Volkswagen (again) – wrong strategy?

Volkswagen have spoken again about the defeat devices that they included in their cars to enable them to pass the emissions tests whilst not performing correctly when driven normally. The one thing which really struck me in the reports was the statement that they made about the problem starting when they decided to launch large-scale promotion of diesel vehicles in the USA in 2005. Apparently they found it impossible to meet strict emissions limits in force in the US at that time, so why did they do it?

It seems to be a classic mistake in strategy – an audit should have shown them that the specific emission regulations existed (legal element from the macro environment) and that they only had the capability to produce cars to a lesser standard (internal environment) and therefore they were not in a position to supply the market without resource commitment to enable the regulation to be met, and the time this would take being necessary before launching the sale of the cars, let alone a large scale promotion.

That obviously didn’t happen and it seems to me there can only be one of two reasons why they chose the route they did with the defeat device – either the leadership put so much pressure on the engineers without accepting that it wasn’t possible and did not have open communication meaning that the engineers found a way to deliver what was needed by beating the tests or the leadership knew what was happening and condoned it. Either way, leadership were at fault and basically because they had a strategy which they couldn’t legitimately deliver.

The simple steps of situation analysis to inform strategy are discussed a low level (Certificate) in CIM qualification courses, then in more detail with the CIM Diploma, so why did Volkswagen not follow simple practice? It is reminiscent of the UK banks who blamed the US market for their collapse in 2008 as they had to lend money for sub-prime mortgages in that market by law, but they did not have to be in the US market so could have avoided it.

It seems that greed of the bankers at the thought of the large potential returns in the US also affected decision making in Volkswagen, with Volkswagen now paying the price for it – they may well be regretting that greed as in the long term the costs could easily outweigh the gains they have made.

Report on the story here