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Power of the People
J.D. "Dave" Power turns auto insights into famed brand.
Dave Power — you
probably know him, as millions of consumers do, as "J.D." — is
the rare entrepreneur whose name has become a brand.
That puts him in the company of rock stars — think of Madonna, in her many
incarnations — and storied names like Henry Ford and Kiichiro Toyoda from
the industry with which Power is most closely associated — autos.
Power's company, J.D. Power and Associates in Westlake Village, Calif., does market research, and its ratings have become a seal of quality for all sorts of products and services, ranging from boats to hospitals. But Power, who earned his MBA at Wharton in 1959 and visited as a Wharton Entrepreneur-in-Residence this fall, remains best known for his work on cars.
He's credited with helping to accelerate the adoption of Japanese cars in the United States by highlighting their high satisfaction ratings in his surveys. "At the time, Detroit didn't think Japan could produce anything other than motor scooters," he says. And he famously spotted a problem with O-rings in Mazda engines back in the early '70s. That won him national notice.
But Power is different than Consumer Reports. Consumers Union, the nonprofit that publishes Consumer Reports, uses experts to do many of its evaluations whereas Power relies strictly on the Voice of the Customer. Power likes to say that his surveys "tell it like it is." In other words, Power's organization acts as an unbiased filter of consumer thoughts and sentiments. As a market researcher, Power lets consumers tell him what they like. Think of it as Merlin versus the masses. Power bets that, more often than not, the masses will be right.
Lately, his method is ascendant, thanks partly to the Internet. The Internet has facilitated the development of prediction markets, which operate like stock exchanges. In these markets, participants "bet" on everything from the outcome of elections to the winner of the Nobel Prize for economics. Like stock markets, these markets represent the bettors' collective wisdom.
So it is with Power's surveys. Rather than hiring mechanics to figure out what might go wrong with every model of car, he asks consumers what problems they've had.
That's how he discovered the glitch in Mazda's engines back when his company was barely more than a startup. His wife, Julie, would tabulate surveys at their kitchen table. "One night, I came home, and she said, ‘Mazda has an O-ring problem,'" he remembers. "I said, ‘What's an O-ring? And she said, ‘I don't know, but look at these numbers.' Bad O-rings were causing the engines to seize up." An O-ring is a rubber seal.
One of the companies that had subscribed to Power's study leaked his finding to the Wall Street Journal's Detroit bureau. He got a call from the bureau's chief, seeking his comment for a story that was slated to run the next morning.
"I told him, ‘I'd like to send you our press release on this.' And he said, ‘You better get it here today.' It was 9 a.m. in L.A., and I sat down and wrote our first press release. Then I had to find a Telex machine to send it on."
Power's entrepreneurial insight was doing his surveys himself, rather than waiting for a carmaker to hire him to evaluate its models. That way, he retained control of the information and could do with it what he liked, including share it with the press and sell it to whomever he wanted. That also allows him to charge companies that want to use his ratings in their ads.
He'd begun his career as a financial analyst with Ford Motor Co. in Detroit and later moved to a firm that did advertising and market research for carmakers. He did a stint with a tractor maker in Wisconsin and then returned to advertising, with a job in Los Angeles. He struck out on his own in 1967. Initially, he was a researcher for hire — Toyota was an early client — but soon started doing independent surveys.
Like many entrepreneurs,
Power figured out early on that the press was his ally. By
sharing his surveys with reporters, he
could speak
to the
car companies' top
executives, even if their subordinates didn't want him
to. "Our competitors
are within the research departments of the car companies," he
says. "They
don't like us going over their heads."
Today, carmakers trumpet their performance in Power's surveys.
Initially, they resisted them and even tried to undercut them. "They
were saying customer satisfaction costs too much," he recalls. "What
we show is that, if the job is done right the first time, it saves you
tremendously."
At one point, a carmaker even hired a statistics professor to try to debunk Power's methods. "He came back with an inch-thick binder with all the things wrong with our surveys," Power says. Power responded by hiring three professors from the nation's top three statistics departments to review his methods. "They said we were doing it about as well as it could be done."
Today, Power's company employs more than 600 people. It still gets more of its business from the auto industry. But it has branched into doing surveys of such varied things as digital cameras and bass boats, restaurants and wireless-service providers.
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