Decision-making is an inescapable fact of business life. Some choices work out, others are regretted. But learning from those decisions helps season an executive.
Diego Ramos, executive vice president of Audi Latin America, pictued above, led discussion on ways to improve decision-making during WorldCity’s CEO Club event May 8. Talks had an automotive tint since Ramos worked at Spain’s SEAT before joining Audi, part of Germany’s Volkswagen Group.
Ramos began with a story about vacationing in Spain in 2009, with his toes literally in the water. His cell phone rang. The unknown caller said he wanted to meet in London and talk about a job. “I’ll send you my resume,” Ramos said.
That caller turned out to be über-entrepreneur Elon Musk, who launched electric car maker Tesla Motors.
Ramos turned down Musk’s offer, which included stock options that by now, would be worth millions of dollars.
Was that a good choice?
“I took the right decision for me,” Ramos said. At that time, he was looking for financial stability. “What I wanted was to make sure that my kids went to university.”
Ramos also wasn’t convinced then that Musk was committed to building an automotive company or that electric cars would be more than a novelty.
Some participants – in answering a question from WorldCity CEO Ken Roberts – said they probably would have taken the risk. But others mulled less quantitative aspects of the decision.
“It’s not only the outcome, it’s the journey,” remarked Leonel Azuela, founder and managing director of Quaxar, a digital marketing firm. And, while Tesla traded at $236.70 per share on May 8, its progress was not so clear in 2009.
People may not know exactly what they want, said Ramos, “but I knew exactly what I did not want.”
Know your audience, overcome biases
Decisions also can be based on the wrong criteria, Ramos told the group, referring to a business case he studied at Ashridge Business School in London. His team evaluated venerable British automaker Morgan Motor Company Ltd., whose bespoke cars can take a decade to arrive after an order is placed.
Ramos’ team suggested Morgan invest in a massive increase in productivity, a value revered in the world of engineering. But their idea was panned. “When we finished, not one of us understood,” he said.
The team then learned that “Morgan is not a car company; it’s a club.” Morgan owners are passionate about their cars and don’t care much about productivity, he said. “We missed the point.”
The moral of that Morgan story: People come in with their own preconceptions, Ramos said. “Many times, we take these decisions based on the biases we have.”
Cadillac’s headquarters move
Participants then were asked their thoughts on why Cadillac recently decided to move its headquarters away from Detroit, home of its parent company General Motors, and to set up in New York City.
“The talk was about getting closer to the market,” said Steven Bartley, principal at Americas Gateway – Search & Consulting.
“They were trying to break the mold,” suggested Alfredo Fuchs, vice president at Right Management.
“My feeling is that changing a location doesn’t change a company,” noted Arun Sharma, University of Miami School of Business marketing professor. “This is people attacking the wrong problem.”
Ramos didn’t know the rationale, but saw similarities to Audi’s move in the early ‘90s to differentiate its high-end brand from the broader VW group.
Such choices, he said, weigh synergy – which often involves saving money – and focus, which can be hard to quantify.
Speed in decision-making and tech adoption
“How does Audi make decisions?” asked WorldCity’s Roberts.
Over a long period of time, said Ramos. That’s the norm for auto companies that must factor in safety and wear-and-tear issues. Simply adding a new car color is a process that can take several years.
“The cycles are terribly long,” said Ramos, adding that planning spans 15 to 20 years. “If we are doing well today, it is because of what was decided 10 years ago.”
Is customer adoption of new technology a challenge?, asked George Calienes, senior vice president for Latin American operations at air conditioning maker Daikin Applied. Calienes said his company is changing to more efficient magnetic technology, but acceptance is slow.
“We face the same thing,” Ramos said. Customers tend to buy “an evolution” of what they had before.
That’s why he predicts slow acceptance of the plug-in electric car. Until electric cars can travel a longer range on one charge, they’ll remain second or third cars in U.S. households, where drivers want the freedom to go where and when they want, said Ramos.
The CEO Club is one of five event series that WorldCity offers to bring together executives in greater Miami on international business topics. The CEO series is sponsored by the University of Miami School of Business Administration and commercial real estate firm CBRE.
The next CEO Club event is set for June 5.