As companies grow larger, they become more bureaucratic and insular. As a result, management teams of these firms assume a sense of entitlement that typically distances them from their customers. Eventually, complacency sets in and the risk-averse bureaucracy stifles any bad news.
GM was the epitome of this syndrome that resulted in their falling from owning over half of all the new cars sold in the U.S. in the 1980’s to filing for bankruptcy in 2009. Throughout this era of year-after-year decline in market share, the company developed a reputation for being more cost conscious than customer sensitive. Obviously, unaware of customer desires and requirements, GM continued to manufacture similar cars under five different brand names co-mingling engines and parts from one to another, confusing customers to no end in the process.
As these brands became less-and-less relevant with aging names like Pontiac, Oldsmobile and Buick, GM’s competitors were designing better cars for customers changing requirements. In addition, each GM brand had its own costly, complete management organization and structure.
Other car models were developed during this era that were equally confusing to loyal GM customers like the Cimarron, a small Cadillac, the Saturn and Hummer brands, and even a smattering of acquired foreign brands like SAAB. All of these car models and others not only had short lives under the GM umbrella, but further diluted the company image, perceived value proposition, and financial strength. Not to mention the misguided joint venture with Fiat that cost the company $2 billion.
Also during this 30-year decline in market share, one CEO after another took over, pledging a return to glory for GM totally unaware of what was really happening in the marketplace. Story after story was published in the business press critical of the management of the company, and even a movie was made of Roger Smith’s administration. Obviously, none of this criticism penetrated GM’s bureaucratic shield and apparently even the board of directors turned a blind eye to the news.