How “Black Widow” C.E.O.s and Caretaker Managers are choking the life out of the world’s most profitable brands:
Fellow brand guy Rob Frankel and I don’t always agree on everything, but more often than not, he an I find ourselves on the same side of the fence, shaking our heads at corporate execs who somehow manage to choke the life out of an otherwise solid brand. They are the corporate world’s equivalent of the proverbial black widows – women who marry for money, kill their husband, and then move on to their next prey.
This isn’t to say that black-widow CEOs purposely kill the brands they are hired to manage, but it would be a stretch to pretend that they have any brand’s best interest in mind: By the time these guys leave – usually after just a few years – the size of their golden parachute seems to be in direct proportion to the damage they have caused.
The worst part about this is that in spite of their horrendous track record, they keep getting hired to run more companies and brands into the ground with the efficiency of an enraged elephant trying to muscle its way out of a porcelain store.
Rob Frankel has some pretty interesting things to say about this phenomenon, and looks at it through the cultural prism of the Three Generations of Wealth principle, in which the first generation creates the fortune, the second generation spends it and the third generation loses it. Pretty clever if you ask me.
Many American brands are victims of third generation “caretaker” managers, who themselves never had to build the very brands they’ve been charged to manage. Living off the fat of the land, they’re complacent managers who fear innovation and risk, the type that figure their brand will always be there, because it was always there for their fathers and grandfathers.
The trouble is it doesn’t work that way. The grandfathers who built the brands knew the power of a brand. They knew how to constantly build and reinforce their value. Caretaker managers, however, spend more time on the golf course than they do building brand value. In fact, most CXOs don’t truly understand what a brand is, let alone how to build its value. And so while the caretaker managers might hold hands, close their eyes and wish real hard, their brands continue to wither from neglect, with market shares shrinking into a mere slivers of what they once were.
But it isn’t enough to just point a finger at ineffective CEOs without looking at exactly HOW they are destroying the brands they should be elevating. There is a method to the madness, and here it is (in its simplest form). Again from Rob:
Year One: Get hired by suckers whose company is hemorrhaging cash and market share to the point that their desperation clouds their good business sense. The Caretaker uses this first year to make promises and “assess the situation.”
Year Two: Caretaker begins sniffing out departments where he can “cut costs”, drastically slashes budgets and tosses out the very employees who built the company. By cutting costs, he hopes to “restore profitability.”
(And on paper, it works.)
Year Three: The costs are cut, but the Caretaker has done nothing to increase revenues. While profits have increased, overall revenue is down and company infrastructure is devastated to the point where any hope of a real financial recovery is gone. But the Caretaker Manager doesn’t care: His deal is done. And by the time the folks who hired him find out how much damage he’s caused, it’s too late. His recruiter has already landed him at another company where he can do the same damage all over again.
The key element of this process is obviously Year Three: a) The black widow CEO has done nothing to increase revenue, and b) the company infrastructure has been severely weakened.Not a good combination.
By then, customer support (one of a company’s most important brand-reinforcing touch-points) has been outsourced, most departments are stretched well beyond their operational limits, and most of the company’s true management talent has left. Meanwhile, because little or no work has been done to enhance or even maintain the brand’s relevance, customers have started to shift en masse to competitors more concerned with creating value than cutting corners… err… costs.
Rob goes on to cite Chrysler’s choice to hire controversial serial CEO Robert Nardelli to take the helm as an example of this process:
According to the Los Angeles Times:
In Nardelli, Chrysler is getting a former senior General Electric Co. executive, who was both credited with overhauling purchasing and technology systems at Home Depot and widely criticized for pay and severance packages seen as excessive.
“This is an interesting choice, and I’m somewhat perplexed by it,” said Erich Merkle, an auto industry analyst with IRN Inc. “There are still things that Chrysler needs long term and I’m not sure Nardelli can provide them.”
Right. Things like vision, direction, purpose or clarity, perhaps? Heck, anything that even closely resembles a strategy beyond growth through acquisitions and further rounds of cost-cutting?
Now we’re on to something.
It should be said that Nardelli’s current annual salary at Chrysler is exactly $1, so kudos to him for at least playing along with Washington theatrics surrounding the spectacular bailout his company is currently benefiting from (especially considering his past history with grossly excessive executive compensation.) That being said, given his history, how can board of directors look at a guy like Nardelli and think “wow, this guy can really turn around Chrysler and get us to the top again?” His track record and tactics are pretty clear.
Is there a forest vs. trees problem going in in the corporate world, or are the boards that appoint these black-widow CEOs that clueless? (The question is not rhetorical. I really want to know.
How to spot a caretaker manager posing as a leader: Look for short-term P&L mirages instead of actual growth:
Something to think about: Efficiency is nice when you’re a CFO or a COO. A CEO’s job is considerably more complex than just hacking off unprofitable divisions and cutting costs to the point of operational anemia, however. (See Year Two, above.) Would Nardelli make a great COO? With the right CEO looking over his shoulder, probably. But CEO? Not on your life. Yet here we are, watching Nardelli accelerate Chrysler’s nose-dive by favoring short term profitability through aggressive cost-cutting over actually rebuilding a limping company and the brand that once made it successful. Sure, efficiency and profitability may look great on paper, but the end result, when not tied to long term strategies is almost always disastrous.
And if you don’t believe that a CEO can resurrect a company by understanding and embracing the value of its brand, just look at Steve Jobs and Apple. Consider for a second what happened to Apple when he left, and how his return a) brought Apple back from the brink, and b) turned it into the powerhouse that it is today. Did Steve Jobs rebuild Apple by cost-cutting and focusing on short term profitability, or did he set out to rebuild Apple’s relevance and culture of innovation again? (No need to think about the answer. It’s a rhetorical question.)
Now compare a black widow CEO like Nardelli and a visionary CEO like Jobs. What kind of CEO builds powerhouse brands and what kind sinks them? (Last I checked, Apple wasn’t applying for bailout money.)
Why is this a relevant topic this week? I’m sure you can draw your own conclusions, but the main catalyst for this post was Rick Wagoner’s precipitous removal from the helm of General Motors over the weekend… and subsequent appointment of GM’s current COO (and former CFO) Fritz Henderson. Now… I don’t know Mr. Henderson personally and haven’t followed is 25 year career with GM, so my questions about this choice as a replacement are completely uneducated and skewed towards today’s argument, but hear me out for a second.
Given what we have discussed today and what we know of corporate America’s habit of rewarding CXOs for short-sighted performance rather than long term growth, ask yourselves for a moment if the best possible choice to lead an ailing company (like GM) is really its former CFO/COO.
Do cost cutting and operational efficiency REALLY impact revenue, or do they mostly help the company’s P&L look good while sales continue their downward trend?
Can a 25-year insider/veteran of GM who has contributed during his entire career to the downfall of a brand really bring new vision and infuse new life into a dying company?
As I was researching this topic for today’s post, I happened to zero-in on a comment Edmunds.com’s Chief exec. Jeremey Anwyl today in an AP story on GM’s move, which he called out as little more than “political theater.”
I couldn’t agree more.
The point here being: Sure, Wagoner being pushed out was a good move considering Chrysler’s horrendous performance and complete lack of direction, but Henderson’s appointment basically negates any kind of forward momentum or positive outcome for GM. He is just another GM exec with absolutely nothing new to bring to the table.
It doesn’t matter how deeply GM and Chrysler cut costs. If neither company focuses on rebuilding their brand(s), they will not be able to rebuild their revenue stream. Period.
More of the same breeds more of the same breeds more of the same, and so on:
Case in point: The AP story makes some good observations about Wagoner’s success in cutting costs and improving operational efficiency at GM, but looking at the big picture, what did the cost-cutting really accomplish?
$82 Billion (yes, with a “B”) in losses in the last four years. That’s what.
Let me say that again: $82,000,000,000 in losses in just four years. (Source)
Does this sound like GM was moving in the right direction with the cost cutting and “restructuring?” In that time period, did GM’s brand as a whole capture our attention the way BMW, VW or Lexus did?
If you find my argument a little weak, ask David Cole (chairman of the Center for Automotive Research in Ann Arbor, Michigan) what he thinks:
“I don’t think you would see any shift or significant change at all with Rick’s leaving. I think the course that they’re on, they’re on.”
You don’t say. Yet Senator Charles Schumer’s (D-NY) comments on the change indicate how deeply rooted our general cluelessness about the value of true leadership and objective change really are:
“Given the history, a change in management could hardly hurt and might do some good.”
No, Senator. Change for the sake of change is just noise. Replacing a caretaker manager with another caretaker manager from the same management culture is not an improvement. It is nothing more than political gesticulation and pointless churn. What we do need, however, is fresh talent at GM. What we need are executives who want to rebuild the GM brand and will attack that task with the passion of a true believer. We need people who understand GM’s importance to the automotive industry and their millions of fans – both in the US and around the world – and will map out a future for it rooted in clarity of purpose. That kind of leadership looks a lot more like Steve Jobs, Richard Branson, Yves St. laurent and John Mackey than Robert Nardelli, Rick Wagoner, Fritz Henderson or Edward Liddy.
Stop mistaking managers for leaders. Please, for the love of god, learn the difference between the two.
The proverbial fork in the road: How companies choose to either succeed or fail:
Ironically, GM currently owns some of the world’s most more recognizable automotive brands, with Cadillac, Saab, Hummer, Chevrolet and Saturn making the list… So it shouldn’t be all that hard for GM to make a comeback… But unless it learns to embrace the power of the brands it depends on to remain profitable, it doesn’t stand a chance.
(As a taxpayer,) what I would like to hear from Mr. Henderson is a statement affirming a new direction in GM’s strategy. Specifically, one that leverages what Cadillac, Saturn and Hummer have managed to accomplish all on their own: Create unique cultural niches for themselves and build loyal brand followings. Cadillac especially, having reinvented itself over the last decade, could help ailing brands like Buick, Chevrolet and GMC find renewed purpose in a market saturated with banality, derivative designs and watered-down identities. In short, what I would like to hear Mr. Henderson say is that the lesson Cadillac learned in the course of its own successful reinvention will be applied across all GM brands effective immediately. That GM, while continuing its commitment to reducing costs where it makes sense will shift its focus back to making cars that people actually want to drive. That GM as a whole has a plan to completely revamp its design and Q.A. departments (please hire some Germans already) in the next six months. That it will immediately end production of all models with notably low market share. And most importantly, that it will actively seek to bring fresh executives to the table. Not US automaker flunkies from the same stale pool that got GM and Chrysler to the brink (like himself), but professionals from other industries with a talent for actually developing culture-affecting products and building brands from the ground up. And that – to that end – he plans to voluntarily step down from his role as C.E.O. sometime in the next year to give them room to work their magic. I want deadlines, direction, purpose and unwavering commitment. What I don’t want is more hollow posturing and vague rehashes of already failed strategies.
Sadly, hollow posturing is probably all we can hope for at this stage in the game. Even the White House seems content to let heads roll at GM and Chrysler without demanding real change. As a result, what we are likely to hear from both auto giants over the next few months will be the same old song that got us here to begin with: More cost-cutting. More attempts to return to short-term “profitability” by hacking their companies into strategic and operational impotence. More bean-counter promotions to leadership positions. More lame duck partnerships. More requests for bailout money. In short, more of the same. Why? Because expecting true leadership from caretaker managers trying to hold on to their jobs in a tanking economy is about as realistic as expecting my chihuahuas to start quoting Buddha, Mohammad and Ghandi in their native Spanish. (Though sadly, the latter is actually more realistic.)
The most likely outcome of this ongoing corporate FAIL will be an endless circus of caretaker managers taking turns playing C.E.O. musical chairs while their once mighty companies burn to cinders around them.
Let’s face facts: Any idiot with a calculator and a spreadsheet can cut costs to make his P&L look good at the end of the month. You don’t need 25 years of executive experience at the Fortune 500 level to master that little trick. So what exactly qualifies executives like Nardelli, Wagoner and Henderson to run (heck, to rescue) companies like Chrysler and GM?
The question I would like to ask these guys is simple: When you run out of costs to cut, then what? (Besides jumping ship or asking for bailout money?)
Anyone? Bueller? Bueller?
Repeat after me: No major brand ever rose to a position of market dominance by focusing on cutting costs.
Apple. BMW. Starbucks (in its heyday). Microsoft. Cartier. Disney. Newman’s Own. Michelin. Breitling. Cervelo. Oakley. Hermes. Pixar. Assos. The list goes on.
Is it really so hard to grasp these simple concepts? That P&L manipulation through chronic cost-cutting is no kind of strategy at all? That preserving the health of your revenue stream trumps all other business functions? That everything you do in a company should be done with one objective in mind: To create customers? That a C.E.O. can’t just focus on the dashboard or the rear-view mirror while he drives his company forward?
This really isn’t rocket science. Is it?
Is it?
Help me understand how we got here. Two ways you can do that:
1. Be sure to add to the already fantastic series of comments published below.
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Thanks for bearing with a particularly long post today. You guys are good sports. 😉
Brand Building and Online Marketing Blog 
Awesome article. I think of this stuff every day as I am in the brand building process, redefining the ultra high end of bicycle fitting and design. It’s funny, with a super small company like mine, the lack of momentum gives a sense of urgency that cannot be duplicated on a big scale. I wish some of these guys would walk in my shoes awhile and they would think golden parachutes!
There is a reason Lockheed created the Skunkworks. I know my rantings will make no difference to the big boys but I am glad that you took the time to share your perspective with people like me who see every day as another to succeed.
I would love to see this article with other examples of good CEOs besides Jobs. There’s got to be others right?
Great article…(and great illustrations as well!). I’m not sure what is more concerning, the fact that we are in this position, or what’s being done (or not done) about it.
Nice job, I’ll be referring back to this for sure.
-Jason
Twitter.com/brandmatters
Great write ! It’s totally frustrating when both business & political leadership don’t get it. They are all on ego & power trips mixed with a large dose of greed and don’t have a clue how the average hardworking American feels or lives. I guess we have a choice. Try to do something about it with our own businesses or sit back and complain. Thanks for the time you took to write. B
Olivier, your argument is filled to the brim with passion. Passion is one of the problems in the CEO replacement game.
The reason Jobs turned Apple around is the same reason it took off like wildfire when introduced… he cares. He cares deeply, about creating the definitive technology experience for his loyal brand fanbase. Is he a tyrant in the workplace, as rumors have suggested? Maybe, but what drives him is not just to have “a company” but to breathe ongoing life and passion into the brand he created, that he still holds so dear. If he has to step down fully because of health issues eventually and not even serve as advisor, the company will not be the same.
Henry Ford was passionate about inventing better ways to do things. He reportedly used to tell the animals on the farm when he was doing chores “Someday, somebody will invent an easier way to do this.” That was his drive. Someone today HAS to be passionate about correcting issues due to bad decisions, and rebuilding the brand with, and for, the brand fans that they have and hope to have. I may never own a Chevy and have never wanted to – but for some folks that is the only car they want to drive. So there is a huge disconnect, between executive chair-hopping and spreadsheet numbers and stockholder demands… from the Wrangler-wearing Texas rancher who has always driven a Chevy, or the Camaro lover who owned one in high school, and wants to relive those tender moments by purchasing a sexy newer model that provides a sentimental, emotional bonding experience for him.
Brand enthusiasts get attached. They are loyal. They make sacrifices, and sometimes spend more than they can immediately afford just to have that item or object or experience that means so much to them, because they relate to it for some reason. Maybe the reason is obvious – for example, they want to take their children to Disneyland because they have a distant memory of love and fun family times when they were younger… what happens then, if the brand has been diminished and altered beyond recognition because of the lack of caring and understanding coming from the uppermost executives?
If a corporation is in trouble, and needs a superhero CEO, they should not merely look for a new manager, and they might not even fare as well as they could with a proven leader, if he is not a passionate brand fanatic. They need to look inside the company – who has been there, through thick and thin – who makes contributions, or tries to, that actually have the heart and soul of the company in mind? Or outside the company – who has used this product, service, etc. and for whom is it not optional that the company live on? Who cares, truly cares and wants to see the brand continue to live on and evolve and grow with the times? That’s who should lead a big company – there are enough financial wizards and advisors who can take a pragmatic view that could help them craft a plan. True brand success only ever comes from one or more people’s passionate and abundant drive to create.
This was a disturbing post to contemplate because so much of this may be coming from America’s culture of greed and always wanting so much for doing so little. Since I have only ever lived here, I’ve always wondered if business expectations are the same in other places. The AIG bonuses, to retain people, are so very ludicrous to me. People should stay or go based on interest and performance, not because they will get several million dollars just for continuing to grace a company with their presence. For the upper business classes in this country to feel this is acceptable and customary is troubling to me. There are so many things amiss, it’s hard to know how to restore integrity and dignity to our economic environment, if we ever even had those attributes in an earlier time. Very thought-provoking, Olivier.
Whew. Long post — but definitely worth the time to read. Can’t disagree with any of it. Good read!
Kevin, next time I’m in San Antonio, you’re taking me on a test ride, right? 😀
Don, yes. I pointed to a few in the post: Virgin’s Richard Branson, Yves St. Laurent’s Yves St. Laurent, and Whole Foods’ John Mackey. Fast Company and Inc. do a fantastic job of showcasing exemplary C.E.O.s every month. If you aren’t reading those pubs yet, I would definitely recommend them. Start with Fast Company. 🙂
Bill, you’re right. It’s hard to empathize with $40K/year workers when you’re making $100M per year. These guys tend to live in a different world, and in a way, it isn’t really their fault that they are so detached from the majority of their workers. (Playing devil’s advocate here.) I understand that they have to make tough decisions sometimes. But the problem is that they don’t seem to understand that the cost cutting leads nowhere. It’s like taking players off the field when you start to lose the game. It simply makes no sense. Empathy is nice, but I’ll settle for common sense. ;D
Jason, thanks for the kind words. In my mind, the fact that we’re here sucks; the fact that we are still not fixing the problem is scary.
Kristi: “I may never own a Chevy and have never wanted to – but for some folks that is the only car they want to drive. So there is a huge disconnect, between executive chair-hopping and spreadsheet numbers and stockholder demands… from the Wrangler-wearing Texas rancher who has always driven a Chevy, or the Camaro lover who owned one in high school, and wants to relive those tender moments by purchasing a sexy newer model that provides a sentimental, emotional bonding experience for him.” Wow. Yes. You nailed it. Your comment is better than my post, as usual. 😀
Thanks for the awesome comments already. 🙂
Awesome post – that must have taken quite a while to assemble. 😉
Cutting costs is an interesting thing to examine within this sort of context, and it’s especially absurd given the salaries that these chronic ‘cost-cutters’ are paid themselves.
In terms of summoning and/or generating the required innovation when and where it’s most needed, you’d think that just a small fraction of one high-level salary would be able to yield some significant results. That’s a lot of pie to spread around. 😉
Here’s my hypothetical (and admittedly outrageous) suggestion: Repurpose say $20mm or so from the top to setup and power a ‘brand strategy and innovation thinktank’. Dig deep to find the best thinkers and doers that $20mm can buy. I think I personally know a few people who would be totally effective in this regard, and they would be more than happy to work on such an ultimately rewarding project for a cool $500k or so a year. Don’t you?
Once again, it may ‘not be rocket science’ – but there is certainly some science involved. Unfortunately, if you’re stuck in an ideological vacuum like so many of these old, big, and currently-screwed companies are, proper science seems to be referenced for insight about as much as it is in a bible class.
In short, if you don’t look even in the right direction for a viable solution, you are probably not going to find one. Cutting costs is merely a way to appease board meetings and sound bites. It’s what I’ve come to expect from a 3rd generation CEO, and nothing less (or more). Pitiful.
Excellent insights, Oliver – well done.
…Dan
While I agree with you on most points Olivier (here and everywhere), I think the question one has to ask is this: Can a business like GM (Business 1.0) survive in a Business 2.0 world? Only then can you effectively consider the variables that are relevant to the problem.
Can Jobs run GM? Not hardly. Can Nardelli run Apple? Not hardly. Can GM be saved? Possibly, but only if they shed themselves of some of the most egregious structural problems any company could face. And I think this is highly unlikely given the nature of the political climate in D.C.. Cole was right, inertia matters.
Apple has no legacy costs that equal more than the actual cost of producing any of its products. Nor do they have the political culture to deal with that GM has. You can’t talk about either Brands or vision, when you cannot address the negative structural issues you face in any company that keep you from growing your way out of your problems. And while I love Kris to death, having passion isn’t the point either. I’m sure Nardelli has a passion for cost cutting, which is what makes him an effective manager but not an effective leader.
You cannot shrink your way into prosperity any more than can you spend your way to success. Sometimes the best thing to do is to admit it doesn’t work and start over.
Oliviér, Who cares if it is long!
Great insight –
A few points to add – & yes, I thought Mr. Wagoner should have been gone long ago. The one that should be in that seat is Bob Lutz – unfortunately he is retiring.
Your quote – lots of Germans – GM *has lots of Germans – and they are trying to sell them. Namely Adam Opel.
Many Opel cars are sold in North America as Saturns (and a pontiac) – unfortunately – Americans don’t like buying them.
‘Too small compared to Lincoln Navigator / Cadillac Escalade” is usually the refrain.
The American consumer is a strange fish. For 30+ years the full sized pickup, and later the full sized SUV ruled the sales channel. Before gas hit 4 bucks US per gallon – GM was quoted as saying that they could not even give small cars away.
Gas hits 4 – Honda Civic is number one selling car for a few months.
Gas drops back to 2 or 2.50 – the big trucks & SUV’s are back on top. Even the Toyota Prius is a hard sell now.
When you consider that GM can make about 7k per truck – while actually losing money on the smaller cars – you can see where their corporate dyslexia comes in – the bigger, badder equals more bucks – so build every damn one you can!
Of the Detroit 3 – only Ford has had the time to start to tackle that dyslexia – with Alan Mulaly. And of the Detroit 3 – they are in the (arguably) best shape of them all.
Personally – I had to reserve judgment on Nardelli – he started with Chrysler just a few months before this train wreck happened (barely time to get his desk chair warmed!) Ford’s Mulaly has had about 2 years.
Another problem with the GM “Brand” is not so much its brand – but its internal fiefdoms and power structure. (Ford had the same prob for years) And that is what the CEO over the last decade should have been killing.
That toxic managerial infighting killed Oldsmobile & Saturn in one fell stroke.
(When Saturn started & was so successful, Bob Rock pulled investment out of Saturn to try and save failing Olds – so Saturn sat with those original SC coupes and the little sedan for almost 10 years – which is 2 generations or more in automotive)
Have you seen the original artists sketches of the Chevrolet Volt? It won huge acclaim – it looked like a cross between …. well, look at the difference here;
One is a sexy brand builder – the other ……. Nuff said
One problem the Detroit 3 brands have never been able to do is make “small” equal desirable.
A GM Chevrolet Cobalt has more room inside of it than an Audi A3 or A4 (I am short – and I cannot get into the back seat of either of them)
But you don’t consider the Cobalt “desirable”
Cheers & Regards!
Elliot
Olivier: Well said my friend! An entry level accountant can find ways of trimming costs from an expense report, but the skill comes in knowing which expenses to cut.
Really good post Olivier – very long but exactly the issue we have with many brands today.
In the boom years a badly run company could still make a profit – now the cracks are starting to show.
I wrote about this in my blog last month http://loyaltyguy.blogspot.com/2009/03/heres-idea-get-involved.html, but you’ve done a much better job of detailing the issues.
I can think of a few managers that should have a read of this article!
Great piece.
Reminds me of the old “Three Letters” joke.
A new CEO arrives on the job. His predecessor leaves him three envelopes labeled “Crisis #1” “Crisis #2” and “Crisis #3” successively
The new CEO, upon the arrival of the inevitable first crisis open the letter labeled Crisis #1 it reads: “Blame me”
Upon the arrival of the inevitable second crisis the CEO opens letter #2 it reads : “Blame the Current Economic Environment.”
When the third crisis arrived the now seasoned CEO opens the third letter that reads: “Write Three Letters”
Dan, I would gladly take that call from GM. 😉
@mthinker, great joke. 😀
Marc, Stevem Sherry and Elliot, I completely agree. And Elliot, you make some great points. Wow. Did you research all that?
I think that the “We can’t give small cars away” thing is a self-perpetuating myth with the D3 though. Name one truly great American compact. (Crickets…) Exactly. The D3 can’t give away their small cars because they don’t make any good ones. And they refuse to invest any resources into creating a great compact because they don’t believe they can sell it. At some point, they’re going to have to commit to putting aside the ridiculous notion that small cars can’t be hits.
Americans DO buy small cars. Let’s see… How many Minis and VW bugs do you see on the road? TONS. And they’re great cars. Add Toyota, Honda and Hyundai to the list. I may be wrong, but my guess is that if GM, Chrysler or Ford put as much effort into designing the next great compact as they do designing the next great barn-crushing SUV, they could give their foreign counterparts a run for their money. 😉
Great points on Opel, Saturn and Oldsmobile too. Great comment, brother.
Jeffrey, You’re forcing me to think here. 😀
1. Yes, I think that a 1.0 brand can survive (and even thrive) in a 2.0 world. But why make things harder than they need to be? 😉
2. Could Jobs run GM? Absolutely. Could Nardelli run Apple? No. (Granted, I don’t think Nardelli could run a hot dog stand, so he’s probably a bad example.)
What would be interesting is a Jobs/Nardelli CEO/COO combo. Guys like Nardelli need smart, bold, visionary CEO to help them discover their true value as CFOs and COOs, and guys like Jobs need shadow execs to expose all the angles. The thing is… while guys like Nardelli and Wagoner can truly shine as super COOs, they obviously aren’t good at being CEOs. (Just like guys like Jobs and Branson would make lousy COOs and CFOs but rock as CEOs.) Everyone has a role to play.
3. “You cannot shrink your way into prosperity any more than can you spend your way to success.” Hammer. Nail. Bang! You’re right. We definitely need a serious shakeup at a lot of these companies. I kind of like Dan’s idea (above).
How about we all start a strategy / innovation think tank and call up GM next week to pitch them Dan’s idea? 😉
A mark of a blogger contributing worthwhile content…long posts that draw many and long comments! Well done.
I think Tom Peters sees you approaching in his rearview mirror.
Trey Pennington
Olivier,
1. Absolutely it can. But only if you can find someone who can put together the extraordinary team it would take to overcome all of the structural and cultural problems Elliiot points out and that I alluded to in my comment. It’s only harder for GM because no one ‘get’s it’ – not even D.C.
2. Jobs could not run GM. Creative minds don’t have what it takes to deal with the grind of ridding 1.0 companies of the culture of antiquated command and control systems. He could run the GM that might reappear from bankruptcy depending on how much the judge cuts from the carcass.
3. I’m not a fan of exec salary caps or limits. Anyone who truly understands value, doesn’t either.
4. We need a shakeup at a lot of companies – for-profit and not-for-profit, big and small. I’ve said for a while now that we’re not in a recession as much as we are a recalibration of the way we approach and think about everything connected with the ways in which we do business and the ways in which we relate to one another.
5. As far as Dan’s idea for a ‘skunk works’ goes – GM has one (all of the big 3 do). The product they produce goes on display at Car Show’s around the world. Some of us have long wondered why these ‘concept’ cars are not actually put into production – oh well.
6. While I love Steven too, not just any good accountant can cut costs successfully.
Finally, the core problem with GM is not a lack of creative energy or passion. It is the rudimentary political and legal obstacles that need to be removed from the equation so that the creatives have air to breathe. Maybe bankruptcy can do that. Let’s hope so.
Thank you for a great post and even better discussion.
@JeffreySummers
Jeffrey, I’m not going to pretend to know the inner workings and players of the CEO’s in the car industry because I truly don’t. I get totally what you’re saying about passion as a bit too simplistic given the conglomeration of fiefdom’s, multiple divisions, complex administrative systems, etc.
But without someone who wants to do more than earn a paycheck or take on a new challenge (of cleaning up giant messes, like poor Obama is coping with right now), how can change EVER occur to not just shake things up, but set American companies on a different kind of course, one that addresses what is in the title of this post. What will it take in the big picture, beyond bankruptcies and reorganizations, to build new, LASTING strong brands (today’s companies don’t seem to last as long), and not utterly destroy the old ones?
And in context of Olivier’s title, aside from the details of these messes, do you even agree CEO’s are killing America’s brands? Or is this all preventable, with better management in place? Is it just a matter of not picking the right people?
I agree about the concept cars from the most shallow perspective – I see tons of things on the front page of Yahoo (sometimes they show them there) that seem like they would be great sellers, but they won’t be made. I think, being a girl and not into cars, I don’t get the point of making totally cool things that are never going to be products!!
I just saw this news about Obama ordering Dodge & Chevy to pull out of NASCAR, and Obama rebutts my passion argument a little bit (and well). From http://www.caranddriver.com/reviews/hot_lists/high_performance/motorsports/obama_orders_chevrolet_and_dodge_out_of_nascar_car_news
“The President realizes this will be an unpopular call, but stands behind the decision, saying, “This is an obvious cut to make, but it is not an easy one. This administration is not ignoring the tremendous sentimental value and emotional appeal NASCAR holds for so many Americans. But now is not the time for sentiment and nostalgia; now is a time for decisive financial action. If our automotive industry is to emerge from this recession intact, then these difficult decisions must be made.”
Obviously in times of severe crisis, swift and decisive management must occur. But employing a visionary/passionate/brand leader at the helm instead of one of these cleanup artists would ensure that beyond the crisis, someone is there capable of taking the company into the future, instead of cashing out and moving on. Agree? Disagree?
Aha. This is what I love about this space. More than 140 characters to make our points. 🙂
Jeffrey:
1. “No one gets it. Even D.C.” No kidding. I’d even be tempted to say “especially” D.C. That is one of the underlying themes of this post, I think. My question is why. Why don’t our captains of industry get it? All the money in the world, all the power in the world, and still they couldn’t think their way out of a paper bag. I just don’t get it. It isn’t like the US isn’t filled with bright folks and talent. Something has to give.
2. Jobs couldn’t run GM as it is today. No one can. GM is broken. I’ll give you that. But that’s the point. A guy like Jobs could map out GM’s rebirth. (Which would probably involve breaking it down and then rebuilding it into a completely new company.) Apple was on the brink of collapse when he came back. It had become a 1.0 company and the brand was shot. He brought it back from the grave and turned it into one of the world’s powerhouse brands once again (even eating into Microsoft’s market share). Other people would have to do the heavy lifting, but he could drive GM’s reinvention.
3. I am not a fan of executive caps on salaries either, but paying a guy $200M to slash thousands of jobs and kill a brand doesn’t make a whole lot of sense to me. Having just spent a year in the Fortune 500 world, I’ve seen how easy it is for many companies to base executive compensation on the wrong performance metrics. And go overboard with it. I am not a fan of rewarding what amounts to failure with enormous bonuses… Personally, as a big shot C.E.O., I would set a limit on my own compensation unless I actually created more jobs than II eliminated and managed to improve my company’s performance across ALL possible metrics: Quality, customer satisfaction, revenue, profitability, etc. That’s just a question of personal ethics though but still.
4. My fear is that the recalibration won’t happen if we entrust it to the same flunkies who got us into this mess to begin with. How do we address that?
5. GM’s skunk works deals with product design, not strategy. I think that what we’re talking about deals as much with strategy, business development and marketing as product design. But yeah, I don’t understand why most kickass concept cars have to be stripped of every once of personality and style before going into production.
6. I worked with a cost accountant turned SVP of Finance once. 20 years of experience in his industry, huge salary, etc. Anyway, turns out he was completely incapable of actually telling me how much a product actually cost to manufacture. (It had been his job for 15 years, by the way.) At the time, I was working on making sure that the design improvements my team was pushing were also cost reductions. Long story short: I had to teach him cost accounting. (And I knew absolutely zip about cost accounting before figuring it out for myself.) So I agree with you 100%: Not every accountant can cut costs successfully. But a $200M accountant ought to cut costs pretty damn well. 😉
Your final point: That’s a leadership problem. If the organization’s mechanisms are broken, if departments and divisions aren’t talking to each other, if data and information aren’t flowing properly, if ideas and insights are being blocked or lost, the CEO and COO have to fix it. If that means moving people around, so be it. If it means bringing in specialists to break down and rebuild divisions, so be it. If it means shutting down a division and rebuilding it from scratch, so. be. it. These things won’t happen on their own. And if a CEO can’t get his executives to play along, he has two choices: Get better executives, or find a better gig. What I am seeing is that these caretaker manager C.E.O.s are perfectly satisfied with the way things are. Why wouldn’t they be? They are rewarded like kings whether they succeed or fail. Where is the incentive for them to actually improve anything?
Eh. I’m digging this discussion. Too bad we can’t do it live. I want a panel. 😉
Kris:
“In times of severe crisis, swift and decisive management must occur. Employing a visionary/passionate/brand leader at the helm instead of one of these cleanup artists will ensure that beyond the crisis, someone is there capable of taking the company into the future instead of cashing out and moving on.”
I agree 100%.
You almost need these two elements concurrently: The visionary CEO rebuilding the ailing company and preparing it for its new direction, and the COO/CFO team working closely under his/her supervision to quickly trim the fat without cutting into the muscle. It’s the ideal model. Sadly (and surprisingly), very few companies know how to do this well.
Olivier,
Regarding GM:
Wagoner was against structured bankruptcy for GM, while Henderson has publicly stated he is open to it, as long as the government finances the process. Wagoner was asked to step down personally by President Obama. All this, combined with the fact that the federal government has already stated they would cover all GM warranties suggests what is likely to happen at the end of the 60 day period GM has been given to figure out the meaning of life.
The company will likely have to go through a quick, structured bankruptcy. They will reemerge smaller, leaner, and poised to focus on the administration’s vision of what the next generation of the American auto industry should be, i.e. more energy efficient cars, and fewer large trucks. Your new GM CEO is Barack Obama. He’s already making decisions. Even today the White House “ordered” GM and Chrysler to cease participation in NASCAR after this season.
Many GM and Chrysler plants will have to close. It’ll be interesting to see if the ones that remain active are located in political regions key to the Democratic party.
One thing you can be sure of is that the President’s goals for GM and Chrysler are indeed long term. He has directly linked them to American viability in the global energy race. They will now also be indelibly linked to the Democratic Party’s viability in the coming mid-term elections and subsequent presidential election.
That’s all far more political than I like to get, but why ignore the elephant in the room.
Regardless of who is at the GM helm (real or showpiece), what is going to breath new life into the company is a renewed commitment to design. From top to bottom, from their products, processes and factories, to the design of their customer experience from dealership to ownership, to the design of their relationship with their suppliers and union workers.
When Jobs returned to Apple he was the prodigal son, and that worked in his favor. Unless we can dig up Henry Ford, there is nobody out there to fill the prodigal shoes for the American auto industry. It’s still going to take a Jobsian approach though, in my opinion, and that means sacred dogma, and traditional methods are going to have to be rethought, and even discarded. That’ll be a bitter pill to swallow for a lot of people, not the least of which will be the UAW.
It’s also going to take government commitment to rethink corporate taxes and CAFE standards, among other things.
It will take creativity and imagination from all parties.
Great comment, Ken. Seriously. You guys are impressing the heck out of me with these brilliant responses. I really liked what you suggested in regards to “sacred dogma.” I think you’re onto something there.
You also write “what is going to breathe new life into the company is a renewed commitment to design. From top to bottom, from their products, processes and factories, to the design of their customer experience from dealership to ownership, to the design of their relationship with their suppliers and union workers.”
Indeed. Let’s hope GM can actually execute. I am still not sure that we’re going to see any change at all until GM physically crashes and burns. I am afraid that without a radical leadership change (and I hope that POTUS has better things to do than become GM’s CEO), this 747 is going to have to be taken out of service, completely taken apart, and then reassembled from scratch.
But hey, maybe it won’t come to that. I guess we’ll have to see. I’m as optimistic as the next guy. I just need to see a true leader emerge before I’ll believe in a speedy recovery for GM.
What’s sad though is that a) it has come to this to begin with, and that b) the damage done by lousy leadership seems so difficult to undo.
All it will take though is a visionary management team to take over and rebuild GM from the ground up. Now all we need to do is find that team and sign them on. 😉
Olivier, the fact that from my distant vantage point, no Fortune 1000 CEO seems to feel this way, is a LARGE part of the problem… “Personally, as a big shot C.E.O., I would set a limit on my own compensation unless I actually created more jobs than I eliminated and managed to improve my company’s performance across ALL possible metrics: Quality, customer satisfaction, revenue, profitability, etc. That’s just a question of personal ethics though but still.”
Personal ethics seem to fly right out the window when multi-million dollar bonuses are on the line. I’d rather them earn a reasonable salary than take the ceremonial $1 a year, when the intention is to collect hefty bonus sums anyway. Spare me the ruse!
Ken, this well written statement is why I think Olivier keeps going back to Steve Jobs, and I keep blathering on about passion… “what is going to breathe new life into the company is a renewed commitment to design. From top to bottom, from their products, processes and factories, to the design of their customer experience from dealership to ownership, to the design of their relationship with their suppliers and union workers.” That is exactly what Jobs did, when he did return to Apple. The designs that have come from Apple since he returned changed not just the computer industry, but the electronics industry. Innovation and creativity plus quality products that people *crave* buying (not just have to buy, like a Dodge truck as a work vehicle) will cause people to start to part with money for cars again. They need to stimulate creativity to stimulate the economy, not just slash and dash and continue business as usual.
I now want to work on a car campaign for “design that moves you” or some such thought… did Lexus already do that?? Gee, thanks a lot, Olivier! LOL! As if finding a car company with a branding budget right now would be easy. 😉
@Olivier – I am a car nut – and work a small training company that works with some Japanese manufaturers
Mini & Beetle are premium – and that is one spot the D3 fail – they could not sell a cobalt for 30 grand – they equate small with econobox.
I have heard that Jobs is a one man show – as it is now – he could not run GM something like 140,000 employees in 70 countries. You don’t want a ‘one man show’ – what you need is a really big stick to smack silos apart. So I have to agree with@Jeffrey on that.
I mentioned Bob Lutz – he is the ‘Steve Jobs’ – if you know cars – he was part of the teams that brought the Dodge Viper and Prowler to your neighborhood.
The stories go that when he started at GM (just a couple of years ago) he would storm into some office and tell them there was no way in hell that they were going to “cost shrink” one piece by replacing it with plastic from a Mattel Barbie Doll.
@Kris C – I think that is a mistake – I am not a NASCAR fan – but it is “Brand” with a capital ‘B’ – other than the names on the car – those are nothing you will buy in a store – yet from Petty on down – it is the BowTie (GM) or the Blue Oval (Ford etc) -brand!!!!!
More Trivia – in the Great Depression – the US Gov’t asked GM to bail out the banking system!
Which GM did by pouring money into the bank that would become JPMorgan ……
Wow. Another mark of a good blog post and its post-er is a comment like this: “I think Tom Peters sees you approaching in his rearview mirror.”
Glad to see the both/and coming out in the comment section: passion and fiscal responsibility.
It seems like the “caretaker” mentality is all but inevitable. All the Tom Peters (and forthcoming Olivier Blanchard) books in the world don’t fully stem the tide of mediocrity. But apparently, at least in the short-term, and for a few lucky [fill in the blank] there’s good money in mediocrity.
Olivier,
What a great discussion you’ve started.
We’re witnessing history right now. No business, or brand, can last forever. No matter how well you adapt, overcome, and roll with the changes, the day will come when every brand will have run it’s course. In this context, we should view the entire American auto industry as one brand. It’s all about to change for them. Companies called GM, Chrysler and Ford will still exist, but in name only. Everything else will be new.
Detroit has been criticized for building gas-guzzling trucks for a long time now. The fact is that those are the vehicles that people want to buy. I heard an interesting statistic on NPR back in October… In the past 18 quarters (not months, but quarters) September 2008 had been the first month when cars outsold light trucks in America. That, of course, coincided with the Wall Street meltdown. The next month, when gas prices plummeted, truck sales, though low, lead the pack again.
The moral of the story there is that the auto makers were building what the consumers wanted to buy. That’s what Apple is doing now, only with a focus on design, throughout every step of the process, and it’s creating better products and a better consumer experience.
Frankly, the Detroit Big3 have been doing a much better job than they’ve been getting credit for. American cars went through a 25-30 year period when they were perceived as mediocre, compared to foreign models. And, they were mediocre. Now, American cars are leading in most classes, for reliability, mileage, etc. I have owned Hondas, Toyotas, and Nissans, but my 2004 GMC Yukon is by far the best and most reliable vehicle I’ve ever owned. Of all the vehicles I’ve ever owned, it’s the only one I’d recommend.
But, Detroit still has problems of perception, and only design will get them over the hump. When you think of fine automobiles, or performance automobiles, etc., you think of European brands first, Japanese brands a close second, and way down on the list you think of American brands.
That is a hard hill to climb for the Big3, but they must climb it. It will take a commitment to design, as I mentioned in my previous comments above.
The good news is that paradigms are shifting. Founded or unfounded, fears of global warming, and energy shortages are going to propel the auto industry into the next generation. To a great extent, the playing field is going to be more level, because EVERYBODY is going to have to rethink everything. The forced purging that Detroit is about to undergo may actually help them, and give them a leg up.
The bottom line though is even if a car gets 80 mpg, it’s still going to need to look “cool” for enough people to commit to buying it. Design will determine.
Thanks for the forum to rant 🙂
Ken, I was thinking about the D3’s image problem this morning, and it occurred to me that only one of the three knows how to do PR (Ford). Bringing Scott Monty onboard (@scottmonty) to run their social media programs (PR, customer engagement, etc.) was one of the smartest things I’ve seen an American corporation do in the last year from a PR perspective.
(And not taking bailout money. That was a good move as well.)
I haven’t looked at GM and Chrysler’s PR spend lately, but if it amounts to any more than a few hundred bucks a month, they need both a new PR strategy and new PR firms. It’s just sad. Where are their PR people? Seriously? I’d like to know.
Craig, thanks. I could only dream of being in Tom’s orbit someday. 🙂
Elliot, Bob Lutz is a friggin’ genius, and yes, the guy needs to be elevated to CEO. He’s the kind of leader the D3 need.
By the way, you know who else was a one-man-show? Walt Disney. Legend has it that he was a tyrant as well… But sometimes, that’s what it takes, I guess. Look at the company he built. As much as I dislike tyrant CEOs, sometimes, you kind of have to put their personality problems aside. (Maybe suggest they learn social graces?) 😀
I also agree with you that the NASCAR thing is probably counterproductive… But that’s a decision I would have to weigh against a number of factors. It’s a cost/benefit equation. You can’t discount participation in NASCAR just because it looks bad on the P&L. That’s a hack-and-slash tactic that doesn’t take into account what NASCAR fans bring to the table when it comes to brand loyalty, exposure, etc.
Thanks for MORE great comments. 😀
First time reader, big time car nut. This was excellent.
I would like to mention, re: the comment about “Obama (personally, of course) ‘ordering’ GM and Chrylser out of NASCAR,” that today is April 1st. I’d also like to think that, if one man truly had that kind of political power in this country, more than 48% of the voting eligible population might come out to vote. It’s not the Democrats OR the Republicans getting us all into these messes, it’s Democrats AND Republicans.
Politics aside, NASCAR really isn’t about innovation or driving sales anyway. In fact, one might suggest that it’s reflective of the type of thinking at the upper levels of the D3. They all get together in a tight pack, drive in seemingly endless circles, then the mouth breathers get bent out of shape when the leaders get tangled up and crash into walls, other cars, said giant elephant in the room, and so on.
Meanwhile, brands like Honda, Toyota, BMW, and Audi are involved in things like Formula 1 or Le Mans, where the racing takes place at blistering speeds, where corners aren’t an endless string of banked left turns, and where a single car would have to race for 24 hours non-stop rain or shine. It’s an interesting parallel to consider. One breeds innovation, performance, sells cars. The other breeds redundancy, flaming wrecks, sells cheap beer.
One thing I’ve not been able to figure out since all this started, was how the D3 (GM, Chrysler, mostly) have been so vocal about needing government bailout money to avoid losing all those jobs. The problem is that they have too many people making too many cars, that nobody is really buying. Bailouts or bankruptcy, I don’t see how it matters either way! These jobs will need to be cut! They talk about 200,000 employees who could lose their jobs if the company had to file bankruptcy, then proceed to lay 80,000 of them off once they get bridge funding. Go figure.
The jobs are gone and everyone’s doing their own song and dance, hoping they won’t be the one reviled by the masses as the scape goat who finally took action. In the meantime, as Olivier so fabulously put it, people are getting more and more apprehensive of dealing with a lame duck. As a veteran Mopar fan, I’d like to think that Chrysler’s merger with Fiat might bring the wonderful little Fiat 500 to our shores, but with Nardelli at the helm, I’m not betting on it.
Here’s to American cars that are actually desirable. Ford seems like they might just pull it off. The new Fiesta is brilliant, the Taurus is looking better than ever, and the Raptor truck of theirs, with the EcoBoost turbocharged engine is a real head turner.
Consider me subscribed. Cheers.
Good points, all across the board here…
Oliver: I was thinking along similar lines this morning. Ford is most certainly doing some pretty cool things these days via @scottmonty. However, GM and Chrysler have absolutely nothing going on within the Social Media space that I can see. Surprising? No. Acceptable? Definitely not…
Attn GM and Chrysler: Look beyond your cubicles. You may not be all that popular, relevant or viable these days, but there are things that you can do to help remedy this. If we as consumers don’t at least see you trying, we’re not going to support your bloated rescue mission one bit. Please wake up.
Of course, if I thought either entity would actually listen, I’d suggest that we get together to draft a super-smart, comprehensive SM strategy and stick it under their noses. My intuition, however, leads me to believe that it would fall on deaf ears. Anyone think otherwise?
Olivier,
I agree that effective GM and Chrysler marketing/PR seems missing. At least GM and Ford have jumped on the Hyundai bandwagon and started offering their own buyer assurance incentives. Better late than never. Hyundai is still doing it better, but Ford isn’t bad. GM’s offer is the weakest.
As I’m sure you know, too many businesses pull back on marketing during tough economic times, which is ironic, because that’s when they need positive exposure the most. It was almost disconcerting in fact to watch the Super Bowl and NOT see the ubiquitous GM truck commercial.
The fact Ford is on the most solid ground of the D3 is not surprising. Ford has always put a premium on design. We all know that Ford’s supply chain management and assembly lines revolutionized industry (and helped America win the second world war). And, though aesthetics are largely opinion, I think an honest assessment of all the current D3 model lines has to lead to the conclusion that Ford has the most attractive, and consistently branded line up. It might also help that their current CEO, Alan Mulally, has degrees in aeronautical and astronautical engineering, and is literally a rocket scientist 🙂
@Dan,
GM has multiple presences on Twitter, so they are doing something in the social media realm. Can’t remember off the top of my head what their Twitter names are. Sure you can find them though.
I agree that SM is a vital part of any marketing plan for businesses these days. Look what Ford is doing with their Fiesta with SM.
Ken,
Interesting. I’m going to have to dig in a bit to find the GM reps though, as my initial round of searches has turned up nothing obvious at all…
If they are indeed spending dollars and time on SM initiatives, perhaps they need to revise their strategy considerably. The simple fact that I wasn’t aware of their presence speaks volumes. 😉
All the best,
…Dan
@Dan,
On Twitter GM can be found at @GMblogs.
I’d swear they had another, but I could be wrong.
Thanks Ken…
I actually spotted this a few minutes ago myself. I wonder how good their monitoring is?
Actually, they can prove it to us right here if they’d like. Does anyone from General Motors have anything to add? If so, consider this as an open invitation for your involvement. 😉
@Dan
I believe they have done SM things for certain product launches – you may be able to dig some up here;
http://fastlane.gmblogs.com/
Great discussion going on here. The fact that GM’s presence is difficult to recall on Twitter further reinforces Ford’s strategy of humanizing the brand (and constant and positive presence). That’s one of the reasons Ford has been so successful in social media in such a short period of time – people need to associate a person with the brand.
@Dan, I’d argue that Ford’s new offer is superior to that of Hyundai. They only guarantee you can return your car, whereas we allow people to keep it AND we pay for it. Kind of essential, if you’re out of a job and you need to get to a job interview.
Scott Monty
Global Digital Communications
Ford Motor Company
Thanks Elliot….
Yikes – ‘corporate blog alert’. I commend them for at least trying, but this certainly lacks the level of intimacy and transparency that I was hoping for…
As a quick, surface level repair, they would probably benefit from a more welcoming blog design as a starting point.
…and another quick suggestion for them would be to remove all imagery and / or video clips featuring ‘execs in suits’. If I were manning that ship, I’d navigate as far away from that territory as possible. 😉
This sort of space should be used to redefine their presence and begin to establish a genuine relationship with the consumer. Bright, shiny objects and honest, personal stories would likely be much more effective than repackaging their age-old arguments inside of a new media blanket. To me, this looks like a bit of a hack, and an easy way for them to merely fill a check-box in the ‘blog’ category.
Or perhaps I’m just cynical. 😉
Scott: I’m glad you caught that too. The fact that GM has a presence on Twitter (just as an example) but none of us can actually recall what it is, what they’ve done, etc. is pretty telling.
Having a presence in a medium is completely irrelevant if that presence is ineffective or inconsequential. GM and Chrysler need to take a serious look at their PR and engagement strategies because (sadly for them) they are obviously not on the same page as Ford.
Let’s cut through all the PR. Harvard vocab. and marketing BS. Think about these 5 words. “The Experience is The Marketing.” Auto Companies. are not delivering anywhere close to what their customers need, want, and expect.
@Bill,
I disagree. Detroit is not totally missing the target.
As I’ve stated above, I drive a GMC Yukon, and can’t speak more highly of it. The purchasing experience was great. The ownership experience has been great. The vehicle is five years old, and it’s been far more reliable than the Hondas and Toyotas I’ve owned in the past. Honda Accords are touted as one of the most reliable cars on the road, but my ’99 Accord EX Coupe was fraught with problems. The alternator went out THREE TIMES, the sun roof constantly rattled and had to be replaced, the gear shift broke, the leather was cheap and tore, etc. etc. My Yukon has been worry free, except for a radio issue that the dealership took care of with no problem.
Detroit could be making better vehicles, but they are already making far better vehicles than they are given credit for. If they were more brand and marketing savvy, consumers would know – and feel – this. This is why Olivier’s point is well taken. The old guard auto execs are a dying breed. Somewhere the Steve Jobs of Detroit must emerge. A design driven corporate culture, that works to form emotional bonds between brand and consumer, across every touchpoint, is what these companies need.
The opportunity with Detroit now is phenomenal. It’s like the chance to coach an 0-16 team to the Superbowl. It’s not a one person job though. It will take a team of people, who can then re-calibrate the entire organization, from top to bottom, in a designcentric fashion, with the total consumer experience in mind. Bill, you’re absolutely correct that the consumer experience is the key. They have to start with the TOTAL consumer experience, and work outward from there.
They have to realize that the consumer experience includes everything from the look and feel of the dealerships, to the fit and finish of the cars, to how the speed and efficiency of the factories, and the efficiency of union contracts affect product pricing for the consumer. Even the size and shapes of the knobs and buttons on the dashboard, and the sound a door makes when you slam it shut are critical. All of these details create interaction points for the consumer. Every consumer experience will send a message that establishes a perception that creates the brand reality within the broader market.
Many individuals know this in these companies, but attention to design, at this level, has not been a company-wide mantra. They can no longer use cheaper materials to save five cents per unit. They can no longer say “no” to an improved component because it doesn’t fit into existing production lines. They’ll have to invest in the new production line, and the improved design will make it pay off in the end.
Consumers are design savvy these days. That’s good, because great design is the path to making powerful emotional connections with consumers. Great design will create value, and convince consumers that you matter – and once consumers decide you matter, you’ve won. Successful design influences consumer behavior, engenders loyalty, demands a premium, and ultimately enhances the bottom line. It’s not a superfluous afterthought, it’s a core strategic component for any successful company. Ask Steve Jobs.
Ken and Bill: Thanks for continuing the conversation.
Bill, all three D3 companies make some great vehicles. But yeah, the reliability and the quality of design tend to be VERY inconsistent across models, categories and brands. It is easy to infer that because half of GM’s cars don’t get high marks for design or quality, the other half has the same problems. That isn’t the case… but GM should certainly do something about that. Perhaps they should take a closer look at what their own Saab brand is doing. Saab builds some great cars. Way too Euro for GM’s culture (I’m not sure that GM knows what to do with Saab) but a great template for Chevrolet’s future in terms of design, performance and quality.
In March I was pointed to an excellent reference from more of an expert on the Detroit bailout – the link is on my blog here;
@Elliot,
At the risk of over-simplifying, or sounding tangential, what Mr. White is discussing in that link to your blog boils down to one word…
Design.
I agree with him.
Smarter, better design, across the board, is what it will take – from those connecting rods he mentions (a perfect example of my design argument), to the UAW contract terms.
Also, and this is key… better policy design by the government. Stop forcing Detroit to invest dollars and energy into fuel efficient models that don’t (and won’t) sell well, just to meet impractical CAFE standards that are nothing more than political show. Let them invest the capital into truly innovative designs that will improve on efficiency AND appeal to consumers.
@Ken – I ain’t arguing there –
But it was the first article I had seen that explicitly referenced the demand side of supply & demand –
On that same post of mine – the other link was one of mine gauranteed to , cough, cough, irritate many in the US.
Regards!
Just a heads up for those interested in the auto industry and SM. Every Weds night at about 8cst, there’s a busy carchat going on Twitter. Search Twitter for the #carchat tag to see who’s in the convo. @scottMonty participates, as do other automotive media and enthusiast types. If you’re not part of the solution, afterall…
I’ve read each of these posts with tons of interest, lots of head bobbing, and severe angst because I work in an industry that mirrors the auto industry. Capital heavy, multiple bland brands, and an incessant focus on cost reduction. So we’re a blob on the commercial landscape.
I yearn for corporate leadership that boldly stands on the bow of the ship with their face pointed into the wind. I worked in the consumer electronics industry and watched firsthand while people like Akio Morita at Sony and Konuske Matsushita at Panasonic did things that guys like Jobs and Branson dod today. What’s that? They care. They have passion. They trust and encourage real leaders to take chances for success, knowing their are risks and failures on the horizon. But through their passionate vision of creating value for society (as opposed to “shareholder value”), they aspired to great things. Mr. Matsushita built his organization by simply stating that if the company did provide value to society, and created relevant products, that society would embrace those products and subsequently, profit to the organization. One could not exist without the other.
What’s different today, and why are there so many caretakers? Because you can’t teach passion, enthusiasm, and creativity. You have it or you don’t. And why do Jobs, Branson, Gary Erikson (Clif Bar), Morita, and Henry Ford matter? Because they WERE the brands they created. The vision and passion and sense of urgency came from their soul. Show me where and how these caretakers learn that in their prestigeous MBA forums? They don’t. I have asked several leaders at top universities what they are doing to teach innovation today. Guess what? Not a great deal.
What relevance does innovation have to the story? It’s the passion, conviction, risk taking mindset that fuels the debate and opportunity. We have to have people that care about their brands so deeply that they don’t want to do anything else. That’s what distinguishes the great ones from the crappy ones. Sadly, today we have too many that want the easy path to riches without investing the real necessities to ensure a brands longevity.
This article reminded me of the “slash and burn” tactics of the 80’s and 90’s within the minicomputer industry. We had our own “black widow” CEO’s who sucked the life out of venerable brands such as Wang Labs, Digital Equipment Corporation, and Data General Corporation – all gone now. I worked for all three corporations and still have nightmares about draconian cost-cutting measures, including lay-offs EVERY QUARTER, and the befuddled managers who couldn’t save the ship from sinking. Olivier is right. The cost cutting measures didn’t save these companies, and a lack of leadership and vision doomed their stockholders and hapless employees. We never learn, do we?
Talk about branding…I love what Cadillac has done with their brand. what used to be an old white guy car is now the balls!!!
An interesting tidbit.
In my comments above I mentioned that we as consumers are curious creatures – a recent issue of Automotive News casually mentioned that in the current financial wreckage – sales of used full sized SUV’s and trucks doubled the sales gains of smaller cars. (2.9 % vs 1.1)
(the wreckage part is mine – not in the article)
Obviously the absolute number of units sold is still slow compared to historical standards –
but still.
Goes to show – if we have 3 nickels to rub together – big trucks win ……
Great article, very well writter & strong ideas.
No matter what Nardelli may think, he is an employee – Jobs is an entrepreneur.
I subscribed for more of the same…
Thank you Olivier
I am raising the issues in this post again, Olivier, because I don’t understand some things AT ALL in light of GM’s bankruptcy yesterday, and the selling off of brands (such as Hummer, being discussed today.)
Ken said up there in a comment: “Wagoner was against structured bankruptcy for GM, while Henderson has publicly stated he is open to it, as long as the government finances the process.”
WHAT THE HELL????? Why should the government finance anyone’s bankruptcy? Questions, questions….
— Did *we* give GM money? I thought they got a big bailout package but honestly have tuned so much of this crap out, I am not totally sure how much it was or whatever.
— Was the plan all along, given we gave them money, that they would use it to go bankrupt and sell off the brands? If so, why? This is illogical to me.
— Is GM just going to sell the brands and be done now? So our taxes are going to be higher, to pay for their bankruptcy, so if some Chinese company and whoever else buys the brands and makes money from them, we will still be paying in taxes for their good fortune? PLEASE help me understand why that is just, fair or even smart.
— If Microsoft (for example) wanted to bail out a company, by buying them outright or loaning them money, would they or would they not have to take any type of shareholder vote? I ask because if so, this is REALLY stupid!!! Billions of dollars are being passed around like a candy bowl at Halloween, so we must assume our taxes will be raised to attempt to cover it, and we had no vote in the matter whatsoever. Just this unsaid message: “Hi, taxpayers, by the way, we’re gonna sink you for the next unknown number of years, because we’ve decided to bail out companies that are going to file bankruptcy. Paying the lawyers to handle it is far more important to us than the bread on your table, or a vacation week with the family once every few years. Thanks!”
I feel like such an ignorant girl here, among you men who get what’s going on, but I cannot wrap my mind around these choices… and I am a Libra – I normally don’t have a problem seeing an issue from multiple vantage points.
Related to this GM bankruptcy, I also do NOT wish to hear about RETIRED auto workers bitching about not having dental or eyecare, when my self-employed health insurance is so freaking high I will have to endure a catastrophic accident before they cover a penny of my out-of-pocket expense for medical services or prescriptions. I just spent $400 at the eye doctor last week. Welcome to my world! (See the DISGUSTING Forbes article: http://www.forbes.com/2009/05/29/gm-uaw-healthcare-business-autos-bankruptcy.html) Just shoot me and save the money, if I get mutilated in some horrible accident.
You are the single clearest communicator I know. Can you explain this so I can understand it, Olivier? One last question:
— Are you ready to move back to France yet? Américains stupides ! 😀
Kris,
I share your frustration about the GM debacle. General Motors is now Government Motors, and if you think it wasn’t working before….
My opinion (and that’s all it is) is that bankruptcy was inevitable and they (GM, the UAW and the Gov.) new it last Fall. I think the economy was too precarious to let them go under then, so they funneled bailout money to them until a time of relative stability when the bankruptcy announcement would have less impact.
The government now owns 70% of GM. That’s your tax dollars that bought it, but you’ll have no say in what happens next, and no, you can’t walk into a dealership and demand a new Camero for your financial support.
It is expected that the U.S. government will only recover $8 billion of it’s total $50 billion investment in keeping GM alive.
Factories, dealerships and suppliers will be shut down and go out of business. Thousands will lose their jobs. Restaurants and other businesses that are near these factories will suffer. Entire towns will become ghost towns.
Some investors have been wiped out. Larger interests have fared better than individual investors.
It sucks. Period. America’s industrial might in the world has taken a huge blow.
The Obama administration will likely suck up to the unions while keeping factories open in areas that will benefit them in the next election. Watch and see.
Is there an upside? Maybe. All of that infrastructure is in place. Why not use it to start building solar energy components and train and light rail equipment. Put thousands to work, keep thousands working, and begin the task of improving our energy and transportation future.
Detroit did an incredible job recalibrating itself to build the tanks and planes that saved the world from Fascism in the 1940s. Detroit can do it again. American industry and ingenuity can do it again… if the government takes advantage of the situation and doesn’t get in the way.
Obama had a vision for the future of the auto industry. It included smaller, lighter, more fuel efficient vehicles. Now he has a jumping off point. He owns the largest of the big three, he has the union in his pocket, and an almost clean slate. What will he do? I hope the right thing.
Like you, I am also self-employed, and my health insurance is my biggest expense. It’s ridiculous. I share your anger toward undereducated, overpaid union workers bitching about their benefits.
But, with all due respect to Olivier’s France, I must respectfully take great exception with your last sentence. Despite our issues, America remains the greatest country on the planet. There is a reason why people still risk their lives to walk across the blistering desert, or sail on a makeshift raft across the Gulf of Mexico to find a new life here. America will continue to lead.
The positive things that could come of the recalibration of the auto industry are inspiring, and could change our country and our world for the better. I am a relentless optimist and a believer in people who exercise creativity and imagination. Those are the two qualities we need most now.
There is a silver lining in this, and it could only be polished in America.
Ken
Ken, while I do love the US and crossed an ocean to live here (and want to stay), let me be 100% pragmatic here: If Mexicans had the option to cross the desert and either go to the US or to France or the UK, perhaps less of them would pick the US. (Personally, if I had nothing but the clothes on my back and the promise of a minimum-wage job, I would pick a country that provides affordable or free healthcare for my family over a country that does not.) They come here because the US is their only option, brother. ;D
That said, yeah, I am still waiting on the wind turbines Detroit could be (and should be) building. Oh wait… They’ll probably be built in Mexico. Never mind. 😛
Actually, the U.S. currently does provide free health care for illegal immigrants. You and I pay for it. 🙂
You are correct. The U.S. is pretty much the only option for illegal immigrants from Mexico and Cuba. And yes, perhaps they would chose France or the U.K. if those marvelous options were available to them. But, your comment immediately got me thinking. So, at the risk of sounding militantly jingoistic (it’s going to), here are a few other reasons off the top of my head why immigrants, legal or otherwise, might choose the U.S. Perhaps some are even the reasons that brought you here:
(Best read while imagining the Star Spangled Banner being played) 🙂
No other nation has welcomed as many people from foreign lands and created a national fabric so diverse.
America was the first nation in history founded on self-government – the principle that just powers are derived from the consent of the governed. The United States Constitution is the oldest written national constitution in use, and remains the model for self-government and democracy. It’s not a perfect system (as we can see), but show me a better one.
No other nation in history has done more to establish equal rights to life, liberty, and the pursuit of happiness for all of it’s citizens. The election of our current President is a symbol of how far the nation has come in dealing with it’s struggles to live up to the founding principles.
Freedom of religion without persecution. George Washington was the first Head of State in history to declare in writing the equality of the Jewish people. In America we don’t, as a collective culture, threaten to kill people who poke fun at religious icons via cartoons.
Freedom of speech. Try openly blogging from China or North Korea.
America is a nation built on creativity, imagination and innovation. Americans were the first to achieve fixed wing flight in 1903, and the first to fly to the moon in 1969. America produced the light bulb, the telephone, the cell phone, the steam engine, the polio vaccine, rock ‘n’ roll, the microchip and the personal computer and what the hell, let’s throw Twitter in the mix. The list goes on.
America is the world’s largest source of humanitarian aid. In 2007, the American people donated more than $300 billion to global charities of all stripes. No other nation comes close. Since 2001 the United States has tripled direct humanitarian and development aid to Africa, and will provide nearly $9 billion in relief by 2010 – an amount more than double the second nearest aid provider to that continent.
Deep breath… Enough with the grade school primer on American history. It’s a necessarily brief overview of 200+ years of national cultural development. You get my point.
Don’t get me wrong, I’m not blind to America’s historic and current shortcomings. Behind branding and design my passion is history and I’m fully aware of, and willing to fess up to, America’s failures. Nor is it my intent to ignore or diminish the contributions made to humanity by all the peoples and cultures of the world. You just pushed my button with the focus on the immigrant issue instead of the broader point, which was that American ingenuity and creativity can make lemonade out of these auto industry lemons. Granted, I may have colored my remarks with the point of view of my political party affiliation, but hey, it’s that freedom of expression thing. 🙂
Our national brand has sure taken a hit in recent years, there’s no doubt (and that’s a topic for another great discussion). I don’t usually like to be the guy who evokes Ronald Reagan, but I believe that America remains that “shining city on the hill”. I also believe the world continues to look to America for leadership. The world is getting smaller every day, and national leadership comes with new challenges and responsibilities. I think America remains up to the task.
Detroit could/should be building the trains and buses for a mass transit system. Now that would be a visionary, longterm use of our Billions of dollars, could be implemented immediately, and would put millions back to work. What an idea!
Now you’re speaking my language. A bullet train system linking Miami to Boston with stops in ATL, CLT, D.C. Philadelphia, NY, etc. is way overdue, for starters.
And, that is exactly the point. Trains and light rail, as well as wind and solar energy components are what our fading auto manufacturing infrastructure can be used to produce. The workers are ready. The factories can be re-outfitted. Unions will comply. Automotive special interests won’t get in the way. There is a majority party ruling in Washington that can pass legislation through. Everything is aligned in a way that it may never be again. The time is right.
That is what I mean by making lemonade out of lemons. Done correctly, the positive impact on the U.S. and the world will change the course of history.
It’s not WHAT you see, it’s HOW you see it. The auto industry collapse isn’t a failure, it’s an opportunity.
Thank you for the explanation as you see it, Ken.
It still sucks. 😛
Yep, it does suck. But it doesn’t have to continue to suck.
If you’re interested, this link will take you to an article on my blog where I discuss what I see as the amazing opportunities for innovation that could come from the cultural and economic recalibration the entire world is undergoing.
http://nocturnaldesign.com/cm/content.asp?pid=21&lid=21
Olivier,
This is a great blog and I would like to address two points. The first is that, in some ways, black widows and caretaker managers are peculiarly American. You will notice that a small group of CEO’s and executives make the rounds enabled by another small group of highly rewarded members of the Boards of Directors. A very symbiotic relationship exists between these two groups and until that is cracked merit pay at executive levels will not exist.
Second, I would like to name a few other examples of companies who consider long range plans to be essential to their success: Costco, Sees Candies, and Patagonia. What do they have in common? They value customer relationships, loyalty, and, perhaps most importantly of all, don’t run their companies according to what Wall Street demands. I’m sure there are many others; they just don’t stand out because they’re not squandering billions of taxpayer dollars.
Thanks again for the thoughtful writing.
Great comment, Kristina. 🙂
So you’re saying that black widow CEOs is specifically an American thing? That’s fascinating. I never thought about it that way. Can you elaborate?
I think it’s peculiarly American, though not exclusively. And I really believe that it has become entrenched with this system of Boards of Directors and CEOs who cross-pollinate companies. The puppetmasters have been Wall Streeters encouraging “profits” by massive down-sizing and at the same time encouraging the gross executive pay-worker pay disparity that now exists. Of course this was encouraged by Wall Street because it meant that they could justify their own outrageous take home. One’s company is more highly valued with less workers, less employee benefits. Costco is a great example of a well-run company whose stock suffered from what Wall Street believed was over-compensation of its employees. And its CEO is one of the lowest paid of publicly traded companies!
I don’t know why this systemic corporate bloodsucking has not happened in Europe or Japan but the evidence is the truly amazing difference between their executive-worker compensation disparity and ours (Someone more learned than me will have to answer that). The gap jumped from 24 times CEO:worker in 1965 to 431 times in 2004 in the US! Japan has the smallest gap at 10 times, Britain has the highest in Europe at 25 times.(2007) These figures say all it, don’t they? I wouldn’t call them corporate caretakers, that’s the last thing they do. Raiders, rapists, those words might be too kind.
But, the public, especially the shareholders are to blame for letting this happen and become so entrenched. And they’re the only ones who can make it stop because the Boards of Directors, supposedly named for their acumen in guiding companies are really only interested in getting their $150k per year for the 2 times a year they begrudgingly show up for a 1 hour Board meeting. There’s no way they would ever vote down a compensation plan, after all they’d be thrown off the ten Boards they sit on.
Yikes, I ramble. The number really do say it all. Mind-numbing aren’t they?
Ok, I am not as poetic as all ‘o you folk, but don’t forget to look at the plain math part of economics as a part of the bailout
1) the US state franchise laws are just as protective to dealers as the unions are to labor – When the Oldsmobile brand was closed a few years ago, it cost a billion
An GM wants to shut down about 2600 dealers (they have three to four times more car dealers per city than just about anybody else – try a drive in your city – you can probably find one or two every couple of miles) – so with the attendant lawsuits – they will be able to force closure of some dealers
(to me that seems pretty stupid – but hey – I am not an economist)
2) The working rule of thumb is that for every primary automotive job – there are between 6 and 8 other jobs maintained. This includes everything from accountants, day care workers, to the kid at the 7-11 – so if you do that math – with the current recession – throwing another Million or so out of work in a liquidation would be a real extra whack
3) Suppliers – are being financially killed already – that hood on your Camry, Accord, or Malibu – they could all come from the same supplier – so a complete liquidation of GM could fold that supplier – which means that the other cars cannot be built either
And Finally!!!! – YOU the American consumer! The Detroit 3 screwed up – but the consumers (You!) were handing them so much Cash for those big Monster trucks & SUV’s – you can sorta see why!
If Olivier hands me a Buck – fifty & Kris is handing me Three Hundred …… Well – I want the three hundred
And this has NOT changed – Just this **April** – in the midst of this mortgage mess – recession, or what ever you want to call it – look at US car sales numbers (autonews)
Small & midrange car sales – negative 4.9 % (less people want small cars)
Full Size SUV’s – Positive 10.2% – and Full sized Trucks positive 8.3% (in other words – now that gas is less than 4 bucks a gallon in the US – you don’t want small cars anymore)
Over all sales are still way down (obviously) – but my point is that all else being equal – Americans want the big boats
Eliott, I will definitely reply to your comment later. 🙂
Don’t get me wrong – I am not trying to “defend” GM – I know many areas where they have screwed up for years – and as Nassim Taleb writes, you cannot predict the future from the past.
I just wanted to point out that the pure (non altruistic or philosophy oriented) economic facts that you know were being looked at by the financial types.
Olivier, this is truly a quality piece. You need a book deal.