of motorcycles. Over the next 18 months, Honda introduced or replaced 113 models, effectively turning over its entire product line twice. Yamaha also began the war with 60 models; it was able to manage only 37 changes in its product line during those 18 months.
Honda’s new product introductions devastated Yamaha. First, Honda succeeded in making motorcycle design a matter of fashion, where newness and freshness were important attributes for consumers. Second, Honda raised the technological sophistication of its products, introducing four-valve engines, composites, direct drive, and other new features. Next to a Honda, Yamaha products looked old, unattractive, and out of date. Demand for Yamaha products dried up; in a desperate effort to move them, dealers were forced to price them below cost. But even that didn’t work. At the most intense point in the H-Y War, Yamaha had more than 12 months of inventory in its dealers’ showrooms” George Stalk Jr, [ reference]
Honda won the war by out innovating Yamaha. They were able bring product to market faster, learn and adapt. They did not respond to change, they inspired and exploited change using it shape how people perceived motorcycles. Simply, Honda was more agile than Yamaha.
In the last 15 years software agility has been defined by the agile manifesto and has become implicitly branded as a specific set of practices for delivering software. What tends to get lost in the dogmatic debates about software practices is the original mantra of embrace change. The agile manifesto was about seeking better ways to create software. However, agile software development practices will not create value for an organization that is not prepared to embrace change to innovate to create value that is enabled by agile and lean thinking. For many business domains, predictable strategies that were once seen as responsible and sane, are now paths to corporate senility.
I am confident the managers at Yamaha believed they were pursuing a sane, predictable, and responsible strategy for out competing Honda. It would not be hard to argue to the C-suite a strategy for competing that reduced the per unit cost of a motorcycle. It would not be hard to argue for a strategy of flooding the market with cheaper motorcycles. I am sure numerous Yamaha marketing managers, crunched numbers again and again to understand the demand for motorcycles and elasticity of motorcycle pricing. Manufacturing engineers likely sweated detail after detail to reduce per unit costs.
Yamaha managers must have believed Honda was crazy, taking unjustifiable risks as it rapidly brought new untested technology and style to the market. How could you predict market? How could you manage manufacturing costs – think of the retooling for each new model? And don’t even get me started by R&D costs, bringing out that many new models must have pushed Honda’s R&D budget through the roof! What kind of C-suite would accept such a crazy and unpredictable strategy?
I am sure many of models Honda brought to market were failures, and I can imagine Yamaha managers wondering about the pain they would experience if one of their initiatives failed in the market place, how they would be dressed down for wasting valuable company resources. What managers at Yamaha probably could not imagine were the lessons Honda learned, and how Honda was able to use that knowledge to create greater value through innovation . In short, Honda was more agile than Yamaha.
Agility is much more than just seeking better ways to create software. For software intensive organizations it is about replacing delayed decisions, slow feedback, wasteful buffers and contingencies, with clear vision and fast decision cycles. What could you do to your competition if you could deliver new product or services every quarter, while they are still planning next year’s new product? Every month? What if the only constraint on your ability to offer new product or services was how fast your customers could accept a new product or service? What if product development was no longer the constraint on business strategy? What would happen to your competitor if by the time they got their “Next Generation” product to market, yours had gone through a half dozen or more cycles of innovation? Does anyone remember Research in Motion? Kodak?