WTF Happened To General Motors
Is there a light at the end of the tunnel for General Motors? The Harvard Business School faculty weighed in..
Robert D. Austin, Associate Professor:
When I worked in a U.S. auto company in the mid 1990s, we were doing many of the right things. But often, when we ran up against the really tough problems, when we started to feel the real pain associated with real change, we pulled back. We were so profitable then, it was hard to muster the will to make the hard choices.
Nancy F. Koehn, James E. Robison Professor of Business Administration:
Beginning in the mid 1920s, GM staged an astounding victory against Ford Motor Company. Alfred Sloan, Pierre Du Pont, and other GM executives placed a series of important bets on what American consumers wanted (different makes, models and prices; cars that were status symbols and identity holders as well as transportation sources) and they did so with careful, consistent attention to what the competition was—and was not—doing. As company leaders rolled out this daring strategy, they also created an organizational structure and culture developed to support a multi-product, vertically integrated enterprise. By the mid 1930s, GM’s market share had risen to 42 percent while Ford’s had fallen to 21 percent. And General Motors had laid the groundwork for decades of industry dominance, offering “a car for every purse and purpose” and pioneering the multidivisional structure that became one of the signal achievements of the modern corporation.
In this context, it is interesting to consider the root causes of General Motor’s decline, which has been under way for 30 years. Although there are many factors that contributed to the company’s long, slow bleed, the three fundamental issues are management’s consistent failure to do the very things that made the business so successful initially.
* First, pay close attention to what is happening to consumers’ lives in the context of the larger environment—not only their stated preferences, but their hopes, dreams, wallets, lifestyles, and values.
* Second, keep an equally close eye on the competition.
* And third, understand how a company’s structure and culture relate to its strategy. Use all this understanding to place innovative bets. This is what the early leaders of GM did. And this is what several generations of executives—beginning in the 1970s with the first oil shocks and the entrance of Japanese imports—have consistently failed to do.
It has been a failure of leadership as astounding and momentous (and ironic) as the company’s early achievement.
