Triskedecaphobes beware: I make it 13 days until GM files Chapter 11. It will be interesting to see which meme means business on the day. Will the popular press parrot Detroit’s party line: comeback interruptus (i.e., unforeseeable events destroyed the best laid plans of mice and men)? Or will karmic retribution be the topic du jour (i.e., they killed the electric car)? No matter how the Monday morning quarterbacks parse it, there’s no doubt that Detroit’s decline will serve as THE case study in monumental failure for those who don’t want to read Gibbon’s “The Decline and Fall of the Roman Empire.” Always ahead of the wave, TTAC’s Paul Neidermeyer has already shared his analysis of this debacle. Paul’s warming up his Dawn of the Dead essay for the actual event. Meanwhile, a number of our Best and Brightest have sent me a link to a BusinessWeek synopsis of “How the Mighty Fall: A Primer on the Warning Signs.”
The funny (not ha-ha) thing about the collective heads-up on the Five Stages of Failure: the story is NOT about GM. And yet, of course, it is. Here are some excerpts.
Stage 1: HUBRIS BORN OF SUCCESS
Suppose instead you succumb to hubris and attribute success to your own superior qualities (“We deserve success because we’re so good/so smart/so innovative/so amazing”). What’s the downside if you’re wrong? Significant. You just might find yourself surprised and unprepared when you wake up to discover your vulnerabilities too late.
Stage 2: UNDISCIPLINED PURSUIT OF MORE
Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence—or both.
Stage 3: DENIAL OF RISK AND PERIL
As companies move into Stage 3, internal warning signs begin to mount, yet external results remain strong enough to “explain away” disturbing data or to suggest that the difficulties are “temporary” or “cyclic” or “not that bad,” and “nothing is fundamentally wrong.” In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility.
Stage 4:
Common “saviors” include a charismatic visionary leader, a bold but untested strategy, a radical transformation, a dramatic cultural revolution, a hoped-for blockbuster product, a “game-changing” acquisition, or any number of other silver-bullet solutions. Initial results from taking dramatic action may appear positive, but they do not last.
Stage 5:
In Stage 5, accumulated setbacks and expensive false starts erode financial strength and individual spirit to such an extent that leaders abandon all hope of building a great future. In some cases the company’s leader just sells out; in other cases the institution atrophies into utter insignificance; and in the most extreme cases the enterprise simply dies outright.
My favorite reasons for the fall of the big three: low speed limits and low gas prices. It’s the perfect environment for the growth of large, sloppy, inefficient cars.
If we had low gas taxes but an Autobahn speed system our cars would be big and powerful but they would also have had sophisticated suspensions/brakes/handeling. If we had low speed limits but high gas prices the cars would have been small and efficient. But, low gas prices and low speed limits, that’s never going to force a manufaturer to build a great car.
Mulchay took Xerox from near bankruptcy to a nice recovery by cutting bad businesses (including things she championed like ink jet printers) and reorganizing to a nice profit.
The problem is that she was able to do that by massively upping R&D as a fraction of sales and using that to drive the recovery.
Can you imagine the UAW putting up with someone doing that? Not in this life. And the desire to protect their members will reduce GM to also-ran or dead before long.
That this is also how nations / civilizations collapse. Think about the Roman Empire or more recently, the British Empire.
Condensed from Wikipedia:
“At its height it was the largest empire in history and, for over a century, was the foremost global power. By 1922, the British Empire held sway over one-quarter of the world’s population and approximately a quarter of Earth’s total land area. It was often said that “the sun never sets on the British Empire”
Expenditures of treasure and human capital in a series of wars and foreign adventures gradually sapped the strength from the nation and they lost their dominance.
Am I the only one that thinks Toyota is currently in Stage 2?
If I move to Switzerland, can I get a Peugeot for free? I need something to daily drive while the BMW waits for the weekends.
Anything is better than what GM makes, and of course, there are the awful roads in this country (particularly the Midwest).
Yes, GM has made some horrendous business decisions. Roger Smith’s over-investment in robotics, software and technology, GM’s insain buying spree of Saab, Vauhaux and Volvo and their short sightedness in sticking with Light Trucks/SUVs when the market shifted to small cars.
However, to me, that is not what killed off the Company. What killed it off, for me, was the Corporation’s contempt for its customers. What killed it off for me, a Buick Man, was GM’s decision to produce that ruinous 231 cu in engine as opposed to the perfectly acceptable 229 engine. [FYI, when I read TTAC’s analysis on that engine, I literally pumped my fist into the air and shouted HELL YEAH!!!] That was the pivitable event for our family. We were a Buick Household. My first car was my mother’s mint 1967 Buick Skylark—which made me a BuickMan. My Mother then bought a 1980 Buick Regal TURBO with that wretched 231 cu in engine. My dad drove it 12,000 miles before the engine seized. GM Screwed him over on replacing it. He dropped a second engine in it, that went 36K miles and it too seized up. My dad dropped a third engine, used with 56K miles on it only to watch it seize up at 78K miles. My dad sold the car for $300.00, bought a Honda Civic and we have never looked back—all Japanese cars from 1983 onwards.
When it comes to cars, I am more Anti-American than Bin Laden “I will not buy an American made car EVEN if it is Japanese and made in America. Unless the car is MADE IN JAPAN, I won’t touch it…I am that pissed off with GM. Did GM learn its lesson about screwing over lifetime customers by making knowingly bad products? Dexacool Antifreeze Coolant, anyone?!!!
Mulchay took Xerox from the brink to a nice recovery, but the firm has never regained anything near the dominance of the copying industry it once enjoyed.
“What killed it off, for me, was the Corporation’s contempt for its customers.”
Amen. It isn’t just the product mistakes, it is the way GM dealt with the unlucky customers who bought those mistakes which formed the basis for the Never Again Club. Over a period of a few decades, GM pushed millions of families into that club.
This is a great new book, BTW. I can’t wait to get my copy from Amazon Wednesday.
Toyota is definitely in stage 2. Good thing is that they are taking this downfall very seriously–perhaps more so than anything in their history.
What will make Toyota not a GM (which they seem to be heading to these days) is that they are smart enough to take aggressive action. Whereas GM was so f’ed up that they couldn’t slow the failure.
I love this 5-stage concept. Jim Collins is a genius.
Thank you for bringing this book and the Newsweek review to my attention. I want to read this book.
Looking back with 20/20 hindsight and the help of the book review it is easy to remember GM management’s incredible arrogance and the start of its failure in the 1950’s.
GM management was unable to look at challenges as opportunities.
Roger Smith’s over-investment in robotics, software and technology,
Roger Smith made many bad mistakes that helped put GM in the place it is today. Also the investment in GM-Fanuc was poorly managed. However, Smith’s investment in robotics, software and technology helped bring the company into modern r&d and manufacturing. He also closed some very inefficient plants like the Cadillac plants in Detroit and building Lake Orion & Poletown.
It’s my opinion that Smith was far more responsible for GM’s demise than Rick Wagoner, but the guy wasn’t 100% a failure. Had Smith not made the technology investments he did, GM wouldn’t have been able to last as long as it did in the face of the hypercompetent Japanese manufacturers.
Mulchay took Xerox from the brink to a nice recovery, but the firm has never regained anything near the dominance of the copying industry it once enjoyed.
And Apple will never have near the dominance in the portable digital player market that they did when the iPod first came out. Xerox once had the photocopier market pretty much to itself because, let’s face it, they invented the process. As the original patents expired and new technologies emerged so did competitors. When that happens, I suppose you either accept the fact that you’re in a mature industry or you reinvent your company.
mach1 :
“That this is also how nations / civilizations collapse. Think about the Roman Empire or more recently, the British Empire”.
I thought it, and then scrolled down to see you said it.
Indeed.
I’d put the USA in stage 4 about now.