Originally Posted by Stefan Mullins

Our group took a unique approach to this project. Instead of researching a company that may be in need of a structural change, our group evaluated a corporate giant already going through a developmental transformation. General Motors is currently being forced by bankruptcy to modify how their executives operate the business. We evaluated what the issues at GM are, reviewed what the executives are already doing to fix them and gave our own organizational development position to how we think problems should be dealt with.
This situation, however, must not just be viewed as just a one dimensional issue. To gain a better understanding of why GM is in the gloomy financial state it has fallen into, you must look back to the relevant history of the marketing strategy it used in the 90s.

Relevant History to GM’s Current Situation

During the early 90s GM was facing massive debt and depleted funds do to the top management’s spending decisions during the 80s. GMs board of directors scrambling to make the company profitable again brought in a new CEO whose main focus was not on the product, but on getting cash flowing again. This gentleman brought in a group of managers from outside the automotive industry who did not understand the complexities that go into designing cars. These men could have developed and sold toaster ovens the same way they did cars.

With a focus more on profits, not on quality and innovation, by the late 90s market share in the over all car segment had fallen from 33% to 28%. Customers tend to notice when the competition has a higher quality rating and a more pioneering design. However to make things worse the top management had become complacent to the current line up of GM’s cars, due to the overwhelming success in SUV sales. GM began stretching out the life spans of their car line-ups as well, as they dumped more cash into SUVs.
However, in 2002 due to other circumstances, a new CEO again takes the reins of GM. He is a much more car-oriented business man and replaces much of the top management with people who think like him. GM, already dependant on SUV sales, finally begins to use their profits to finance and replace the neglected car lines.

Conversely, to keep profit numbers looking good, GM does this at a very slow pace. This comes back to haunt them when SUV sales collapse in 2004. GM begins to hemorrhage millions of dollars since the competitive cars they had in development are still years from hitting the streets and the SUV profits are not coming in like they used to. GM counted on these new cars to make up the difference, but now the money funding their development had to be reallocated just to keep the company afloat.

GM is currently scrambling to fund these new cars and still keep their once successful SUV lines from going the same route as their car lines. They were able to release a new line of SUVs just this year and their new car lines should be out in 2009. Gm is doing all this, even at the expense of the disastrous losses you can see on Wall Street.

The Brand Management Problem

But what was the main driving force to overlook the quality and innovation on the car lines at GM? When the first new management took control in the early 90s they brought with them a marketing philosophy called Brand Management. Brand Management -let’s call it BM for short- is a marketing technique to a specific product line that seeks to increase the “perceived value” to the customer; thereby increasing the equity in the overall company. This concept may work if you’re trying to sell soap, but there is too much differentiation in the automotive market. GM executives at the time wanted to sell each division, such as Chevrolet as its own perceived brand. This was the reason car lines such as the Chevy Cavalier or Camaro were hung-out to dry up over the years. The focus at the time was to make each division, such as Chevy, as a brand, seem like a good buy, not necessarily each of the division’s products. Chevy trucks have sold well over the years, because they are well made trucks not because they are a Chevy branded vehicle.

Cars sell because they are equipped with cutting edge technology and are built to the highest standards currently available. Yet the BM theory was implemented for almost 10 years at GM completely ignoring this fact. It is almost as if upper management at GM rewarded managers who assimilated into the corporate mind-thought instead of being innovative. But as I stated above, with the change of the decade, came a change in executive management with a new philosophy. The new management in 2002 brought more central control to the company and away from the divisions. While you have to have brand identity between divisions the new management knew each division could not equal its own brand. The cars themselves are where the focus should be.

This is evident in the current line up of Cadillac. Cadillac as a division has a mission to build world class luxury cars; but now the focus is building up each model up to that standard. Ask the consumer what they think of the new Escalade SUV or CTS luxury sedan. These cars are as competitive as anything else in their segment. But the problem still stands. GM is like a huge ship. While the captains of this ship know where they need to go to succeed, it sometimes takes large ships a long time to turn around in the right direction.

Our Take on the Issue

We believe the most recent GM management implemented the right strategic change in their marketing philosophy to get the organization headed back to being profitable. Overall the new management is doing the right thing currently to save the company. However their risk propensity was too low in their first few years at the helm. We believe it took the new management too long to implement their changes. It’s obvious by the new CEOs decision to clean out the top management and replace them with more car-oriented people that he had performed a strategic analysis of GM issues. He knew a change was needed and that the current strategy was not going to save market share for the company. It is unclear if the new management had a clear plan on how to execute a strategy past BM.

They did reallocate development funds to the famished car-lines but did it too slowly. Basically they knew they had a problem, but did not exactly have an answer implemented immediately. At the same time with SUV sales keeping the company moving and no one felt rushed to implement a new plan.
If GM would have had a structure set up to streamline new products out faster they wouldn’t be in the direr situation they are in now. We believe if the new management would have immediately sat down and not only allocated funds to, but discussed how to get a fresh line of cars out faster, this paper probably wouldn’t even be written.

Finally GM needs a solid mission or vision statement that is relevant to today’s business. This back to the wall solving issues pattern can’t go on if the company wants to stay in business. A motivating statement that gives the company true direction is in need in our opinion.

Originally Posted by Stefan Mullins

Organizational Development Applications

When looking at this situation from an OD perspective the main focus is on competitive strategies and integrated strategic change. Competitive strategies are concerned with choices organizations can make to improve their performance. Brand Management, while unsuccessful at GM, is actually a competitive marketing strategy. In our case Strategic change was the driving force of the competitive strategy with the new management that came into power in 2002. A strategic change is a response that better aligns the organization with pressing environmental demands.

Competitive Strategies have three areas that define the activities that establish a competitive advantage over an organization’s rivals. The first is uniqueness. These are the exclusive resources and process an organization has individually. GM had the competitive advantage in SUV sales for almost 10 years however did not use this benefit to their greatest extent until it was too late. This uniqueness could have been their greatest asset, but it ended up being a mind thought of complacency.

The next area of Competitive Strategies is value. Now this can be looked at two ways in our case; perceived value and actual value. In the automotive world both come into play. Both the perceived value and actual value for GM made cars in the 90s was not too good. Though in the early 2000s the actual value was raised but the public’s perceived value of the cars was still low. Only now has the actual value of GM made cars reached and in some cases beaten its competitors. But much like a girl who has lost her reputation, it may take some years for the perceived value to match that of their actual value. Depending on how you look at it, this part of competitive strategy has and will continue to both hurt and help GM’s products. Yet as long as the focus continues to be on their products value should increase both in how they are perceived and of course in actual professional ratings.

The final aspect of Competitive Strategies is the difficulty to imitate them. This is a combination of value and uniqueness. There are many aspects to this part of Competitive Strategies, but the bottom line is that once the organization has a unique value to their operations it is simple hard to replicate this by another company. This is also especially hard for competitors in the same industry. For example Toyota, a competitor of GM, focused on the quality of their car lines from the mid 80s all the way up to today. Toyota snuck up on the complacent GM, and the public could not ignore their quality. Even though recent professional studies made by J.D. Powers on actual quality between GM and Toyota is roughly equal, there is still a unique perceived quality held by the public for Toyota.

In our case specifically, dealing with GM moving from a focal point of Brand Management to a focus on product innovation and quality, the main OD intervention was the integrated strategic change. Integrated strategic change is an OD process that drives competitive strategies through a process of interventions that deliberately lead to an either gradual or radical systematic realignment between a firm’s business environment and strategic orientation. These can result most of the time in more effective performance if the analysis of the organizations problems is accurate. However we know this is not always true, as shown with automotive brand management. There are 4 application stages or phases to this process.

The first is to perform a strategic analysis of the organizations current issues. What needs to be changed? How ready is the organization for a change? What is the current strategy and how does this relate to the future of the organization’s business? These questions must be answer to understand what must be done.

Next, strategic decisions need to be made about what direction the company should go in. Once the existing strategy is understood, a new one must be designed. This could include a multitude of options. You have to consider the organizations environment, strategic orientation and the performance level. Basically where should the company direct its resources to become more successful?

Once the brainstorming phase has been reviewed you will move into a specific designing phase of the new strategic change plan. How will the company move into their new agenda of business? This stage will describe the specific activities to complete the change of direction.

The final step of a integrated strategic change is the actual implementation of the new plan. This draws heavily on the knowledge of motivation, group dynamics and the change process that was designed. You will run into issues like alignment of plans to people, adaptability, teamwork, and basic learning processes.

The Outcome

Over all this process must be flexible but directed at the same time. GM lacked true direction even when new management took control in 2002. Only when they were force by the possibility of bankruptcy did they move to fully implement new direction.

We don’t believe that there should be an external focus of OD consultants used at GM. It is obvious from the actions and public statements of the top management that GM is head in the right direction. While there is no clear OD application other than downsizing, GM needs to start another Strategic change focused on restructuring the organization in order to develop new products faster.

Where does GM go from here? We believe they have to continue to push hard on bringing new products of high quality to the market faster. The automotive industry is a ruthless, cut throat business where only those who are at the top of the competitive game will survive. GM was lucky enough to have an edge financially with SUVs sales to keep them afloat for so long. Strategic change, even though implemented too slowly, was the Competitive Strategy that will bring GM back to the great company it was once known as years ago.