When General Motors (GM) reached its centennial last year, there was more to mourn than celebrate. Its decline is much more than the decline of a corporation; it may be the decline of a business model.
Last weekend, the US government forced changes at GM, following its $13.4 billion bailout last December. Now, with its stock falling 97% within a decade, the once-iconic company admits that bankruptcy may be likely by June. This is a far cry from the 1950s when it was often quipped that what was good for GM was good for the US.
Across the US and the world, GM pioneered the running of a multidivisional firm, management lessons that quickly caught on. Arguably, the two most influential management books of all time are legendary GM CEO Alfred Sloan’s My Years at General Motors and Peter Drucker’s The Concept of the Corporation, a study based on GM. So, does GM’s fall prompt revision of the old management creeds?
GM’s fall indicates a larger economic shift. Its problems—intractable unions and crippling regulations—afflict the entire US auto industry. An uncompetitive US has driven manufacturing to emerging economies but has, in turn, helped find a comparative advantage in technology and other services. The corporate golden boys aren’t GM or Ford any longer, but Apple and Google. What is bad for GM now may just be good for the US.
Drucker himself wondered in 1983 if GM’s model by then was defunct. Unlike globalized firms, it remained a “one-product, one-country business”. Its “business in which there are managers and workers but relatively few professionals and knowledge workers” was an anachronism. In contrast, Apple and Google rely on these knowledge workers to operate with fewer top-down hierarchies. GM’s model then should make way for others.
But unlike GM, which privileged processes, the new-age tech companies are largely driven by single egos. The GM model’s value, Drucker noted, was its “federal decentralization”. This is a value we hope other firms have internalized. GM’s loss may not be mourned, but the loss of the GM model surely will be. What is bad for GM will then be bad for the world.
Is there a lesson in GM’s decline? Tell us at firstname.lastname@example.org