by Adam Hartung | Jun 15, 2009 | Defend & Extend, General, Leadership, Lifecycle
Harvard Publishing recently posted an article from a professor at the London Business School, Freek Vermeulen "Can we please stop saying the market is efficient?" The good professor's point of view was that he observed a lot of companies that were efficient which didn't survive, and several not all that efficient that did survive. He even took time to point out where some Harvard professors had identified that companies who implement ISO 9000 often see their innovation decline!
Unfortunately, the good professor is all too correct. If markets were efficient, we'd see performance move in a straight line. But any follower of equities, for example, can show you where the stock of a company may have gone up, then declined 20%, then gone back to a new high, maybe to even fall back more than the original 20%, only to then climb to even greater highs. If the market for that equity were efficient, it would never have these sorts of wild price gyrations.
Likewise, the market for products, things like copiers, aren't all that efficient. A case I describe pretty deeply in Create Marketplace Disruption. When Xerox brought out the 914 copier it changed the world of office copies. But it didn't take off. Instead, for years companies maintained their duplicating shop in the basement, using small lithographic offset presses. This went on for years, and usually the basement shop was closed when (a) the operator retired, (b) the printing press simply gave up the ghost and was ready for the scrap heap, or (c) when the company realized it had so many copiers the basement would be better served to house copiers instead of the printing press. The fact is that marginal economics – the very low cost of continuing to operate an alread-paid-for-press meant that it was easy to simply keep using presses long after they had any economic advantage. Not to mention all kinds of kinks in the decision apparatus that funded things like a print shop just because the budget "always had." But eventually, as the retirees and metal scrappers started accumulating, the market shifted. What had been a "mixed market" of presses and Xerox copiers suddenly shifted to almost all copiers. Xerox exploded, and the small offset press makers disappeared.
That wasn't efficient. There was a huge lag between when the benefits of copiers were well known and the demise of print shops. In the end, those who had debts or equity in printing press companies suffered huge losses as the business "fell off a cliff." There was no "orderly migration" out of the marketplace. In a very short time, the market shifted from one solution to another.
As recently as 2007 almost every home in America had a newspaper delivered. By 2009 the market had begun to disappear with subscriptions down over 60% in some markets. For advertisers, the purchasing of print ads dropped by over 50% in just 24 months. Yet, the growth of web usage and internet ads had been growing for almost a decade. In an efficient market there would have been a smooth transition between the two, with say 5% of ads shifting every year. Again, the economists' "orderly transition" would have applied. There doesn't seem anything orderly if you're in a market where the newspaper has disappeared, filed for bankruptcy, or cut its pages 40% – and you're wondering how to get the local news or even the TV listings you once found in the newspaper.
Market shifts are sudden, and big. In the later half of the 1980s the PC market shifted from 60% Macintosh to 80% Wintel in just 5 years – while growth for PCs exploded. It didn't feel very efficient to people at Apple, the suppliers of apps for Macs or the user base. Thousands of people in corporations were told "surrender your Mac and get a new PC next week" with no discussion, explanation or concern.
Companies that fall victim to market shifts aren't without strategists, planners or quality programs. Many have robust TQM or Six Sigma projects. But these are all about optimizing performance against past performance – not necessarily what the market wants. When you optimize agains the past you depend on minimal change. When markets shift, these "efficiency" programs can cause you to be the last to know – and the last to react.
People like to think of evolution as sort of like Continuous Improvement. Get 5% better every year. Like a variety of mammal might lose 1/4" of tail each generation until it no longer has one. We now know that's not how it works. There are winners. They keep reproducing, get stronger and more of them every year. Like mammals with long tails. Meanwhile, an alternative develops – like a mammal with no tail. Then suddenly, without expectation, the environment changes. Tails become a big hindrance, and those with tails die off in a massive exodus. Those without tails suddenly find they are advantaged by the lack of tails, so they begin breeding fast and getting stronger. In short order, perhaps a single generation, the tailed mammals are gone and the no-tails become dominant. Not very efficient, or orderly. More like reactive to an environmental shift.
If you want to do good tomorrow, I mean one day from today, the odds are that you can accomplish that by being just slightly better at what you did yesterday. But if you want to be good in 5 years, you may well have to do something very different. If you wait for the market to tell you – well – you've waited too long. By the time you know you're out of date, the competitor has taken your position. You have no hope of survival.
We live with a lot of myths in business. The value of efficiency, and the belief in efficient markets, are just a couple of big ones. Kind of like the old myths about blood-letting. Before the USA, never before in history has anyone ever tried to establish a government of self-rule. And self-rule led America to a country dominated by businesspeople. No longer did the king determine winners, losers, prices and behavior. Now markets would do so. The people who would make these markets were the emerging business folks. But nobody knew anything about markets – except some theories about how they "should" work written by an Englishman who had grand thoughts about open-market behaviors. So most people accepted the earliest theory – with its ideas about "invisible hands" that would guide behavior.
Markets are dramatically inefficient. Just look at the prices of equities. Look at the bankruptcies all around us. GM, your local newspaper, Six Flags and your neighborhood furniture store. People who were often efficient, but didn't understand that markets shift quickly, and very inefficiently. They don't move in small increments – they change all at once. And if you want to survive, you have to
prepare for market shifts. Simply working harder, faster and cheaper won't save you when the market shifts. If you aren't ready to be part of the shift, you get left behind and won't survive.
Markets are shifting today faster than they ever have. Telecommunications, internet connections, massive amounts of computing power, television, jet airplanes – these things have made the clock speed on changes much faster. Market shifts that used to be seperated by decades are compressed into a few years. If you don't plan on market inefficiencies – on market changes – you simply can't survive.
Lots of people misunderstand Darwin. The prevailing view is that his study on the origination of species says that the strongest survive. In fact, his conclusion was quite the opposities. What he said was that it is not the strongest that survive, but the most adaptable.
by Adam Hartung | Jun 11, 2009 | Uncategorized
"The Evolving CMO" is the Brandweek headline. According to this article, increasingly CMOs (that's Chief Marketing Officers) are becoming quite nerdly. Whereas top marketing folks were once seen as "big idea" folks, now recruiters like Heidrick & Struggles (quoted in the article) are looking for top marketers to be analytical types who pour through on-line data to discern ad effectiveness and response rates.
It's not at all clear this is a good trend.
Ever since marketing has been around it's been an easily derided function. Unlike Sales, which has hands on daily contact with customers, marketers were considered more staff-like. And much more easily let go. Especially in companies that aren't consumer goods oriented, the first people let go in a downsizing are usually marketers. Some companies, like Computer Sciences Corporation in services and many manufacturers of industrial products, don't have any marketers at all! There are a lot of executives that believe marketing is a waste of money – you just need to focus on Sales.
So how should marketers deal with this lack of respect? Increasingly, they are turning to numbers. It appears that marketers want to overcome their Rodney Dangerfield position by being more like other parts of the company. Product Development and engineering tend to be loaded with engineers, who like to push around numbers. Operations folks like to analyze the plant output and quality numbers to death. And everybody in finance tends to use numbers to make their argument. Strategists and planners obsess over trend numbers. Even salespeople talk about salescalls, orders, total revenues, margins – numbers. So it seem marketers are starting to think that to gain respect they need to adopt personal, or role, Success Formulas much like others in the organization.
The problem is that numbers tend to focus you on the past, not the future. Yes, on-line ads and click-throughs offer us a bounty of new numbers on the efficacy of ads, placements, messages, hits – all kinds of things we can run through the same analytical tools used by the rest of the company. But does studying the recent behavior, upon which we have numbers – such as ad clicks – or of links to facebook pages – or the volume of tweets – or the respondents to a Linked-in group query — do these things tell you what big trends are emerging? Do they tell you whether your product line could be made obsolete by a new competitor? That is far less likely to happen.
All this number crunching may make marketing look more scientific, but the important question is whether it helps the company grow. Unfortunately, most trend numbers tell us what worked well in the past. Yet knowing that still doesn't tell you what will work in the future. Number crunching is great for execution of a designed plan. Midway through an ad program, analysis can help you tweak it in order to catch more viewers and grab a few more sales. Midway through a promotion, analysis can help you understand the impact of a price change, or a product pairing, or a sales blitz so you can tweak it for maximum results. Analysis is great for understanding what to do right now. But we have to run our business not just for right now. We have to run businesses to position the company where the market will be in a year, two years, five years and beyond.
There's a tendency to think that the person who has the most numbers, or does the most analysis, is the better businessperson. I don't know how this proclivity developed, but it did. The desire to "engineer" a business so that it has no risk, and will generate ongoing growth and profits is a powerful desire. But reality is that we live in a highly dynamic world. We cannot predict the future. Most 3 to 5 year forecasts aren't off by 2% or 5% – they are off by 50%! Having all the numbers imaginable about the past won't give you much help for dealing with a market shift. And that's the big problem in business today – dealing with these radically shifting markets and the changes they bring so quickly. Analysis depends too much on the future being like the past, and that just isn't so. The world keeps changing.
Lehman Brothers, Merrill Lynch, Bank of America, Chrysler and GM were/are full of peoples deeply skilled in how to "run the numbers." Business training the last 30 years has given us thousands of skilled analysts, deeply ingrained in how to dig up and analyze vast amounts of data – using newer and more powerful computer tools every year. Yet, for all this analytical skill we aren't producing more revenue growth, nor more profits. Throughout the last 30 years growth rates have declined, and profit rates have dropped. And recently we fell off a business cliff into an amazingly deep recession. Yet, we're drowning in a sea of data and Powerpoint slides full of analysis. The link between running numbers and improving performance appears broken – if it ever existed at all.
Marketers should be all about growth. And growth comes from moving beyond executing static promotional programs on existing products. To grow you have to be flexible to enter new markets, pioneer innovation and generate new solutions. Somebody has to lead the charge to do scenario planning that opens the collective vision to doing new things – things not visible in the numbers. Somebody has to understand the behavior of competition to recognize the holes they are unable to address because of their Lock-in to past practices. Somebody has to reach beyond the numbers to offer Disruptions which allow the company to move from making computers to making consumer electronics (like Apple), or from making cars to making airplanes (like Honda). Somebody has to be willing to manage market tests that teach you how to create new markets where you have fewer competitors and higher profits as growth takes off. And all of this work is well beyond analyzing the numbers.
I advocate that all executives pull their heads out of the numbers to undertake these tasks for growth. Many CEOs of now defunct companies could memorize pages and pages of financial and market numbers. They could recite market shares, product margins, product variable costs, plant fixed costs, employee costs and segment profits from the top of their heads. Yet, the businesses are now gone (Multigraphics, AB Dick, Wang, Digital Equipment, Western Auto and TG&Y are just a few that no longer exist). Having a deep understanding of the numbers means you know the past. But unless you use that to be adaptive, to prepare for and launch Disruptions, all those numbers simply get in the way of being successful. You can know all the trees, but end up unable to save the forest.
Marketers are not given their due. Usually they see market shifts before anyone else. They are able to generate scenarios that are possible, but often ignored because they require change. They know the limits of a product, and they realize when the variations and derivatives are getting long in the tooth – causing margins to
slip as the cost of sales and new launches keeps rising. They also know the company weaknesses and how they must be addressed if the company is not to become irrelevant. They shouldn't retreat to the bastion of numbers to try and make themselves more likable. Rather, they should lead the charge to make sure planning is about the future, not the past. They need to keep executives paranoid about competitors. They need to constantly bring up company shortcomings left vulnerable due to Lock-in. And they need to champion test after test after test to keep the company growing. In these roles, they are more important than anyone else in the company. And vital to growth and viability. Without marketers and the application of their skills all companies become out of step with shifting markets and inevitably fail.
by Adam Hartung | Jun 10, 2009 | Current Affairs, Defend & Extend, In the Swamp, In the Whirlpool, Leadership, Lock-in
As I've given presentations around the country the last year I'm frequently asked about the role of leadership in Phoenix Principle companies. All people can bring Phoenix Principle behaviors to their work teams and functional groups. Yet there is no doubt that organizations do much better when the leaders are also committed to Phoenix Principle behaviors.
Unfortunately, all too often, top leaders are more interested in Defend & Extend Management. BusinessWeek's recent article "How to Succeed at Proctor & Gamble" talks about replacing CEO icons such as Charles Schwab, Michael Dell and Jack Welch. Unfortunately, only one of these was a real Phoenix Principle leader – and the others ended up coming back to their organizations when the replacements tried too much D&E behavior – leaving their shareholders with far too low returns and only dreams of rising investment value. Even more unfortunate is the fact that too many management gurus simply love to wax eloquently about leaders of big companies – regardless of their performance. Such as Warren Bennis's description of A.G. Lafley at P&G as "Rushmorian." Those at the top are given praise just because they got to the top. Yet, we've all known leaders who were far from being praise-worthy. Even the mundane can be loved by business reviewers that rely on them for money, access, ad dollars and influence.
There's a simple rule for identifying good leadership. Grow revenues and profits while achieving above average rates of return and positioning the organizations for ongoing double digit growth upon departure. It's not the size of the organization that determines the quality of a leader, it's the results. We too often forget this.
Back to departing P&G CEO, Mr. Lafley. Preparing to retire, he's taken the high ground of claiming to be "Mr. Innovation" for P&G. Experts on innovation classify them into Variations, Derivatives, Platforms or Fundamental. Using this classification scheme (from Praveen Gupta Managing Editor of the International Journal of Innovation Science and author of Business Innovation) we can see that Mr. Lafley was good at driving Variations and Derivatives at P&G. But under his leadership what did P&G do to launch new platforms or fundamental new technologies? While variations and derivatives drive new sales – "flavor of the month" marketing as it's sometimes called – they don't produce high profits because they are easily copied by competitors and offer relatively little new market growth. They don't position a company for long-term growth because all variations and derivatives eventually run their course. They may help retain customers for a while, but they rarely attract new ones. Eventually, market shifts leave them weaker and unable to maintain results due to spending too much time and resource Defending & Extending what worked in the past. Mr. Lafley has done little to Disrupt P&G's decades-old Success Formula or introduce White Space that would make P&G a role model for the new post-Industrial era.
Too often, bigness stands for goodness among those choosing business leaders. For example, GM is replacing departed CEO Rick Wagoner with Ed Whitacre according to the Detroit Free Press in "Former AT&T chief to lead GM." Mr. Whitacre's claim to fame is that as a lifetime AT&T employee, when the company was forced to spin out the regional Bell phone companies he led Southwestern Bell through acquisitions until it recreated AT&T – as a much less innovative company. Mr. Whitacre is a model of the custodial CEO determined to Defend & Extend the old business – in his case spending 20+ years recreating the AT&T judge Green took apart. Where a judge unleashed the telecommunications revolution, Mr. Whitacre simply put back together a company that is no longer a leader in any growth markets. Market leaders today are Apple and Google and those who are delivering value at the confluence of communication regardless of technology.
Today, few under age 30 even want a land-line – and most have no real concept of "long distance". Can the man who put back together the pieces of AT&T, the leader in land-line telephones and old-fashioned "long distance service" be the kind of leader to push GM into the information economy? Does he understand how to create new business models? Or is he the kind of person dedicated to preserving business models created in the 1920s, 30s and 40s? Can the man who let all the innovation of Ma Bell dissipate into new players while recreating an out-of-date business be expected to remake GM into a company that can compete with Kia and Tata Motors?
Any kind of person can become the leader of a company. Businesses are not democracies. The people at the top get there through a combination of factors. There is no litmus test to be a CEO – not even consistent production of good results. But in far too many many cases the historical road to the top has been by being the champion of D&E Management; by caretaking the old Success Formula, never letting anyone attack it. They have avoided Disruptions, ignored new competitors, and risen because they were more interested in "protecting the core" than producing above-average results (often protecting a seriously rotting core). Much to the chagrin of shareholders in many cases.
Now that the world has shifted, we need people leading companies that can modify old Success Formulas to changing market circumstances. Leaders who are able to develop and promote future scenarios that can guide the company to prosperity, not merely extend past practices. Leaders who obsess about competitors to identify market shifts and new opportunities for growth. Leaders who are not afraid to attack old Lock-ins, Disrupting the status quo so the business can evolve. Leaders who cherish White Space and keep multiple market tests operating so the company can move toward what works for meeting emerging client needs. Leaders like Lee Iacocca, Jack Welch, Steve Jobs and John Chambers. They can improve corporate longevity by shifting their organizations with the marketplace, maintaining revenue and profit growth supporting job growth and increased vendor sales.
by Adam Hartung | Jun 8, 2009 | Current Affairs, General, Leadership, Lifecycle
Unless you have a lot of time to research stocks, you probably invest in a fund. Funds can be either an index, or actively managed. People like index funds because you aren't relying on a manager to have a better idea. Index funds can only own those stocks on the index. Like the S&P index fund – it can only own stocks in the S&P 500. Nothing else. Interestingly, the Dow Jones Industrial Average is considered an index fund – even though I don't know what it indexes. And that is important if you are an investor who benchmarks performance against the Dow. It's even more important if you invest in the Dow (or Diamonds – the EFT for the Dow Industrials).
GM is now off the Dow ("What does GM bankruptcy mean for Index Funds?"). Because it went bankrupt, the editors at Dow Jones removed it. But it wasn't long ago that the editors removed Sears and Kodak. But not because these companies filed bankruptcy. Rather, the Dow Jones editors felt these companies no longer represented American business. So the Dow is a list of 30 companies. But what companies is up to the whim of these Dow editors. Sounds like an active management (judgement) group (fund) to me.
Go back to the original DJIA and you get American Cotton Oil, American Sugar, Distilling & Cattle Feed, Leclede Gas Light, Tennesse Coal Iron and Railroad and U.S. Leather. Household names – right? As the years went buy a lot of companies came and went off the list. Bethlehem Steel, Honeywell, International Paper, Johns-Manville, Nash Motor, International Harvester, Owens-Illinois, Union Carbide — get the drift? These may have been successful at some time, but the didn't exactly withstand "the test of time" all that well. Even some of the recent appointments have to be questioned – like Home Depot and Kraft which have had horrible performance since joining the elite 30. You also have to wonder about the viability of some aging participants, like 3M, Alcoa and DuPont. So the DJIA may be someone's guess about some basket of companies that they think in some way represents the American economy – but it's definitely subject to a lot of personal bias.
Like any basket of stocks, when the DJIA is lagging market shifts, it is not a good place to invest. And the editors are greatly prone to lagging. Like their holdings in agriculture and basic commodities years ago, through holding big industrial companies in the 1990s and 2000s. And the over-weighting of financial companies at the turn of the century when they were merely using financial machinations to hide considerable end-of-value-life problems. When the DJIA is holding companies that are part of the previous economy, you don't want to be there.
The Dow should not be a lagging indicator. Rather, given its iconic position, it should hold the "best" companies in America. Not extremely poorly performing mega-bricks – like GM. GM should have been dropped several years ago. And you should be concerned about the recent appointment of Kraft. And even Travelers.
Those companies that will do well are going to be good at information, and making money on information. So who's likely to fall off (besides Kraft)? DuPont, which has downsized for 2 decades is a likely candidate. Caterpillar is laying off almost everyone, and cutting its business in China, as it struggles to compete with an outdated industrial Success Formula. Bank of America has shown it is disconnected from understanding how to compete globally as it has asked for billions in government bail-out money. And the hodge-podge of industrial businesses, none of which are on the front end of new technologies, at United Technologies makes it a candidate — if people ever recognize that the company would quickly disintegrate without massive U.S. government defense spending. Even 3M is questionable as it has slowed allowing its old innovation processes to keep the company current in the information age.
Adding Cisco was a good move. Cisco is representative of the information economy – as are Verizon, AT&T (which was SBC and before renameing, GE, HP, Intel, IBM, Microsoft, Merck and Pfizer (if they transition to biologics from old-fashioned pharmaceutical manufacturing ways – otherwise replace them with Abbott). But all those other oldies – like Walt Disney (sorry, but the web has forever changed the marketplace for entertainment and Walt's folks aren't keeping up with the times), Boeing (are big airplanes the wave of the future in a webinar age?), Coke (they've kinda covered the world and run out of new ideas), P&G (anybody excited about Swiffer variation 87?), and Wal-Mart – which couldn't recognize doing anything new under any circumstances.
As an investor, you want companies that can grow and create a profit. And that's increasingly not the DJIA – even as it slowly adds a Microsoft, Intel and Cisco. You want to include companies in leadership positions like Google and Apple. Their ability to move forward in new markets by Disrupting their Lock-ins and using White Space to launch new projects in new markets gives them longevity. As an investor you don't want the "dogs" – so why would you want to own DuPont, et.al.?
Investors may have been stung by overvaluations in technology companies during the 1990s. But that was the past. What matters now is future growth ("Technology on the comeback trail"). And that can be found by investing in the future – not what was once great but instead what will be great. Invest for the future, not from the past. And that can be found outside the DJIA. Unless the Dow editors suddenly change the portfolio to match the shift to an information economy.
(For additional ideas about recomposing the DJIA, see my blog of 3/12/09 "Dated Dow")
by Adam Hartung | Jun 6, 2009 | Uncategorized
"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 change. Rather 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 Saturn? Some 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 lead. Manufacturing 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.
