Detroit disrupted

I posted over at www.ondisruption.com about how the Detroit automotive industry was disrupted. It’s disappointing to see the advice of business leaders like Jack Welch and economist Thomas L. Friedman ignored. What Detroit needs is radical change, not the sort of incremental improvements likely from a government bailout.

If a company or an industry can no longer be competitive, for whatever reason, then bankruptcy may be the best choice. Why invest taxpayer money in a business that is no longer working? The auto industry has a strong legacy, but there’s nothing in the constitution that guarantees it’s ongoing operations.

The biggest management challenge illustrated by Detroit’s downfall is that, unlike relatively rapid competitive setbacks (think of Motorola or Palm), gradual, long-term decline is hard to diagnose and easy to deny. It’s like the onset of Alzheimer’s.

Unfortunately, as we enter 2009 it has become too easy for CEOs to blame the economy, Wall Street, or other external forces, when in fact the only thing that is keeping them from success is their own lack of action. If you’re in an industry faced with disruption, you better figure out a radical plan to change your business. Otherwise, be prepared for a long-suffering downward spiral. And don’t expect a bailout will fix things.

Of course, Detroit isn’t the only industry that could be accused of being asleep at the wheel. Newspapers, media, retail, and even portions of the tech industry can fall into the same trap. So consider these management questions:

• If you are a senior manager in an industry that might face a risk of disruption (denial may be a problem), what would be the warning signs you would watch for to signal emergency action is required?
• If you or your management team were presented with the same kind of well-articulated and dire warnings that GM received from its own executives, how would the organization react?

If you take the time to read a memo prepared by Executive Vice President and General Counsel Elmer Johnson, it’s quite clear that people inside of GM knew what to do — they just lacked the gumption to do it. The memo is a fascinating look into how a culture can become complacent and oblivious to changes in the market place. Johnson identifies a wide range of issues at GM including:

• Fragmented responsibility
• Lack of clear accountability in managers
• Bad news not well received
• No focus on bottom-line product profitability
• Feeling of entitlement among executives
• Little “pay for performance”

In the end, GM’s many years of success created a culture that was risk averse and largely self-serving. Not surprisingly, things continued to get worse over time. Had GM reacted to the core issues identified 20 years earlier, perhaps it would have been in a different situation.

So if you’re in IT, consider what role technology can play to improve the operations of your firm. If your organization can recognize what decisions can help make it a disruptor rather than the disrupted, you will be that much better off. Let me know your thoughts on this issue.