The recent demise of Chrysler's once popular PT Cruiser automobile holds important lessons for lab managers. A decade ago, Chrysler Corporation introduced its PT Cruiser. The car's retro styling immediately made it popular with both car dealers and drivers. It inspired imitators such as the Chevrolet HHR. PT Cruiser production could barely keep up with demand. All this gradually changed. Last July Chrysler manufactured its last PT Cruiser. Sales had declined from 145,000 in 2001 to just 18,000 last year. Back in 2001, What happened to kill the car?
The answer to this question holds important lessons for lab managers. What is the answer? Chrysler ignored its customers. Although car dealers (Chrysler's direct customers) and drivers (Chrysler's indirect customers) asked for things such as two-door and panel van versions, Chrysler failed to invest in the car to offer these options or change it beyond offering additional paint colors and a convertible top. With the loss of the once rich PT Cruiser profits, Chrysler paid a heavy price for ineffective customer relationship management.
Even in 2001, the PT Cruiser was considered a heavy vehicle with relatively low gas mileage. As drivers are demanded ever higher gas mileage, Chrysler never made design changes to improve gas mileage.
In short, Chrysler never updated the car to overcome its disadvantages or broaden its appeal. This and competitive threats from boxy, higher mileage vehicles destroyed the appeal of the PT Cruiser. The same sort of problem can confront instrument makers, drug manufacturers and even commodity chemical manufacturers. Their lab manufacturers are responsible for protecting their employers' markets. However, like Chrysler's designers, sometimes they are asleep at the switch.
Example–polyester raw materials
Early in my career I received a valuable lesson in the dangers of ignoring competitive threats until it's too late to retain one's markets. I worked for Hercules, then a major manufacturer of dimethyl phthalate (DMT), the raw material for polytheylene terephthalate (PET). PET is used to manufacture plastic soda bottles, water bottles, clothing made of polyester fibers and other products. Then Amoco introduced terephthalic acid (PTA) as an alternative.
The introduction of PTA was an ambiguous threat because its consequences for DMT producers was unclear at first. "When faced with ambiguous threats, organizations often tend to downplay or minimize the risks," notes Trustee Professor of Business Management Robert Rigoberto of Bryant University. Hercules appeared to do this. I saw lab managers dismiss the threat because PTA was a solid rather than a liquid. They were convinced that customers would prefer to handle a liquid product. However, with Amoco's help, polymer manufacturers soon learned how to handle PTA pellets in their plant. Suddenly it was DMT that had a major disadvantage: methanol was produced as a byproduct when polymerizing DMT but not when polymerizing PTA. Previously polymer makers had lived with the problem of finding markets for the methanol. They didn't have to do this when using PTA. Hercules was forced to buy back the methanol from its customers thereby reducing profit margins. Still storing methanol, loading rail cars, etc. was a hassle for polyester manufacturers. As a result, Hercules had to fight hard to keep its customers in what had been a growth market.
Hercules eventually got out of the business selling its plants to other firms.
Lessons for lab managers
So what is the lesson for lab managers? When an ambiguous threat appears on the horizon and you are unsure whether or not it poses a threat to your firm's business, consider the threat carefully. Study of the patent literature may help define its seriousness. If it is indeed serious, your firm has a window of opportunity to confront it before your business starts to suffer. For example, lab managers could have started a program to investigate making PTA themselves. Marketing managers could have immediately instituted a methanol buy-back program and persuaded DMT customers to sign long-term contracts. This would have given lab managers time to work on the problem before sales and profits began to decline too severely. Alternatively, Hercules could have acted quickly to get out of the business.
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