Learning from Lotus

There is a scourge draining the life-blood out of industry at the same time it paradoxically infuses it with record profits.

There is a scourge draining the life-blood out of industry at the same time it paradoxically infuses it with record profits. I have observed this monster through anecdote, observation, and even personal experience while working with Lotus Cars USA. This devil has many names, but is most often called "shareholder value." Read on, you may even recognize some symptoms of the disease that's threatening the health of your company.

Founded by one the most charming and talented pirates ever, Colin Chapman, Lotus earned its reputation by being lean, solution-focused, innovative, and agile. Ever since Chapman's death in 1982, however, the company has been bedeviled both by an appalling lack of funds (nothing new to Lotus, actually), and management that thought it could reinterpret Chapman's vision to suit their purposes.

Fast forward through the ownership and mismanagement by Roger Smith's GM, and the subsequent "sale" of Lotus to Romano Artioli. Jump past the purchase by Malaysia's national car maker, Proton. It's 1997, and a new management team, headed by former Royal Dutch Shell executive Chris Knight, is in place. They listen intently, establish fundamental accounting requirements and fiscal controls, and do something no one else dared: put a premium on the neglected U.S. market. Only it never quite works right. In no time, management consultants are running rampant, a youth kick is in full swing to bring "fresh thinking" into the hallowed halls of the Hethel headquarters, and the bureaucracy takes over.

Sure, Lotus Engineering has two new buildings in Michigan, an engineering center in Southfield and a dyno facility in Ann Arbor. Lotus Cars USA, on the other hand, still relies on an Esprit that's 25 years old because there's still no federalized Elise. And the vaunted M250 is dead. Why?

Simple. Management embraced and empowered a "youth movement" that produced "winners" like:

  • A one-make Elise race series to promote a car whose production couldn't meet demand
  • Grand efforts to sell branded trinkets, clothing, and the Lotus lifestyle
  • The Elise 340R, a PR exercise disguised as an allegedly inexpensive line extension that further delayed an Elise for the U.S.

As for the M250, the much hyped "Porsche Boxster killer" couldn't be produced within a reasonable timeframe and budget. And though the U.S. would have been its strongest market (not Germany, where Lotus is weak), a federalized version wasn't part of the original plan.

While all of this seems odd to those of us interested in Lotus cars (i.e. we'd rather drive them than buy a hat or poster), it does happen for a reason: By positioning Lotus as a company ready to take on all comers, visibility, and therefore shareholder value, skyrockets. Forget the cars. Watch the bottom line. The future is secured by managing the image, not the deeds.

We watched as the Lotus bureaucracy stifled the voices of reason through workshops and reassignments. Promises made to Lotus Cars USA were never kept because the U.S. had little effect on the U.K.'s image, despite its potential to greatly impact the bottom line. Managing the image and costs for "quick wins" was confused with insuring the long-term health of the company.

Thankfully, Lotus can thrive if its anti-Chapman bias crumbles, and the experienced stalwarts are given the chance to return the company to first principles. They understand true shareholder value comes from producing the best possible product for the lowest possible cost, in line with the company's history, vision, and goals. How many of you work at companies that can say the same?