The Demise of General Motors
About GM and strategic alignment
Everybody knows the fate of GM. What does strategic alignment have to do with the demise of the once largest automobile manufacturer in the world...? Everything!
When the purpose and brand values of your company aren't clear, there will never be a clear strategy. Whithout a clear purpose and strategy people do not focus, and are not able to identify with their brand and what it stands for. GM's internal organization has been stifled by bureaucracy for decades, its production has been hampered by strikes, and its marketing has since long lost track of the developments in the outside world where car buyers have increasingly been disappointed by the failing reliability and lack of fuel efficiency of the GM cars they bought.
The Saturn case: a demonstration of lack of alignment
A clear example of lack of strategic alignment in GM is the story of Saturn.
About 25 years ago - in 1985 - GM founded Saturn, the car brand intended for a rearguard action against the fuel efficient and high-quality foreign-made cars that had flooded the market after the 1973 oil crisis (Why did it take 12 years...?).
GM founded Saturn in the hopes that "A different kind of car company" would bring foreign-car fans to GM. Initially it actually worked; most Saturn buyers had never bought a GM car before. In fact, many owners didn't even realize they had a GM product in their driveway.
It's not that Saturns were such bad cars, the models just weren't terribly interesting, attractive or exciting. Owners were mainly attracted by Saturn's friendly no-haggle car pricing policy. Saturn also earned a reputation for fuel economy and dependability, despite the fact that Saturns were actually about as dependable and efficient as similar cars from other GM divisions.
For years, GM didn't seem to know what to do with Saturn and the brand languished with cars lacking inspiration and appeal. Eventually GM decided to make Saturns just as it made other GM models - basing them on the same underlying outdated engineering as its other cars - but making the designs more eye-catching. It took GM 23 years (!) - until 2008 - to complete the change-over to a new, more attractive line of car models. Then the economy tanked, marketing money dried up and with Saturn sales being sluggish, GM decided to pull the plug on Saturn.
Saturn has never become the success GM intended it to be, mainly because the Saturn management didn't get the freedom and mandates to run their own business, and employees were never geared towards delivering the premium reliability and efficiency required to become the no. 1 best selling car in the market. They remained the typical GM workers in the typical GM bureaucracy they had always been, instead of rethinking their business processes and developing their own 'Saturn Way'. Saturn's business purpose (deliver an all-American, reliable and fuel efficient car to the US market) and strategic goals (become the no. 1 car brand in the US) were clearly out of line with GM's business processes (dominated by stifling bureaucracy) and company culture (sluggish, slow apparatchik style decision making combined with lack of identification with the brand values), and they failed to change this. In 2009 Saturn filed for bankruptcy, and the brand will be phased out by 2011.
Meanwhile, the Toyota Camry became the no. 1 best selling car in the US instead, closely followed by the Toyota Corolla.
Management-by-panic - an exemplary example of total misalignment
As a last attempt to survive GM made a fatal mistake they had already made before in the early 1980s: rebadging.
After the 1973 oil embargo Cadillac - the GM luxury brand - joined other luxury brands in trying to attract more entry-level buyers with a smaller, more fuel-efficient car. Of-course the most important element of a luxury brand is its image and one bad model can ruin it. Instead of coming out with a truly new product, GM added the Cadillac crest to what was in fact a rebadged Chevrolet Cavalier, while adding thousands of dollars to the price tag. In effect, it was neither a good Cadillac nor a good value, and it never became a success.
In the first decade of the 21st century GM tried the same trick again; it started putting badges of GM brands on 'no-name' but more fuel efficient foreign cars. Is my car a Chevrolet? Or a Korean Daewoo with an all American Chevrolet logo? And isn't a Daewoo an outdated European Opel with a Daewoo logo, now replaced by a Chevy logo? What the heck am I driving? By doing this GM killed the very last bit of identification its workers and buyers still had with GM.
Instead of listening to their buyers GM for decades has consistently ignored world scale ecological and economical developments. Contrary to what Opel - one of GM's most successful car brands - did in Europe, GM in the US continued building bigger cars based on ancient fuel gurgling engine technology.
It was just a few years ago - at the 2004 North American International Auto Show in Detroit - that Robert Lutz, GM's vice chairman of product development at that time, said about the Toyota Prius: "It just doesn't make environmental or economic sense to try to put an expensive dual-powertrain system into less expensive cars which already get good mileage". Lutz also said: "Hybrids are an interesting curiosity and we will do some, but do they make sense at $1.50 a gallon? No, they do not."
Well, as we all know, the curiosity called Toyota Prius today (2009) is one of the most successful car models in the market; the 2010 Prius drew almost 100,000 consumer orders in the US months before going on sale...
In fact, since 2004 the name 'Prius' has become an acronym for anything hybrid.
But... there is a trace of hope. In 2009 GM showed off one of its rare rays of light: the plug-in electrical car 'Volt', which GM says will get 230 miles per gallon when it is expected to hit the road by the end of 2010. The price however will be a steep $ 40,000.- or more.
What do we learn from GM's business case?
GM - one of the oldest and once most successful automobile manufacturers in the world has failed to keep its purpose in line with the world's evolutionary (and sometimes revolutionary) changes. GM missed crucial opportunities to rethink its purpose, its goals, its strategy, and in line with that its organizational model, and last but not least its company culture.
On June 1, 2009 GM filed for bankruptcy protection, set to close more than a dozen facilities and cut more than 20,000 jobs.
It was Charles Darwin who said: "It is not the strongest or most intelligent that survive, but those who can adapt to change".
GM has become one of this world's industrial dinosaurs. GM since decades has been heading the same way the dinosaurs went. Let's hope that GM is able to realign itself with a clear, new business purpose, and turn the tides in time.