Validation

Introduction

Where do good ideas come from? The vast majority of people want to be more creative, develop better concepts, and belong to innovative teams and organizations. Unfortunately, there is no route or interface to access Platon’s topus uranus; the place where pure ideas and perfect archetypes exist. In return, the human being has a natural inclination to empathy, allowing him to recognize problems that are worth solving, focusing his attention to produce ideas of arbitrary solution. Some were capricious, others “clever,” and some brilliant. But for life and for business, any of them have the same value: none. Only when ideas are set in motion, incubated, and tested, they evolve to the level of an actionable, executable, and validated concept, acquiring value. Between the idea and the execution, there is experimentation.

In the previous chapter, the importance of swiftly experimenting with new concepts was discussed; in most cases using the prototype, as an instrument par excellence, to test the assumptions behind a promising business idea. In this chapter, the focus is on actual experimentation, without being able to subtract the influence of the prototype in its execution from the hypotheses of the project.

At the end of 2007, Grupo Elektra announced an agreement with First Automobile Works Group (FAW Group), to commercialize automobiles of the biggest automobile company of China. The target market was new customers for the automotive industry. The agreement contemplated the construction of an assembly plant in Michoacan, México for 2010, with a capacity of 100 thousand units annually (GrupoElektra, 2007), thereby satisfying the regulation to import cars exempting the tariff. Two years later, according to the 2009 Annual Report and in a standing note, Grupo Elektra stated: “Derived from the global economic contraction and in the automotive sector and due to the delay in the construction of the automotive plant in Michoacan, his registration as a vehicles producer was canceled” (GrupoElektra, 2009). In other words, the project was canceled. In the fourth quarter 2009 earnings release, the bold initiative was in discontinued operations, with a charge of 276 million pesos, plus a charge for the same concept in 2008, for 78 million pesos. (GrupoElektra, 2009) What went wrong? Without a shred of a doubt, the selected year for the introduction of the FAW was a complicated one for such a strategic move: The fall in car sales to the public was the second biggest issue, only behind the crisis of 1995, with one difference: Then, the collapse affected Mexico exclusively. On this occasion, the fall was in the hands of the North American market (Secretary of Economics, 2012) and the global recession. Under these conditions, the investment flows of the plant in Michoacan began to be delayed, bordering on the Ministry of Economy to cancel the permit for the import of vehicles without tariffs. Other reasons, closer to managing the initiative, were related to Elektra’s lack of experience in automobile distribution and the inability of the vehicle to meet environmental and safety standards for the United States market, the main objective for output production of the assembler. In fact, the reasons were of a different nature: it is estimated that the sale of FAW vehicles was in the order of 5,000 units in two years (Sanchez, 2014), a ridiculous amount compared to the 100,000 units planned for the Michoacan plant. The product was for “new buyers” of cars, which in the context of the Grupo Elektra, means the first purchaser of an automobile throughout the “family lineage.”