Use Disruptions, not Goals, to Succeed – GM

Many people think the best way to grow is by setting big goals – even Big Audacious Hairy Goals (BHAGs).  But increasingly we're learning that goal setting is not correlated with success.  At AmericanPublicRadio.org there's a partial text, and MP3 download, of a recent interview between General Motors leaders and a University of Arizona Professor titled "It's not always good to create goals." 

The story relates how about a decade a go, with market share hovering at 25%, GM set the goal of moving back to 29%.  It became a huge, multi-year campaign.  Lapel pins with "29" were made and all kinds of motivational programs were put in place.  The GM organization had its goal, and it was highly aligned to the goal.  But it didn't happen.  Despite the goal, and all the energy and talent put into focusing on the goal, GM continued to struggle, lose share – and eventually file bankruptcy.  The goal made no difference.

Worse, the interview goes on to discuss how goals often lead to decidedly undesirable, sometimes unethical – even illegal – behavior.  Instances are cited where goal obsession led company employees to falsify documents, even  ship bricks in place of products to meet sales targets.  No executive wants this, but goals and goal obsession – especially when there is a lot of reinforcement socially and monetarily on the goal – can become a serious problem.

Results are exactly that.  Results.  They are an outcome. They are the way we track our behaviors and activities – our decisions.  When we focus on goals – usually some sort of result – we lose track of what is important.  We have to focus on what we do.  And for most organizations a big goal merely leads people to try working harder, faster,better, cheaper.  But when the Success Formula is mis-aligned with the market – even when the whole organization is aligned on maximizing the Success Formula results will still struggle – even falter.  Goals don't help you fix a Success Formula returning poor results.  Just look at GM.

In fact, it can make matters worse.  In "White Bears and Other Unwanted Thoughts" (available on Amazon.com) the authors point out that when you try to turn a negative (a problem) into a positive (a challenge, or goal), you often achieve a rebound effect making people obsess about the problem.  Tell somebody not to think about a white bear – and it's all they think about.  When your company has a problem and you try to tell employees "hey, don't think about the problem.  Go do your job.  Work harder, increase your focus, and all will work out.  Sure share is down, but don't think about lost share, instead think about the goal of higher market share" frequently the employees will start to become obsessive about the problem.  It will reinforce doing more of the same – perhaps manicly Instead of becoming innovative and doing something new, obsessive devotion to trying to make the old methods produce better results becomes the norm.  Goals don't produce innovation – they produce repetition.

So what should you do when facing a problem?  Disruptions.  GM didn't need a big goal.  GM needed to Disrupt its broken Success Formula.  GM needed to attack a Lock-in (or two).  GM leaders needed to admit the market had shifted, and that competitors were changing the game.  GM needed to recognize, admit and encourage employees to engage in attacking old assumptions – and recognize that market share would continue eroding if they didn't do things differently.  Setting a big goal reinforced the old Lock-ins and even an aligned organization – working it's metaphorical tail off – couldn't make the outdated Success Formula produce positive results. 

Only a Disruption would have helped save GM.  After attacking some Lock-ins, like the desire to move all customers to bigger and more expensive cars, or the desire to focus on long production runs, GM should have set up White Space teams to discover new Success Formulas.  Instead of putting all its management energy and money into growing volume at Chevrolet, Cadillac, Buick and GM nameplates, General Motors leadership should have revitalized the innovative Saturn and Saab to do new things – to develop new approaches that would be more competitive.  Instead of pushing Hummer to have 3 identical cars in 3 sizes, GM leadership should have unleashed Hummer to explore the market for truly unique, limited production vehicles. GM should have allowed Pontiac to really take advantage of the design breakthroughs happening at the Australian design studio – to change the nameplate into a performance car segment leader.  By attacking Lock-ins, Disrupting, and using White Space GM really could have turned around.  Instead, by creating a BHAG GM reinforced its focus on its Hedgehog concept – and drove the company into bankruptcy.

You can see a 40 second video about the value and importance of Disruptions on YouTube here.

A 75 second video on White Space effectiveness on YouTube here.

Read free ebook on "The Fall of GM:  What Went Wrong and How To Avoid Its Mistakes"

If at first you don’t fail, try, try again – General Motors (GM)

"Henderson Never Fit In At GM Helm" is the Detroit Free Press headline.  Imagine that – the CEO of GM has been asked to leave Industry sales are down about 24%, and GM is down 32%.  Meanwhile, Mr. Henderson had proposed selling 4 divisions (Saab, Opel, Hummer and Saturn) – which were the most interesting divisions in the company – and none of those deals have closed.  In fact, 3 have fallen apart completely.  Only the Hummer sale to a Chinese firm is potentially going to happen.  In fact, it's hard to find anything good that's happened at GM since Mr. Henderson took over.  Including closing Pontiac.

When the government invested in GM this year the existing Chairman/CEO, Rick Waggoner, was forced to resign.  Imagine that, after puting several bilion in a company the investor's transition team replaced the CEO who got the company into bankruptcy, almost out of cash, with no plan for recovery.  Also, the Board, which had allowed GM to get into such a mess without even raising tough questions, was replaced.  All seems remarkably sensible given the sorry state of the company.

The goverment led transition team, which rocketed GM through bankruptcy, cleaned the ceiling, but then selected Mr. Waggoner's hand-picked successor (Mr. Henderson) to replace him.  The claim was they'd need 6 months to search for somebody new and didn't want to take the time.  And they put in a lifetime monopolist, Mr. Whiteacre of AT&T, as Chairman. And a 40+ year industry veteran was made head of marketing (Mr. Lutz.)  And a 40+ year company employee was kept as CFO.  And we're supposed to be surprised that things aren't going well? 

The Chairman and replacement CEO says of the company says "Whiteacre: GM On the Right Path," also in the Detroit Free Press.  But do you believe himWhat does he know about competing successfully against intense foreign led competitors who move fast?  The AT&T that trained him early in his career failed horribly, never succeeding in any market outside the U.S. and getting cleaned by offshore competitors in hardware and mobile telephony.  And as head of Southwestern Bell, all he did was rebuild the old "Bell system" of land-line companies – without effectively taking a leading position in any new telephony businessOr any other business.  Broadband, mobile phones, digital television – can you think of any market where today's AT&T is a technology, product development, innovation or other market leader?  He may have bought up a bunch of the old spun out businesses, but those are on their last legs as people give up land lines and transition to a different sort of connected future.

What's surprising is that GM isn't doing worse.  But it's unlikely Mr. Whiteacre, or Mr. Henderson's replacement, will do much better.  Several candidates are from inside GM – all with the same Lock-ins that allowed Messrs. Waggoner, Henderson and Lutz to perform so abysmally – despite incredible pay packages for many years.  In "Selling GM's CEO Job to be Tough Task" (Detroit Free Press) headhunters claim that the industry is so complex they'll have a hard time finding someone talented who will work for the pay.  Balderdash.  That's only true because they are so Locked-in to traditional thinking about who should lead GM that they keep trying to recycle already overpaid CEOs who have done little for shareholders.  That's not what's needed at GM.

Give us a break.  Who would want an industry veteran in the job at all?  And why would a recruiter hunt for somebody with a lot of industrial-era Lock-ins.  GM's investors (that's the citizens of the USA and Canada,) employees and vendors need somebody who's ready to move beyond the old industry and company Success Formulas and do something very different.  Willing to develop entirely new scenarios of the future which alter the competitive playing field and then Disrupt the organization in order to start doing new things.  Before Tata Motors and China's Chery auto join the other companies ready to put GM into the grave.

It's amazing how "inside the box" the people who are leading GM, and advising the company, remain.  Why not try to recruit somebody from Tesla to take over?  The long-delayed electric Chevy Volt might well get to market faster – and in a more desirable form – if that were to happen.  Or how about an heir apparent at fast growing Cisco Systems?  Those people know how to pay attention to the market and move quickly to give customers what they need – profitably.  

Turning around GM requires leadership that will change the Success Formula.  Not try to Defend it, or Extend it with slowly evolving variations and minimal change.  The whole house needs to be cleaned.  The investor representatives who led the transition pulled up short of finishing their job.  Only by bringing in new managers who are willing to see a very different future, unbounded by the GM legacy, can GM's competitive position be changed – and if GM tries to keep competing the way it has Toyota, Honda, Hyundai, Kia, Tata Motors, et. all will eat GM's dinner.  And only by Disrupting the old Lock-ins, using White Space teams to develop new solutions, can GM regain viability.

Get the GM businesses growing – Sell them ALL!!

"GM reaches deal to sell Saturn to Penske" is the latest GM headline.  Although the management at GM could not figure out how to run a profitable Saturn, it has very quickly sold the business.  And within a week of selling Hummer to a Chinese company.  Sounds like a combination of low pricing, and better skills at hiring investment bankers than running a business.

The biggest lesson we can learn from this is that GM was so Locked-in to its old Success Formula that it was frozen in place, unable to take actions that would allow GM's revenue and profit to grow.  After years of doing nothing more than layoffs, GM was able to find buyers for 2 of its 3 semi-autonomous divisions almost immediately.  In other words, if GM management had to change to fix GM the team would rather fail — wiping out the shareholders, most of the bondholder value, and eliminating thousands of jobs –  and sell assets (at a significant loss) than changeRather than Disrupt and use White Space to create a new GM, management preferred to declare bankruptcy, beg for billions in aid (like some impoverished third world starving nation such as Bangladesh), and give away assets in an effort to preserve the Success Formula they believe in – but which failed in the market.  These leaders have shown they don't care about anyone or anything more than they care about trying to Defend & Extend the GM legacy – Cadillac, Chevrolet, Buick and GMC.  This management doesn't want GM to succeed, they want to wind back the clock, and they'll try anything possible to see if they can make it happen.

They can't.  The clock won't rewind.  And GM's management is demonstrating why they should not be allowed to run any company – much less a major auto company.  Nor should you trust them to watch your dog – much less trust them with $60billion in financing.  Trying to preserve the past will only prolong dismal results.  They will not repay this money.

So what about SaturnSome think this acquisition, coupled potentially with the new ownership of Hummer, marks another shift in the auto industry.  In "Putting GM's Saturn on a different orbit" the Marketwatch commentator indicates that we may be seeing a shift away from an industrial model of manufacturers pushing cars onto dealers.  Since Penske owns many dealerships, he thinks these new independent labels may let the dealerships take the leadManufacturing will have to respond, through a network of manufacturers something like Nike uses, to the retailers – who will be much more in touch with the market.

From the pixels displaying these articles to God's ear, paraphrasing an old maxim.  It would be wonderful if both Saturn and Hummer, and the soon to be independent Saab, were driven by market requirements rather than internally entrenched management trying to Defend & Extend old practices.  If they are, the odds are good that they'll push the losses at the remaining GM much higher, much faster than the management team (and probably the government overseers handing them money) expect.

But it does beg the question, if it's so easy to sell these divisions why doesn't the government simply dismantle GM and sell everything?  These are supposedly the smallest, least viable parts of GM.  And they are selling incredibly fast.  Instead of these "one-off" sales, happening at distressed prices to buyers with little competition, why not create an open market to sell everything?  Obviously the only way to get rid of the terrible GM leaders is to sell the business out from under them, leaving them with nothing to do.  So, instead of handing these incompetent GM leaders another $40B, why doesn't the government turn over assets to the investment bankers and tell them to maximize the value of a sale?  Create a bunch of bidders for the various assets (less toxic than nothing-down mortgage securities), ala the intent of bankruptcy law, so that people with new ideas (like Penske) can acquire these assets and use those ideas and innovations to convert the brands, product lines, supply chains and manufacturing plants into something more valuable?

In a sale, a new buyer could purchase plants to redeploy for windmill production, for example.  A GMC buyer could attempt to converting the brand into a competitor of Caterpillar Tractor or Komatsu.  Chevrolet might have better life as a U.S. motorcycle company.  Someone might want to turn Cadillac into an airplane company.  As crazy as these ideas sound, don't forget that Honda has entered airplane production and shows every sign of succeeding.  We know that running any part of GM like it used to be run will not work.  So why not give the innovators a shot at these tangible and intangible assets on the open market?  Wouldn't you rather see someone new, like the team at Penske Enterprises, try to do something with the rest of GM – rather than leave it in the hands of the people who say they need another $40billion to keep it alive.  Ever heard of the term "cut your losses"?

Those who listen to markets survive – even thrive.  That's what creates optimism about the future of Hummer, Saturn and Saab.  The concept that new owners will utilize new market-based scenarios with clear understanding of competitors to Disrupt these companies, then attack old Lock-ins in order to implement new behaviors, excites people.  We can imagine these new leaders using White Space to convert the design, production and distribution processes into methods that give customers what they want when they want it – achieving profits as a result.  After 3 decades of ongoing failure, we can't imagine the people running GM doing it. 

We believed in Lee Iacocca primarily because he had been fired at Ford.  He knew Chrysler was not well enough connected to customers – and that he was.  This was a guy who would cut off the top of a production car with a skill saw in order to drive it around the block as a way to test relaunching convertibles.  He wasn't afraid to develop cars people had never seen, like mini-vans, because he saw changes in customer needs.  He wasn't afraid to Disrupt the status quo and he wasn't afraid of testing new technologies, new production processes and new markets.  That's why he turned around Chrysler.  And that's what it will take to turn around Cadillac, Chevrolet, Buick and GMC.

It's too early to really know if new owners will do the right things to make these fire-sale divisions into successful businesses.  We have to look for the scenarios, Disruptions and White Space.  But we know we won't see such behavior out of GM.  If the government folks who are considering giving more money to GM really want to save jobs, grow the economy and keep the profit motive alive they need to pull back fast from funding this GM management team.  Instead, use this immediate market input (from the dividion sales) to force the courts to bust up the rest of GM and sell it to someone who just might have a truly better idea.

Why GM won’t survive very long

"Chrysler Avoids Bankruptcy as GM steps toward it" is the Marketwatch.com headline.  According to the article, Chrysler has a deal to manage its debt while Ford has never been as close to the edge as its two brethren.  But GM is trying to get bondholders to take a 60% value reduction AND exchange the bond value for equity value – which of course has no assurance and could easily go to zero.  The bondholders are squawking, and it's unclear they will agree.  Which would plunge GM into bankruptcy Are the bondholders just greedy?  Or do they see the chance of getting some of their money back better via liquidation?

Ford has some of the most popular and fuel efficient vehicles in the world.  They just aren't sold in the USA.  But they've long had high share in Europe, where Ford has built smaller cars with both diesel and gasoline engines that have met market needs.  Now Ford is preparing to build and sell those cars in the USA, which would move them a lot closer to recent market shifts than the worn out Lincoln line and the renamed 500 (rebadged as Taurus under the guise of the name making all the difference.)  These European cars offer an opportunity for Ford to Disrupt the U.S. market and regain a positive footing.

Meanwhile, Chrysler has some of the most innovative cars on the market.  Its 300, Charger and Challenger cars use technology that allows V8 engines to shut off 4 when not needed – allowing them to achieve over 30 MPG in a "large" and "performance" format.  Further, for those seeking safety and control, the 300 and selected other models are available in all wheel drive, which has been proven to be the #1 safety enhancer possible.  And of great value in northern climates where foul weather (rain and especially snow or ice) makes driving treacherous.  All included in dramatic styling that appeals to American consumer tastes.

But GM?  "GM to focus on four keeper brands" is the MediaPost.com headline.  Most GM innovation is concentrated in Pontiac, Hummer, Saturn and Saab.  The first of these is to be closed down for sure, and the latter 3 either sold or closed.  As the CEO says "the company will focus on four brands it defines as core: Chevrolet, Buick, Cadillac and GMC." Anytime the CEO of a failing company says he plans to save the place by "focusing on the core" and thereby cutting back to some aged part of the company RUN, RUN, RUN.  The past is the past, and you NEVER regain it.  Making these brands exciting is about as likely as making Holiday Inn a high-end hotel chain.

Think about it.  Remember Izod with those alligators on the breast plate?  Would you consider buying those shirts in Macy's?  Or how about resurrecting Howard Johnson's as the place to stay and eat while traveling?  Or shopping at KMart?  Or taking instant photos on a Polaroid?  When the market moves on, it's moved on.  No business can recapture past profit levels by "focusing" on old brands and products that were once great.  The clock never runs backward. T he market has shifted, and companies have to shift with it – not try to pretend "focusing on the core" will create profits simply because they are dedicated and focused.

It's Ford's offshore innovation that may save the company.  It's Chrysler's engine, drive train and styling innovations that may save it.  But GM is getting rid of anything that looks like innovation – and anything that might look like a Disruption or White Space.  It has no hope of ever regaining market strength.  It's plan is faulty, and won't work.  Even if bondholders accept the swap of debt for equity, in short order GM sales will continue declining (as will profits), and there's no way bondholders can sell all that equity in order to recover their invested value in the bonds.