What can Small Businesses Learn from GM?

A lot. The simple answer is "passion", and that is tied to innovation. Passion is kind of a funny word to use with respect to business, and suggestions that "passion return to the boardroom" or the like are (appropriately) met with grins. But there is a role for passion in business. I got to thinking about this topic over a year ago, when GM (and Ford) bonds were cut to "junk" status. GM's market share is sliding toward 20%. Toyota is poised to pass GM as the world's largest automaker. The current news is that one of GM's biggest shareholders is pushing for an alliance with Nissan and Renault, who are both led by Carlos Ghosn. How did this come about? What went wrong? I think it is a matter of outlook and training. The difference between passion for your business, and mere competence. GM is led by Rick Wagoner, who has a bachelor's degree in economics from Duke and an MBA from Harvard. Mr. Ghosn was educated as an engineer. Hmmm. Cars are designed and built by engineers. For all their stodgy image, engineers dream, design, develop, and make the things we buy. I once heard engineering described as "the art of the possible". If you can imagine it, it can be built. Great cars are inspired and built by great engineers. That's where the passion comes in -- from eating, sleeping, and breathing cars. Managers may be competent -- gifted, even -- in business-related activities, but let's not confuse that with passion for the business they are in. Management skills should be built on top of the skills at the core of the business (as Mr. Ghosn demonstrates) and driven by passion. Two years ago, my family took a long driving trip through the American West for two and a half weeks. We put a couple thousand miles on our rental vehicle, a Chevrolet Classic. It was disappointing at best. (The car, not the trip. We had a wonderful time. This country has some absolutely breathtaking natural beauty.) Yes, the Classic started every time, ran when it was supposed to, protected us from the elements, and went where it was pointed, but those are the commodity elements of a car. I can't remember any distinguishing features, and the reputation of Chevrolet is certainly not why I rented it. It was an uninspiring product (and a lousy advertisement for GM). Last year, GM lost 10.6 billion dollars. Much of the blame has been placed on onerous pension and healthcare costs, and management has proposed that GM use it's cash hoard to preserve the current business until those costs go away, and then start reinvesting. It is also selling off 51% of GMAC (the financing arm) to raise $14 billion in more cash. This is not an innovative strategy. It is not a strategy for winning, or growing. It hasn't even stopped the loss of market share. I have no doubt that GM hires and retains huge numbers of enormously talented engineers. My guess is that very few of them are proud of the Classic. I can imagine that, if pressed, they would say that they wanted to do a much better car, but the "bean counters" and/or "marketing" prevented it. Once I would have dismissed this as whining and blame shifting. Experience suggests otherwise. Successful organizations tend to manage what made them successful rather than what will continue to make them successful. They look in the rearview mirror instead of through the windshield. Risk is avoided. Innovation is stifled. The status quo is preserved. They get "stuck". Passionate people are rarely satisfied with the status quo. They want to do more; to make things better; to help their customers solve more problems. They innovate -- and they innovate in innovative ways! Perhaps the best thing that could come out of this proposed alliance for GM is to get an engineer -- and hugely successful manager -- to run the show. Hopefully, this will lead to an explosion of new products -- maybe from fewer nameplates (I hesitate to call them "brands"). The seeming resurgence of Cadillac gives one hope. Another example of how dramatic the role innovation and passion play can be found in the personal computer industry. When was the last time a truly innovative product came out of HP or Dell? (I'm hard pressed to think of one.) Where are the innovative PC's coming from? (Apple.) Are Mark Hurd and Kevin Rollins passionate about PCs? Is Steve Jobs? I think the answers are obvious. In small and mid-sized companies, it is likely that the person running the company is passionate about the business. They "eat, sleep, and breathe" it. The company grows. Employees are excited about coming to work. Customers look forward to doing business with the company and using its products. Observers say good things about the company. They are all passionate as well. Alas, they may also fall victim to the same process of getting "stuck". Fortunately, small and mid-sized businesses are more nimble than Fortune 500 companies like GM. If you recognize that you are falling into this pattern, it is easier to break out of it -- easier to introduce innovation. Easier to get "unstuck". Lesson: The inspiration for innovation will come from people who are passionate about their business. Good management will capture that and turn it into a forward-looking strategy. We can all learn from GM. P.S. There are a number of great books written about this subject. Three of my favorites are: • "The Innovator's Dilemma", by Clayton Christensen; • "The Innovator's Solution", by Clayton Christensen and Mark Raynor; and • "Blue Ocean Strategy", by W. Chan Kim and Renee Mauborgne. P.P.S. In a January, 2005 interview, Kevin Rollins, CEO of Dell, called the iPod a "fad". Take a look at Apple vs. Dell's share price in the last two years.