FROM INDUSTRY JOKE TO SERIOUS
COMPETITOR
Lessons from the Skoda transformation
By Professor Jan Kubes and George Rädler (October, 2006)
IMD
Chemin de Bellerive 23
PO Box 915,
CH-1001 Lausanne
Switzerland
Tel: +41 21 618 01 11
Fax: +41 21 618 07 07
info@imd.ch
http://www.imd.ch
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR | Lessons from the Skoda
transformation
Quality, transfer of know-how, value-for-money, timing and speed were the key factors in
the total transformation of the Czech-based car manufacturer Skoda from an industry joke
to highly respected competitor.
After acquiring an initial stake in Skoda of 30% in 1991, Volkswagen (VW) raised its
investment gradually, improved the product range and geographic coverage, as well as
organizing a real knowledge transfer between both companies. In 2000 VW took full
ownership of the company.
By 2005 Skoda was exporting 85% of its production. Skoda cars were sold in more than 85
countries (up from 30 in 1991), and the firm had more than doubled its net income to €260
million. Skodas were positioned as good value for money. The cars were positioned in
between traditional segments in order to reach a wider audience. Between 2000 and 2005,
the company won over 30 first prizes in car ratings in both Western and Eastern Europe.
From no-class to world-class
The case of Skoda demonstrates a successful transformation. Skoda regained its standing
in the global automotive industry, and went from being the industry joke to a serious
competitor. Even in this difficult sector with high capital intensity, long product lifecycles,
long lead-times in development and production, Skoda was able to become a world-class
operation. This was done by addressing three themes:
1. What was competition doing? Who were the major competitors? How did they
compete? How did they differentiate their product offering?
2. How should the company respond: What were the strategic alternatives? Where was
Skoda going to compete? What did the product/service offering look like? What
segments would they serve? Was there a clear understanding of the business
system/value chain?
3. How should the company align its software to support the transformation? How
about company culture and style? Did the firm have the right systems and the right
resources?
IMD - www.imd.ch
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR
Page 2/5
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR | Lessons from the Skoda
transformation
Key success factors of the transformation
At Skoda the transformation was driven by some key management principles:
A quality drive that put the manufacturer back on the shopping lists of consumers. Quality
was the number one objective. This was understood from the board to the shop floor.
A value proposition around value-for-money in the minds of consumers helped Skoda to
overcome massive disadvantages owing to its negative brand perception.
Timing and Speed: Given the long product lifecycles in this industry, it made sense to
improve the quality of the re-launched Felicia model (easy wins) before introducing new
models (starting in 1997). Facilities were gradually upgraded.
The ability to learn
The ability to learn is one of the most important skills for latecomers in global markets. In
the case of Skoda, knowledge sharing and learning was institutionalized:
Within Skoda, there was a culture of trust and commitment and a thorough communication
process with VW's HQ facilitating the flow of information.
VW successfully transferred production, product and marketing know-how.
Right from the start, VW sent key employees and set them up in tandem in order to
exchange information continuously.
Important links to stakeholders/decision makers
In volatile/emerging markets, it is important to be linked to various stakeholders/decision
makers. Skoda achieved this by:
− Having members of the Czech government on the board helped Skoda's
management to get buy-in.
− Active involvement in industry associations as a sensing tool.
− Visibility in the community by investing in sponsorship.
IMD - www.imd.ch
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR
Page 3/5
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR | Lessons from the Skoda
transformation
Skoda's results were driven by the attention paid to these key themes and success factors
that helped the management to pull off this impressive transformation.
Further information is available on this from IMD on two of their case studies on Skoda
Auto.
Jan Kubes is Professor of Strategy at IMD and Director of the International Consulting
Projects. He is Co-Director of Orchestrating Winning Performance, IMD's six-day flagship
management program. Before joining IMD, he was a Partner at McKinsey.
George Rädler is a Research Associate at IMD. He specialises in the automotive industry
and is the author of numerous case studies. raedler@imd.ch.
IMD - www.imd.ch
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR
Page 4/5
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR | Lessons from the Skoda
transformation
RELATED PROGRAMS
ORCHESTRATING WINNING PERFORMANCE - http://www.imd.ch/owp
The 6-day global business program - The fastest way to bring yourself up to date
and stay ahead
Program Directors Peter Lorange, Bettina Buechel and Dominique Turpin
- For individuals and teams who seek the latest management thinking and
practical, innovative solutions for their business
- A unique energizer: boost your performance, broaden your perspectives
and expand your global network
- Network and design the program that suits you
THE IMD MBA - http://www.imd.ch/mba
Focus on Creative Leadership - Developing Leaders Who Make the Difference
Program Director Benoît Leleux
- Add to your management talent by hiring experienced IMD MBA
graduates ready to contribute to your business
- Develop your future corporate leaders in this leading edge, small,
intense, 11-month international program focused on leadership
- Gain new insights on your strategic issues from MBA teams in
International Consulting Projects (ICPs)
IMD - www.imd.ch
FROM INDUSTRY JOKE TO SERIOUS COMPETITOR
Page 5/5