Bail out GM?  No Way

At Columbia Business School Public Offering blog, read Rita McGrath’s posting:  We’ve been down this road before, and seldom has the ending been pretty. General Motors and the other American carmakers are textbook cases of what one of my colleagues famously called “permanently failing” organizations. The syndrome of permanent failure afflicts supposedly for-profit organizations that create no economic value or that even destroy economic value. This syndrome often persists because a coalition of stakeholders comes to value the organization as an organization—as an institution— and its survival becomes an end in itself. The webs connecting the entities that benefit from the company’s ongoing existence are so strong that they dominate all decision making. GM, depending on whose analysis you read, is widely recognized as having destroyed billions of dollars in economic value, and it has been unsuccessful in its half-hearted efforts at transformation since at least the 1970s.  To read the entire blog, click here.

Share this article:      

• Posted Admin on November 24, 2008

The Big Three and Symbolic Chernobyls - will they never Learn?

Today’s headlines in most major newspapers have detailed the sad story of the CEO’s of the Big Three American automakers slinking off back to their offices—well, actually traveling back to their offices in private jets—after being turned down in a massive bailout request that would allow them to continue to operate, business as usual, courtesy of the American taxpayer.  I am not a fan of this idea at all (for my views on this, see this post at Columbia Business School’s web site - Public Offering).  Indeed, it was gratifying to note that Jack Welch isn’t a fan of this either (see his column in Business Week.  But this post isn’t about that issue.  It’s about the jets.  It seems that the leaders of these companies really need to get out of those out of date buildings and get some external perspective.

One of the points I always emphasize in leadership seminars is that symbolism is one of the most powerful allies - or enemies - you can have as a leader.  The old illustration of this was the contrasting behavior of Lee Iacocca then CEO of Chrysler, and Roger Smith, then of GM.  Iacocca, in trying to reach agreement with the unions, famously said that he would work for $1 a year until things turned around.  The union leaders felt this showed important solidarity with the troops and with their help and some government assistance, Chrysler was able to recover (for a while at least).  Smith, on the other hand, saw what Iacocca had done and said to his folks, “guys, I feel your pain - so much that I’m going to cut my salary by 25%.”  The amount he was cutting was more than a typical auto worker saw in a lifetime.  Symbolic blowout.

My colleague, Don Hambrick, always reminds us that a symbol is an artifact that has meaning beyond its inherent substance.  And that executives simply cannot escape from ‘symbolic fallout’ - the meaning that others attach to their actions, whatever their intentions were.  Which brings me back to the auto-makers.  For goodness sake, isn’t anybody in their organizations plugged in enough to what is going on in the economy to realize that flying around in corporate jets—particularly to ask for taxpayer assistance—is a symbolic disaster???  That cluelessness alone suggests they shouldn’t get the money.  What if instead, all three of them took the best and nicest cars they make and drove them to Washington?  You know, on roads.  You know, like the rest of us?  At least the symbolism would suggest that they like, enjoy and are proud of their products. 

Share this article:      

• Posted Rita McGrath on November 21, 2008

Green:  Nice while it lasted?

Only the blink of an eye ago, it seems, you couldn’t open a paper or read a magazine without someone talking about how ‘green’ their businesses were and how environmentalism has become a top-line concern.  With the economy in crisis, one thing we can predict is that green concerns are going to have to fight a lot harder to stay on top of the agenda.  In fact, I was recently involved in planning session for a major corporate event in which the event organizers, who had planned a session on “Green Business”, were told in no uncertain terms that the session was now irrelevant and should be yanked from the agenda. 

It will be interesting indeed to see which organizations stick to their green commitments as economic conditions continue to dominate the headlines. 

What can we predict?  Firstly, that a lot of smaller companies that went into business with a ‘green’ proposal are going to find things very tough, particularly if they are counting on a premium price for greener products.  They will be hit not only by the economic troubles of their evironments but by a radical shift in people’s priorities:  green may be nice, but if the choice is a green widget or a gallon of gas, it may not be affordable.  Secondly, we’ll see companies continue with programs that are green but that genuinely save money or time; while those that are more expensive or inconvenient are likely to be phased out (quietly of course).  Finally, we may see the beginning of an era in which items that are both not green and expensive or optional take a beating (bottled water, anyone?).

Your predictions?

Share this article:      

• Posted Rita McGrath on November 07, 2008

Discovery Driven Planning:  Most barriers to growth are self-inflicted

I am spending today with a very well-managed, large company, and even here the long fingers of the economic slowdown are creating even more obstacles to innovation - led growth than in more ‘normal’ times.

The issues they raised as barriers to growth include:

• The “de-risk” mode that many companies have gone into which makes anything even remotely unpredictable look dangerous
• A lack of a global mindset that leads to local optimization of investment and cuts off more promising corporate projects
• Brand conflict - when a new project isn’t a great fit for the existing brand
• Churn among the managers and leaders involved in innovation projects
• Silos within the organization
• Existing metrics and rewards that are not suitable for innovation
• Fear of cannibalization of the existing business
• Fear, in general
• Short-termism driven by quarterly results pressure
• Politics
• Existing power structures in the company

What I find absolutely fascinating about this list (and remember, this is an extremely well managed firm) is the extent to which the barriers to growth are essentialy self-inflicted.  They are internal processes, systems, relationship sand politics that can get in the way of doing anything new.  Existing companies tend to have accumulated lots of these sorts of barriers - but it doesn’t have to be a foregone conclusion that these will be or should be in place.  Here is where adroit innovation leadership, to me, can make all the difference.  This is one of the key themes in our forthcoming book Discovery Driven Growth.

Share this article:      

• Posted Rita McGrath on October 30, 2008

Discovery Driven Planning:  Teaching in Non-Degree Executive Education Programs

I’m just here at the Strategic Management Society’s annual conference in Cologne.  It’s a meeting which aspires to bring together academics, consultants and business-people for fruitful dialogue and exchanges, although in fairness the tilt does seem to be more toward academics recently.  I did participate in an interesting session on how to teach in executive education programs.  I focused on issues of style (not too much lecturing, please!) and actually included some substance on real options reasoning and discovery driven planning.  Anyone with an interest can download the attached .pdf. (the blog software wouldn’t allow me to upload it in .ppt.)

For now, the key takeaways from my session:

1.  Too much one-way communication is ineffective

2.  In design, remember the basic principle of what makes something interesting—challenge to weakly held assumptions

3.  Build on executive participants’ own experiences and connect to your teaching points

4.  Creative repetition (700 times)

5.  Tell stories

6.  Combine facts, emotions and symbols—often, one or another are left out

Feel free to write with any questions or further ideas.  On to the next session!

ExecEdTeaching.SMS.10-08.08.pdf

Share this article:      

• Posted Rita McGrath on October 14, 2008

Search: