Contents
Hardly any case study in strategy is as famous and as disputed as Honda’s entry into the American motorcycle market. There are two versions of the same story. One tells of a brilliant plan. The other tells of mistakes, chance and rapid learning. Henry Mintzberg made the second version the prime example of what he calls Emergent Strategy.
The plan: big machines for America
Situation
In 1959, Honda founds an American subsidiary in Los Angeles. A small team from Japan is to open up the market. The plan is to compete with the American manufacturers using big motorcycles, because in the United States only big machines count as real motorcycles. The managers consider the small models that sell well in Japan unsuitable for the American market.
Link to the principle
This is the intended strategy. It is soundly reasoned and fits what the company believes it knows about the market. In their 1985 article, Henry Mintzberg and James A. Waters call this the deliberate side of strategy.
What goes wrong
Situation
According to the interviews the management scholar Richard T. Pascale later conducted with the managers involved, the first months are discouraging. Dealers treat the Japanese team condescendingly. The few big machines that are sold leak oil because they are not built for long, fast rides on American roads. At the same time, the team is short of money.
Link to the principle
Part of the planned strategy cannot be carried out. Mintzberg calls this unrealized strategy. It is not an exception but the rule: hardly any plan survives contact with the market unchanged.
The small machines in the parking lot
Situation
For getting around Los Angeles themselves, the Honda people use small 50cc Super Cub motorbikes. Passersby ask about the bikes and want to know where they can buy one. A buyer for the Sears department store chain also gets in touch. According to Pascale’s account, Honda does not end up selling through Sears, but the inquiry is taken as a signal. Honda begins to sell the Super Cub in earnest.
Link to the principle
Here a pattern emerges that no one planned. The managers recognize it and follow it. This is the core of emergent strategy: it is not the plan but the response to what actually happens that sets the course. What matters is that someone sees the pattern and takes it seriously.
Two stories about the same success
Situation
By 1964, nearly half of all motorcycles sold in the United States are Hondas. In 1975, a report by the Boston Consulting Group for the British government explains the success quite differently: as a deliberate offensive based on cost advantages from high production volumes in the home market. A well-known Harvard Business School case study is based on this report. In 1984, Pascale publishes his counter-version based on the interviews.
Link to the principle
In hindsight, almost every success looks planned. Anyone explaining it from the outside can easily invent an intention that never existed in that form. The principle warns against this: the strategy actually realized is often a mixture of plan and what was learned along the way.
Luck, judgment and skill
Situation
In 1996, Mintzberg, Pascale and other scholars debate in the California Management Review which version is correct. In 2004, the British economist John Kay considers both versions too simple. Successful strategy, he argues, mixes luck and judgment, and the two cannot be separated even in hindsight. The Harvard version, in his view, is right about Honda’s technical skill, and Pascale is right about the human factors.
Link to the principle
This is an important limit. Emergent strategy does not mean that planning is useless or that success is chance. Honda could seize the opportunity only because the company knew how to build good, reliable small machines. The pattern emerged in action, but on the foundation of capabilities that had been built up over a long time.
Key takeaways
Key lessons
- Be prepared for part of your plan not to work out.
- Pay attention to what customers find interesting about you on their own.
- Take unexpected successes as seriously as planned ones.
- Distrust success stories that sound too smooth in hindsight.
- Build capabilities that allow you to seize opportunities when they come.
Summary
Honda arrived in 1959 with the plan to sell big motorcycles and succeeded with a small motorbike that its own people used for errands. The managers recognized the pattern and followed it. Later, the story was told as a master plan. Henry Mintzberg sees it as the prime example of an emergent strategy, one that emerges in action when someone is willing to learn from the unexpected.
Sources
- Henry Mintzberg and James A. Waters: Of Strategies, Deliberate and Emergent. In: Strategic Management Journal 6 (1985), No. 3, pp. 257–272.
- Richard T. Pascale: Perspectives on Strategy: The Real Story Behind Honda’s Success. In: California Management Review 26 (1984), No. 3, pp. 47–72.
- Henry Mintzberg, Richard T. Pascale, Michael Goold and Richard P. Rumelt: The “Honda Effect” Revisited. In: California Management Review 38 (1996), No. 4, pp. 78–117.
