HD Inputs the Nadler-Tushman Congruence

HD Inputs

The Nadler-Tushman Congruence Model is a model based on open systems theory which evaluates an organization's inputs, throughputs and outputs. These are measured against each other for congruence. There are several main categories of inputs - the environment, the organization's history, resources and strategy.

For Harley Davidson, the organization's history is one of its most critical inputs. This history is represented in the strength of the Harley Davidson brand and the images associated with that brand. Harley trades heavily on its easily identifiable, outlaw image. Brand strength allows Harley Davidson several competitive advantages. One is that the company makes a substantial portion of its income on branded merchandise, which further strengthens the brand. Another competitive advantage deriving from the strong brand and history is that the company does not need to rely on rapid technological change as a source of competitive advantage. Other motorcycle firms change engines nearly annually, whereas Harley Davidson does so only every fifteen years or so, granting the company substantial savings are research and development.

One of the negative impacts that the company's history has is that the Harley Davidson brand is strictly associated with its traditional product, superheavyweight bikes. Harley was forced to use the less-resonant Buell name for lighter bikes and has failed in their other attempts to introduce smaller bikes. This hampers the company's ability to move with the motorcycle market; they must create a market for their products rather than adapt their products to meet market demands. This has caused bust cycles in the past for Harley Davidson. Because of this, the history of Harley Davidson, as encapsulated in its iconic brand, is an input that is not only a critical success driver but a critical failure driver as well.

Tied in with the brand is the operating environment, in particular consumer trends. Because of its lack of flexibility with regards to product, Harley Davidson is highly sensitive to fluctuations in the external environment. Changes in consumer preferences result in demand shifts that significantly affect Harley Davidson's revenue. Also with regards to consumers, Harley Davidson is affected by demographic trends. For example, when the company enjoyed something of a renaissance during the late 1980s and 1990s, it was the result of a demographic bubble passing through middle age, which is a core target market for Harley Davidson. Other shifts have seen consumers demand lighter, flashier bikes from Japanese manufacturers.

Consumer trends represent such a critical input for Harley Davidson because of the way in which they drive demand. In recent decades, demand shifts for Harley Davidson have been sudden and dramatic. These shifts impact decisions regarding production capacity, new product development and other key strategic thrusts. The company's brand image makes it difficult for it to make dramatic changes to its product offerings in order to adjust to demand fluctuations. Therefore it is critical that Harley Davidson make subtle changes to other parts of their strategy in order to adapt. It is also imperative that Harley Davidson develop complex forecasting of demographic and consumer preference shifts. Harley could suffer significantly if they take a reactive rather than proactive approach to these demand shifts.

Strategy itself is another key input. One of the most important strategies for Harley Davidson is its strategy for dealer relations. The company's dealers not only sell the bikes, they service them as well. Dealers also sell Harley Davidson merchandise. Service and merchandise are two of the means by which Harley smoothes out its income streams. The dealers are also the main point of contact with the customers. In past, poor dealership strategy resulted in erratic dealer performance that hampered overall corporate performance. Harley's core customer group consists of middle-aged professionals, a group that typically demands a high level of service. As a result, dealer strategy is one of the most important inputs for Harley Davidson. The ways in which they manage their dealer network dictates in part the degree to which the company will achieve its objectives.

The final critical input group for Harley Davidson is resources. As Harley's demographic has aged, its consumers have become more demanding in terms of features and ease of maintenance. This has resulted in the development of a key resource - technology. Harley Davidson typically acquires technology rather than developing it. For example, they formed a joint venture with Porsche for expertise in engine emission compliance. This illustrates that although Harley Davidson's research and development program is focused on incremental improvements, other motorcycle manufacturers are driving the industry in terms of technological advancement, forcing Harley to keep up at least a little bit.

Therefore, developing such joint ventures and other partnerships is a means crucial for Harley to acquire needed innovation. Of all the most important inputs, technology is therefore the most difficult for Harley Davidson to acquire. Rival firms are hesitant to enter into such ventures with Harley, necessitating partnerships with automobile manufacturers or specialized racing organizations. Finding appropriate partners that can provide technological innovation to Harley Davidson is an important input but is also a tremendous challenge.

There is a moderate degree of interdependency between these inputs. We have seen that demographic shifts and the company's strong brand do not support one another in many situations. Occasionally, they do, resulting in tremendous surges in revenues and profits. When they do not, the company falls on hard times. Through the 1970s and early 1980s, dealer strategy did not support the changing demographics of the Harley Davidson consumer. The company therefore changed its dealership strategy to one that better supported the demographic shifts. Again, the result was improved profits.