Culture eats strategy for lunch
November 7, 2014 Leave a comment
In the 1960s General Motors was at the top of its game. Fifty years later GM struggles to remain a viable entity. During the years in between GM faced multiple challenges which could have changed its course but failed to. During the 1970s the US automotive industry was shaken by changes in the ecosystem. The gas crisis fostered by OPEC placed Asian manufacturers in a highly competitive position. This however, was not the real emerging threat that emerged in the 80s and 90s. What ultimately toppled GM allowing Toyota and now VW to surpass them as the largest automotive producer; was how the engineering design and manufacturing culture changed.
During that time GM looked at mass production techniques which were designed to produce efficiency through economic order units (tools for large and long production runs). They did not see Toyota’s drive for rapid changes and quality drive as a threat. When it became apparent they tried to copy the tools their competitors were employing. While they received a bump in productivity and quality, it was nowhere near to the levels its competitors enjoyed.
What GM and other US manufacturers failed to understand was the cultural changes were significant and attributed as much or more to the improvements than the tools. Other Asian companies that didn’t have all the latest technology were achieving close to similar results due to culture transformation projects these companies copied with assistance from larger corporations such as Toyota.
GM’s executives took on the strategy to adopt the current engineering practices without have the culture change to match these. Additionally, they attempted to target parity with the model they understood which was two years old: GM took between seven and nine years to field a new model (version) of products while Toyota took only five that benchmarked year. However, Toyota’s goal was to reduce product development cycle time a year each cycle as well as get to mass production of units of one. While not there yet, Toyota’s and Volkswagen’s production facilities are capable of producing multiple model types from the same production line, at the same time, using much of the same components but still being able to differentiate effectively –which GM had failed at with their common component program.
GM’s first level strategy failures are easy to point out. What is more critical was leadership’s failure to realize targeting the competition’s current benchmark was a recipe for losing dominance. Targeting parity with current competition assumes that the competition will stay stagnant and not improve (i.e., wait for you to catch up). This is unrealistic as GM has found out. Once a lead has been established competitors always push to increase that competitive advantage.
In the software industry, we’re fast followers of engineering approaches of other engineering disciplines (reference Discipline Lifecycle of Engineering Disciplines). Right down to making the same mistakes.