A separate product didn’t work well for Honda (the Insight), so they opted for the route of adding hybrid technology as a feature in one of their best selling models. This limits their risk, but also limits the upside reward if there was a boom. There can be endless debate about whether the lack of success of the Insight was design-related, market timing, poor marketing, or some combination, but clearly Honda was hedging their bets by going with a feature rather than a product the 2nd time around. You could also argue that Honda may have seen less value (or more risk via cannibalization) in creating a purely hybrid model, since they already had the Civic, which when using a gasoline-only engine gets pretty impressive MPG (36 vs the 45 for their hybrid version).

Conversely, Toyota chose to create a separate product that while based on an existing vehicle, was it’s own product. The original was not a huge success, but with the design make-over of the 2nd generation Prius, the product gained a lot more traction and saw the cars fly off lots. Again, one could debate whether design was solely responsible or if there were other factors at play such as the difference in fuel costs and environmental awareness when the Prius was released vs. the Insight.

With the success of the Prius, Toyota has started capitalizing on the cache of the hybrid by adding that as a feature to other product lines (Camry, Highlander and the Lexus LX, GS, and RX all offer hybrid options).

In software, Product Managers sometimes have to evaluate a feature or capability to determine if it is better suited as a feature for an existing product or as a stand-alone product. There are trade-offs for each choice and it’s much easier and cheaper to add a feature than to create new products, but too many features that are ancillary will make the product bloated and often leads to mediocrity (or worse).

http://www.newyorker.com/talk/financial/2008/05/12/080512ta_talk_surowiecki

Saeed

Thanks for the comment. A big part of success is understanding that the “product” is the entire experience and not simply the technology or the physical commodity that is sold.

Apple provides a mobile entertainment experience, not simply a portable music/video player.

Saeed

Not to turn this into a debate, but based on the numbers in the link I cited, Civic hybrid sales were basically flat in the US in 2007 relative to 2006. Even with a great November 07, the 11 month totals are only about 2% higher in 07 than in 06. This is a very small increase, given the increase in interest in the market. Prius sales, in comparison, were up over 68%.

Honda definitely needs to market their hybrid products better, and IMHO, take a lesson from Toyota and create a branded hybrid line, vs. simply the product line extension of the Civic. While it may reduce costs in simply extending the Civic product line, it doesn’t help market presence nor, apparently does it make sales grow. And Toyota is now unveiling their 3rd generation hybrid engine.

Making comparisons with the iPod, the Prius is certainly the dominant market leader and looks like it will stay that way unless someone can disrupt their momentum. Honda should be able to do that, but it’s not clear they have the strategy in place.

Saeed

The key is finding a way to successfully integrate innovative design with “normal” design, as well as proper marketing in order to make sure that consumers see how great the product is.

Thanks for the comment. As I mentioned, there is no single reason for the lack of sales of the Insight. And while I’m no fan of the CRX design, I didn’t call the Insight “ugly”. The comment about a “normal” looking car was taken from a list of the cons people had given about the Insight. I don’t remember where I read it though.

The 2004 (I believe) redesign of the Prius was certainly a big factor in its success. The old Echo body certainly was ugly. One of the intangibles about the redesigned Prius — and it is a good lesson to remember — is that not only did people want to drive fuel efficient cars, they wanted to be SEEN driving fuel efficient cars.

This is where the redesign of the Prius gave a distinct competitive advantage over the (basically) equally fuel efficient Honda Civic. I drive a regular Honda Civic. If I was driving a hybrid Civic, no one would know unless I told them or they were driving right behind me and saw the word hybrid on the back of my car.

The redesigned Prius, with it’s unique look, became the symbol of “green” driving and everyone from ordinary people to movie stars wanted to be associated with it. The Prius virtually became an eco-friendly brand.

As for the hybrid Civic, it might have cannibalized the anemic Insight sales a bit, but even it does not have stellar sales. Here’s a link to some recent Honda America sales numbers. Scroll down to the table.

As you can see, in November 2007, only 3238 hybrid Civics were sold. If you look to the right to the Year to Date numbers, for the first 11 months of 2007, there were 29,352 hybrid Civics sold in the US. That is only up slightly from 28,845 for the first 11 months of 2006.

The Prius sold over 180,000 units in the US in 2007 which is roughly 6 times the Civic hybrid.

Saeed

Agreed. Design matters. As does Marketing, Positioning, Channels, Competitive Advantage and a whole lot more. The combination of technology + all these other business value points is what makes the iPod successful.

While the design of the iPod certainly was different, so was the marketing. As I said “1000 songs in your pocket” will resonate with a lot more people than “4GB of RAM for your MP3s”. Additionally, Apple did what no other vendor did. They created iTunes Store.

While others could possibly copy aspects of the iPod (though I’m sure Apple has lots of patents on things like the thumbwheel), by entering into resale contracts with the various record labels and locking out other devices, Apple created a sustainable advantage that other vendors couldn’t compete with. Now they’ve extended that to videos, movies, TV shows, radio shows etc.

Meanwhile other vendors such as San Disk and iRiver have failed to even compete on the marketing side. I see ads for the San Disk Sansa in electronics retailer flyers, and it is priced well under the iPod, but I have no idea how well it works or why I should buy it. It may in fact be technically superior to the iPod, but people would rather spend the same money for an iPod Shuffle as compared to an almost similarly priced Sansa that can hold much more music and has a colour screen.

Saeed

Your didn’t point out that Honda also introduced the Civic Hybrid which also undoubtedly cannibalized sales of the Insight. Sales of the Prius didn’t take off until after the had a body redesign away from the ugly Echo to the current version that looks like an elongated CRX. Since the Insight also is derived from the CRX, I would dispute the assertion that the Insight was “ugly”.

In two words – Design matters. Case in point, iPod was the 70+th MP3 player – enough said. What they did was innovative design. (I may be wrong on the number 70+ for iPod, but it sure was not the first one, or not even in the first 25)

Gopal