Tom Friedman is one of my favorite writers. It is not just his insights into global phenomena, but his wit that I enjoy. He recently noted that it was unbelievable that the automakers needs billions of dollars to “retool for innovation.” Clearly, GM et al. forgot that business is the business of innovation. If we look back at the performance of the American auto industry over the past 10 years, I can only think that managers in Detroit were all marketing majors, and perhaps they never got into advanced study of innovation. Over and over it seemed that companies spent millions to market small differences between brands and revive dying brands, spending money to split the pie without providing value. Why would I ever care if I had a Hemi vs. another extremely inefficient oversize motor. Did someone read a case on Intel and think it made sense to do the same thing? My grandmother had a Buick. Just because Tiger is being paid to drive a Buick do I buy it? No. Just because Tiger is being paid to drive with a Nike do I buy it? Well, maybe. I can’t believe the number 1 golfer in the world would use an inferior product to play golf but why wouldn’t he drive an inferior car. The trouble with the US auto industry is that they actually have come a long way recently in terms of reliability, but it is very difficult to change consumer perceptions.
So here is my plan for the US auto industry. GM should make 7 cars: a truck, a minivan, an SUV, a sports car, a sedan, an economy car, and a luxury car. They should deck these cars out with everything they can and provide customers greater value because of production savings. A built in computer integrated with maintenance, entertainment, etc. OnStar, on board, all the time. This is actually just what Steve Jobs did when coming back to find that Apple was making dozens on models, with no clear differences. They should brand all these cars with whatever their best brand is. Saab? Cadillac? Something new. Doesn’t matter. Only some type of radical move like this is likely to change direction. Once they have reinvented themselves they can then figure out the automotive equivalent of the iPod. Electric car?
So this raises questions of how diverse a company should be in its product line and industries. Ross Perot slammed the GM board in the 80’s for focusing on the satellite business when they couldn’t even make a reliable car. Disney’s animation department was considered to be so terrible around the same time that the company considered killing it. In contrast, GE has done a relatively good job at managing growth in a wide range of industries. What is the difference? When should a company expand outside of its core industry? Comments?
Posted by Jason 