Our text this morning is the two-part cover story of this weekend’s Barron’s, on
the creation, rise, and dominance of Lexus in the luxury auto market.
And I select it not because Lexus ownership surely over-indexes
among readers of "Adam Smith, Esq.," but for its powerful
and focused message about how to enter and conquer a difficult,
competitive, high-end marketplace, in the teeth of nay-sayers and
doubters. Consider
the situation facing Toyota in 1986 as it began the launch of what
would be Lexus: It was viewed as a chronic lightweight in
the industry, amply capable of churning out underpowered econoboxes,
but with all the brand cachet among the well-heeled crowd of, say,
professional wrestling—or, as one wag put it, as probable
as introducing "Beef Wellington at McDonald’s."
Toyota’s genius? Not to take on Cadillac and Lincoln—not
to mention BMW and Mercedes—squarely on the turf of luxury
and performance, but to stake out a new, essentially unoccupied,
position:
"In its rise to the top, Lexus has forced competing auto
makers around the world to rethink their own models, especially
by the key measure of reliability. Lexus, which largely
eschews bold styling and tire-searing acceleration, has demonstrated
that legions of luxury-car buyers value reliability above all else.
In survey after survey, Lexuses have been shown to have fewer
mechanical breakdowns than all other cars in all price ranges.
[emphasis supplied]"
While some analysts note that Lexus had a window of opportunity in
the late 1980’s opened to them by the inattentive and complacent
attitudes of their competition, the relentless focus on reliability
comes through as the what drove their success:
“‘With
a Lexus in your driveway, you knew that your friends knew that
you had bought wisely,’ recalls Csaba Csere, editor of Car and
Driver magazine.
Indeed, Lexus has always placed high in long-term quality ranking. This
year, for the 11th straight year, the brand was ranked No. 1 by
J.D. Power and Associates."
Think of that! Eleven years in a row—this is, to say
the least, no accident. And emulating it is harder than it
looks. How many PC manufacturers have tried to clone Dell’s
hyper-efficient supply chain? How many entertainment
companies Apple’s bullseye after bullseye in design? How many
airlines Southwest’s no-frills-plus-fun business model?
It takes obsession to make this happen: Care to bet how many of
1,500 original applicants for Lexus dealerships were accepted? 72
(that’s less than 5%, to spare you the calculation).
Swell, you’re saying to yourself, but haven’t we entirely departed
the realm of law firms?
Not really: The Lexus story is the story of an outsider
challenging entrenched incumbents by providing something customers
would respond to even though the incumbents thought it vaguely
beneath them:
- a reliable,
- quality,
- "perfect" customer experience
- without exotic styling, over-the-top luxury touches (the new
Rolls Royce has an umbrella holder built into each rear door;
need I say more?), or blistering performance.
Now, imagine an AmLaw 50 firm deciding to emulate Lexus. The
mantra switches from things like "best of breed," "biggest deals,"
and "your most arcane problems solved" to "quality," "reliability,"
and the "perfect" client experience. Not "the exotic,
the ne plus ultra, head-turning guaranteed," but "here for you,
solid, always dependable."
Do you think clients would flock to this largely unoccupied positioning? Wouldn’t
it be fascinating to watch someone try?
This is very much in line with what Clayton Christensen talks about in _The Innovator’s Solution_. Don’t compete with existing players based on performance criteria they’ve always used. Do something that attacks “non-consumption” and then move from there.
In a services environment, the question of the day would be “who isn’t buying (legal) services” (non-consumers) and can one design a service that appeals to them?
“Lessons from Lexus” highlights a number of important messages for law firms.
First, we are a service business. It’s worth repeating. We are a SERVICE BUSINESS. We provide legal services to our clients and our clients expect (no, they demand) quality and reliability. Most of us in AmLaw 100 firms feel pretty confident that we do that. However, clients expect more. They want satisfaction that you can deliver the best RESULTS for their matters and that you can MANAGE their matters on a cost-effective basis. That requires budgets and constant communication with the client as changes occur. Those firms that can excell here will be the best of breed, which is the Lexus model.