Learning From Missed Opportunities
History hangs in balance. The fate of General Motors - ranging somewhere between revitalization and bankruptcy - depends on the decisions of CEO Richard Wagoner, GM's board, the U.S. Congress, and the White House during the days ahead. What decisions could GM executives have made in the past to have averted this life-or-death moment? With the benefit of hindsight, four prior leadership decisions come quickly to mind.
First, GM's executives could have learned more actively from their experiments in innovative auto production. They formed a joint venture with Toyota more than two decades ago in part to learn how the world's rising automaker was using a lean production system to create higher quality and lower cost autos.
GM executives rotated through its joint-venture plant in California to learn first-hand how the Toyota manufacturing system worked, but the concepts diffused too slowly through GM, in part because of lukewarm support at the top. Similarly, the innovations in marketing, design, and production at Saturn, another of GM's fresh initiatives, were stranded by the company's decision to cut off funding for future products and by inter-divisional jealousies that hindered learning.
Second, General Motors executives could have more aggressively sought to understand why their competitive position in the U.S. was sinking. GM's share of the American vehicle market declined from well over 45 percent in the 1960s to well under 25 percent today. Was it pricing, styling, service, quality, or brand that increasingly led buyers to opt elsewhere? In GM's culture, improvements of any magnitude were often greeted with claims of "we're back," short-circuiting the learning process and distracting attention from the difficult work of consistent effort to rebuild product brand and corporate reputation.
Third, the decision of GM executives to take advantage of their success in designing, marketing, and selling large SUVs and trucks is fully understandable from a profit-maximization point of view. But what is not excusable is the failure to devote adequate attention to what would be required to keep GM competitive in a gasoline-starved and environmentally-threatened world - a scenario that could be seen in anybody's crystal ball.
Fourth, with stronger learning from Toyota on how to produce better cars and understand its declining competitiveness, GM executives could have initiated the restructuring that would be required to build on both. When IBM CEO Louis Gerstner took over a troubled IBM in 1993, he decided that the company would have to radically restructure since it was becoming less innovative and less competitive. He did so and successfully turned IBM around from a failing firm to a prospering enterprise, proving that early intervention can make a difference. GM fell short here in two areas: first, making serious attempts to engage the UAW in solving the very tough problem of high legacy costs (this finally happened in 2007, but why not a decade earlier?) and second, trimming back the unsupportably high number of brands, products, and dealers (still occurring very slowly, even under the threat of bankruptcy).
Had GM executives decided to restructure the company well before they are being required to do so by the plummeting economy now, they too might have returned their company to prosperity without forcing the now fateful decisions that lie ahead for the CEO, board of directors, Congress and President. Even short of that, had they made a best-faith effort in years past, Washington would have been more ready to hear GM's plea for help now.
Note: This posting was co-authored by John Paul MacDuffie of the Wharton School.
Posted by: email@example.com | December 10, 2008 2:48 AM
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