The announcement Monday that GM filed for bankruptcy brought about a spate of stories dominating the news cycle this week. Much of the coverage reflected on GM’s glorious past and the changes the company underwent in the past 30 years that led to its downfall. Among those commenting were Harvard Business School professors, and here are a few lessons that can be distilled from their musings.
1. Make change preemptively
If you see something in your company that need changing, don’t wait until it’s too late. Professor Robert Austin worked in the U.S. auto industry in the mid 1990s. He recalls that when the industry faced tough problems, “we started to feel the real pain associated with real change, [and] we pulled back. We were so profitable then, it was hard to muster the will to make the hard choices.” Difficult or not, what has happened to GM since shows the price a company can pay for sticking its head in the sand.
2. Don’t lose sight of your company’s core values
Professor Nancy Koehn writes that GM’s first managers valued three key things: being attuned to customers’ lives, staying keenly aware of the competition and understanding how company structure related to its strategy. She attributes the company’s “long, slow bleed” to “several generations of executives, beginning in the 1970s with the first oil shocks and the entrance of Japanese imports,” who lost sight of these key values. Koehn writes, “It has been a failure of leadership as astounding and momentous as the company’s early achievement. ”
3. Streamline offerings
Professor John Quelch says that one of GM’s biggest mistakes has been confusing consumers:
The Toyota and BMW product lines are very simple, easy for a salesperson to explain and easy for the consumer to understand. There is a logic to the product lineup. Desperate to retain share in the US, GM continues to add to its already confusing array of 60 models under 8 different brand names…. Buying a car is an infrequent purchase; the consumer needs a clear roadmap of what is on offer.
As Toyota and BMW’s success attests, keeping it simple is far from stupid.
4. Be an innovator
GM’s complacency in the marketplace was a big reason for its eventual failure; as Professor Rosabeth Moss Kanter eloquently puts it, “Where others see merely bankruptcy, I see a bankruptcy of ideas. The issue for GM is not just financial failure, it is a failure of imagination.”
She goes on to ask the Obama administration “to help innovative new companies emerge from the ashes of GM. The entrepreneurial spirit will restore the American economy more effectively than propping up falling giants.”
Readers, what are you taking away from GM’s bankruptcy?
GM truck image courtesy of Flickr user Dave_7, CC 2.0
