Detroit's Decline and Fall
In March 2008, British Airways discontinued its decades-old daily service between London Heathrow and Detroit. Not exactly world-shattering news, you might think. But BA's decision was quite significant. They made it because passenger numbers had dwindled so pathetically low that the flights were no longer profitable. It's just one of a whole kaleidoscope of symptoms that signaled the Motor City's dismal decline. Then, Detroit's "Big Three" automakers were forced to beg for billions in bailout money to stave off bankruptcy (although Ford opted out). Yet, as far as I can see, not one of them seems to have a credible plan for long-term viability. All of which begs the burning question: How could such powerful car giants ever get in this sorry state?Over twenty years ago, auto-industry analyst Maryann Keller wrote a book called "Rude Awakening: The Rise, Fall, and Struggle for Recovery of General Motors". It recounts hair-raising stories of GM's arrogant excesses. One story involved a sales VP attending a regional sales meeting who insisted that his hotel room have a refrigerator filled with soft drinks. Since the hotel couldn't get the fridge up the stairs, GM's local people persuaded the hotel to take out the room's window and part of the wall, then use a crane to insert the fridge through the hole! Another story involved a junior GM staffer who was assigned to stand for ages outside a hotel in a snowstorm, just so he could be there to open the door for an assistant general sales manager who was flying in from Central Office. GM even bought one of the hotel elevators and blocked it off so that this manager would have his own private elevator to use. And, as if that wasn't enough, the kitchen staff was instructed to test his glass of morning orange juice with a thermometer because Mr. Important wanted it served at a particular temperature!
This was the kind of insane stuff that continued to go on while the Japanese were stealing percentage point after percentage point of GM's U.S. market share. Fast forward to today, and we found that the five best-selling automobiles in North America in 2008 were (in this order): the Toyota Camry, the Honda Accord, the Toyota Corolla, the Honda Civic, and the Nissan Altima. And, bailout or no bailout, the prognosis for Detroit was not looking good.
It seems the Big Three have taken an excessive, heavy-handed approach to almost everything they have touched over the last few decades. Including innovation. While Toyota, for example, took a careful, staged approach to building alternative powertrains (and scored big with its hybrid technology), GM famously blew billions of dollars on its massive but so far failed forays into electric and hydrogen-powered vehicles. In the late 1980s, Ford's top brass tried to push the company's engineers to be more innovative by setting up a high level "Committee for Creativity". Yet rather than making the cultural environment more conducive to innovation, this initiative actually had the reverse effect. When engineers were brought in to report to the committee, they found that they were being judged, criticized, and ordered to work on their boss's pet projects. It became just another example of the massive hand of authority imposing itself and intimidating people. Instead of fostering or facilitating creativity, the committee was trying to command and control it. No wonder the structure was eventually scrapped.
In 1994, I had a conversation with strategy guru Gary Hamel about the state of innovation in Motor City. His gripe was that 'there has not been one fundamental strategic innovation in the automobile industry in the last 40 to 50 years that has come out of Detroit'. A couple of years later, I related this to a former top manager at one of the Big Three. At first, his response seemed to contradict Hamel's view. He said, 'Rowan, some of the most important and innovative ideas in the auto industry came out of Detroit'. But then, with a look of deep frustration and despair, he added, 'Very few of them were implemented'. The reason? People couldn't get the resources, the investment and the support they needed to make their ideas happen. As The New York Times put it last year, 'GM's biggest failing, reflected in a clear pattern over recent decades, has been its inability to strike a balance between those inside the company who pushed for innovation ahead of the curve, and the finance executives who worried more about returns on investment.'
Of course, uncontrollable external events in the U.S. economy have rapidly worsened Detroit's woes over the past couple of years. But, let's be honest, the Big Three have been hemorrhaging billions of dollars for years. In 2006 and 2007 alone, Chrysler lost over $3 billion, Ford lost over $15 billion, and GM lost over $40 billion! Nobody can blame those numbers on the U.S. economy, because it was growing briskly for six straight years from 2001 through 2007, as were the sales figures of Detroit's Japanese and German competitors. Instead, the accusing finger is increasingly being pointed at the failure - particularly of GM - to successfully innovate; to continually come up with and commercialize new ideas (and new vehicles) that create meaningful value for customers.
GM candidly admitted this for the first time in a one-page advertisement that ran a year ago in Automotive News. In this open letter, entitled "GM's Commitment to the American People", the company frankly acknowledged that it had "disappointed" and sometimes even "betrayed" U.S. consumers with its lackluster products. Instead of innovating in response to shifts in the marketplace (come on, guys, the writing has been on the wall since the 1973 oil crisis, for crying out loud!), GM has been impossibly slow at adapting its cars to changing customer needs.
If, then, it's essentially an ineptitude at innovation that has driven Detroit's once-great industry leaders down the toilet, I would argue that companies of all shapes and sizes should sit up, take note and, more importantly, take action to make innovation happen inside their own organizations.
Rowan Gibson is widely recognized as one of the world's leading experts on enterprise innovation. He is co-author of the bestseller "Innovation to the Core" and a much in-demand public speaker around the globe. On Twitter he is @RowanGibson.Labels: Automobile Industry, Chrysler, Creativity, culture, Ford, GM, Innovation, Recession, Rowan Gibson


Not a day goes by without more news about Detroit's beleaguered automakers. While each new development is notable in and of itself, I find it more telling to take a few steps back and look at the big picture.
Steve McKee is a BusinessWeek.com columnist, marketing consultant, and author of "When Growth Stalls: How it Happens, Why You're Stuck, and What To Do About It." Learn more about him at
The conventional wisdom about innovation is that companies should be less risk-averse. If this means they should try to increase their share of courageous employees who are willing to stand up and fight for ideas, then I would agree. However, when we move from the individual level to the corporate level, the challenge becomes quite different. After all, do we really think companies should be taking more risks? If anything, many firms have been far too willing to make big, risky bets on ventures that ended up losing billions of dollars - GM's ill-fated EV1 project and Motorola's Iridium phone are two examples that come to mind. I would argue, therefore, that the real challenge for organizations is not how to take more risks but how to derisk bold aspirations.
Last week I had a fantastic meeting with the CEO of a mid-sized energy company. We had a number of fascinating conversations ranging from Personality Poker, Open Innovation, and alternative energy.
Of course there are many more possible solutions. But the solution is not the point of this article.
Ever since innovation became the buzzword du Jour, a lot of people seem to have lost their ability to tell smart ideas from stupid ones. Case in point: the financial "innovations" (read: stunningly stupid loan products) that kicked off the trillion-dollar economic meltdown mess we're currently in. The simplistic notion that "new equals good" has often been a recipe for grand-scale disaster, just as it was in the dotcom debacle at the turn of the millennium. And when the doo-doo inevitably hits the fan, it's all too easy to level the blame at innovation per se rather than admit to being a bonehead. Here's why many ideas that are labeled "innovations" are just plain stupidity.
It's precisely big boondoggles like this one that give innovation a bad name. In fact, columnist Paul Krugman wrote in the New York Times that "financial innovation" is a phase that "should, from now on, strike fear into investors' hearts." Yet should the financial services industry - or any industry for that matter - now decide to "throw the baby out with the bathwater" when it comes to innovation?
Take Iridium, Motorola's failed satellite telephone venture, which was built on a fundamentally flawed assumption about the size of the target market. Basically, Motorola totally underestimated the speed at which cellular coverage would spread. Their premise was that there would be huge regional gaps in the global network - parts of the world that would have no mobile phone coverage for a long time to come. That would have made Iridium the perfect answer. It turned out quite quickly that those regions would be very few and far between (you would practically have to be an Arctic explorer to need an Iridium phone!), so the target market soon shrank to insignificance. This is something Motorola should have known better.
Business history is full of such examples: from Coca-cola's infamous "New Coke", to GM's all-electric EV-1 project (which cost a billion dollars and sold only 700 vehicles), to all those other empty dot-com business models in the late 1990s - like Pets.com - that quickly disappeared. The lesson from all these disasters is to look before you leap. A company should first reduce the uncertainty surrounding critical project assumptions before committing irreversible and non-recoverable resources to an idea. The greater the uncertainty surrounding these assumptions, the greater the risk associated with any new opportunity. Therefore, the focus of an innovation project should initially be on learning rather than earning. It should be on launching experiments to test whether a business model makes sense or not, or whether a new technology will work or not, or whether customers would value the new service, or what they would be willing to pay for it, or which product configuration would work best, or which distribution channels would be most effective, and so on.
Snow in Seattle today. It will be interesting to see how many of my current clients make it to their office today. I for one am taking the bus and despite it being a bendy bus, it looks like it will manage to make it downtown. It had to go out and around a jack-knifed bus to make it up and over the bridge out of my neighborhood, but it made it.







