As GM Braces for Disruptive Innovation, How Should You?

According to the Washington Post’s Tim Higgins, “Akerson has assigned a small team to study billionaire industrialist Elon Musk’s upstart electric-car maker and how it might threaten the 104-year-old automaker’s business, said Steve Girsky, GM vice chairman. ‘He thinks Tesla could be a big disrupter if we’re not careful,’ Girsky said. ‘History is littered with big companies that ignored innovation that was coming their way.’

“The approach is part of Akerson’s effort to change GM’s culture as he tries to push the automaker to move beyond its 2009 bankruptcy reorganization and make it the most profitable car company in the world. He has redirected research and development spending, focusing efforts on commercial applications, quickening implementation and investing money in startup companies that are developing cutting-edge technology.”

Such investment is worth applauding, but one wonders whether the innovation muscle within the organization hasn’t atrophied too far. In an interview, recalled by former GM vice Chairman Bob Lutz in his book, “Icons and Idiots,” when then GM CEO Rick Waggoner was asked why GM had so many finance people in top positions, and no “product guy,” Rick carefully explained that this “product guy thing” was vastly overrated; if you had good designers, good engineers, and good manufacturing people, they would ensure product success.

Lutz recalls thinking “…and symphony orchestras don’t need conductors, and professional sports teams can do without coaches. It just doesn’t work.”

Akerson faces the age old question. Why is a firm’s biggest enemy more often not the competition like Tesla may be for GM, but one’s own company? The answer according to Vijay Govindarajan, director of global business leadership at Dartmouth’s Tuck School of Business, is: “Organizations are not designed for innovation. Quite the contrary, they are designed for ongoing operations. The stronger the “performance engine” gets, the more difficult innovation becomes.

Antagonizing the performance engine is a really bad idea. When leaders responsible for the performance engine sense danger, they fight. And, because the performance engine is bigger and more firmly established, it almost always wins. “In the process, innovation dies.”

Instead of pretending that the performance engine won’t fight back, suggests Govindarajan, Akerson and others who find themselves in a similar predicament would be advised to build a partnership with the performance engine while establishing an innovation team that is distinct from it.

This is how BMW, for example, developed regenerative brakes for its hybrid vehicles. It’s how Electrolux CEO Hans Straberg chose to build a new capability—apart from the company’s main operation—to develop premium products. It’s also why Timberland created a dedicated team that it called The Invention Factory to create on an entirely different rhythm. Among the Invention Factory’s first endeavors was a breakthrough show for trail runners.

Business organizations are not built for innovation; they are built for efficiency, observes Govindarajan. “While most companies have plenty of creativity and plenty of technology, they lack the managerial skills to convert ideas into reality.” Tesla may provide any number of prods to GM, but it will be up to them to execute.

Read: https://www.washingtonpost.com/business/ceo-wants-gm-to-stay-ahead-of-tesla/2013/07/19/9f98a646-f006-11e2-9008-61e94a7ea20d_story.html

Read: https://www.tuck.dartmouth.edu/people/vg/