What Went Wrong with GM?

Karen Berman and Joe Knight point out in their recent post to the HBR blog that “GM makes cars that people don’t want.” I think that is really the most compelling reason why GM failed, and it is certainly something they should have been able to prevent. As a product researcher and technology professional, I know how even the smallest, most agile, companies can become disconnected from customer needs. There are several reasons why this happens. The stronger the company culture is, the more insular and inward facing the company becomes. Employees are typically rewarded based on the degree to which they support the product direction advocated by management and and the degree to which they conform to the company culture. Employees learn that as long as they tow the company line they will continue to receive their bonuses and promotions regardless of how out of step the company is from the customer. The market impact of this approach usually occurs much later when the company can do little about it, such as the case with GM. As Peter Drucker pointed out many years ago, one way to create a more knowledge based and a less inward facing culture is to create an organization that is more horizontal in both form and in substance. I say substance because I know of many companies that have reorganized to create a structure that was more horizontal but continued to distribute power vertically. This typically does not create a less inward facing organization but instead creates waste, inefficiency and negatively impacts employee morale.

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One thought on “What Went Wrong with GM?

  1. Christensen’s notion of separation being necessary for the sucess of a distruptive innovation runs counter the notion of strategy alignement. This separate organization requires a new cost structure and policy structure. The cost and policy structures would reflect the maturity of the innovation through the technology adoption lifecycle. The corporate culture would likewise be new and emerging.

    Sadly, Christensen has had a hard time selling separation. Anderson’s book on innovation revises the need for separation. Anderson works in Christensen’s consulting firm.

    Orthodox business practices stress linearity and continuity. That linearity should be questioned in terms of Christensen, Moore’s technology adoption lifecycle, and both internal and external cultures.

    The PT Cruser and Harleys demonstrated that vehicles are cultural. Breaking free of the generic; the economically insensitive; the non-cash, non-profit pool accounting and finance only world; the abstractional would release business value. GM needs to go there to escape its red ocean.

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