How Should GM Innovate? Management first, products second

As we all know, General Motors is in trouble. Along with other industry leaders, GM has been widely castigated for its leadership failures, and above all its failure to innovate. As a result, CEO Rick Waggoner has been busy pleading Congress for bailout money.

Yet despite all the public castigations of failed banks and failing automakers, few of us have suggested solutions to their innovation problems. And when ideas have surfaced, they have often been misguided -- focusing too singly on what I think of as product innovations (e.g., building next-gen hybrids like the Toyota Prius; selling ultra-compact, ultra-affordable cars like the Tata Nano; etc.). These are certainly good next-gen product ideas, and I hope that GM is considering them. But in reality, I'd bet that GM has already considered these ideas -- and either dismissed them or failed to implement them successfully. My wager, therefore, is that GM doesn't fail at innovation; it fails at innovation management. This distinction is critical. In fact, it underscores the core themes of my innovation management research at Forrester.

GM: Hapless Failure, Or Symbol Of Our Times?

Consider this: In April 2008, General Motors ranked as the world's ninth-largest public company by revenue, according to the Forbes Global 2000 list. GM's revenues outpaced every company in the world except for eight, and every car company in the world save Toyota. Yet, GM finished at #573 in the overall rankings. And for the same year, GM lost a net of nearly $40 billion -- ranking dead last among the world's public companies. From this cursory view, it would appear that GM's products are selling just fine -- second-place in its industry, and 9th across all industries -- and instead that GM's troubles run deeper than just products. Although certainly product innovation could improve GM's profitability -- as it would any company -- I'm left wondering whether something more systemic is at work.

Certainly, many companies have succeeded by focusing strongly on revolutionary products (reflexively, Apple comes to mind). And many companies have succeeded where GM has failed (Toyota for instance). Yet these alone are incomplete as mantras to explain the world. Apple is not the world's leading consumer device maker by market share; that mantle belongs to Nokia. And even Toyota -- the much-hallowed auto-industry innovator -- has recently run into major profitability struggles. Again, something more systemic is at work.

Innovation MANAGEMENT To The Rescue

At Forrester, we've spent years studying the patterns of technology and business innovation. I myself have grown my career under the patient tutelage of colleague Navi Radjou. And Navi himself had sought guidance from Forresterites such as Bobby Cameron before launching his influential Innovation Networks thought leadership more than four years ago. And I'm not alone in the new crop of innovation-minded analysts at Forrester: colleagues such as Cindy Commander and Gil Yehuda also have research plans with a strong focus on innovation.

For a long time, Forrester's role in covering business innovation was simmering in the background; after all, our core expertise has always been the technology that powers business -- not the business itself. But today, any lingering boundaries between IT and the business are vanishing. Information technology is now just as embedded in business as traditional functions such as Finance or Sales. For different reasons, the importance of innovation -- especially business innovation -- has increased dramatically among today's managers and executives. As companies in GM's position (of which there are many) can testify, innovation has never been so urgently mission-critical. Indeed, bloggers and major media outlets alike have suggested that innovation may be pivotal in determining future economic prosperity.

As recently as a few generations ago, collaborative brainstorming required a multi-day carriage ride -- from each participant. Even looking back a single generation, our innovation infrastructure was restricted to airplanes, conference calls, and spiral-bound notebooks. Today, it's not just that the game has changed -- it's that suddenly the game exists at all. For the first time, continuously coordinated innovation is possible systemically across an organization -- both synchronously and asynchronously; openly and anonymously; locally and globally. Companies now innovate with their customers (crowdsourcing); with partners (expert-sourcing); and with themselves (employee-sourcing). Innovations can create new products; new markets; new business models; or even new industries. They can also save energy costs and slash operational overhead. They can even improve customer trust and increase workplace morale. All of these things have been considered as "innovation."

The sheer number of "Innovations" is almost stupefying -- to the point where the very term "innovation" risks irrelevance. If innovation comes to mean everything, then actually it means nothing.

This is why the management of innovation is now so important. And this holds not just for a straw-man example such as GM -- but also for countless other enterprises around the world. Innovating new products and features is important. So are myriad other types of innovation -- from biz-process innovations to creative marketing strategies. Regardless, they are ALL more powerful if done *together* in an integrated, coordinated fashion. The future of innovation exists as a core enterprise discipline -- not a series of isolated, ad-hoc initiatives operating as so many frenetic beasts without heads. Neither, however, will innovation be an isolated group working on its own -- but rather an integrated management focus that pervades the organization.

The systemic cause behind all of this? Technology. Innovation has always been important -- but never before has it been so possible. Never before have we had a technology infrastructure at our disposal, capable of supporting innovation so scalably and systematically. The arrival of new and powerful business technologies -- Web 2.0; Web Services; social analytics; semantic search; etc. -- now gives us a truly systemic innovation infrastructure. However, to make use of it, we also need a systemic approach to innovation management. Through my work at Forrester, I look forward to exploring this topic in 2009 and beyond.

Comments

re: How Should GM Innovate? Management first, products second

Hi, Chris!Technology has indeed enabled new modes and processes of innovation, but that is only half the story. Technology doesn't drive innovation, it merely enables it. You rightly observed that the management of innovation is often deficient. It need not be so. The discipline of innovation is now mature enough to address both the technological and human dimensions of creating new business solutions.Our solution to the tension between under- and over-management of the work of innovation is a generic process where the innovators can choose which specific tools and methods to use at each stage of the process. This preserves enthusiasm and creativity while imposing enough discipline to focus on the efficient achievement of profitable results.At the organizational level, we have found that one size does not fit all. Innovation can be assigned anywhere in a company. Technology supports distributed, collaborative and open innovation in ways that were impossible just a few years ago.In both tasks, organizational design and the management of innovation work, the human aspect is crucial to success. I expect that your research will bear this out, and I look forward to reading more.

re: How Should GM Innovate? Management first, products second

Chris,Great points. I agree that there is often not a lack of ideas, but rather an inability by orgnaizations to turn those ideas into results. In fact, we see that much of the problem is that comapnies actually have too many innovative ideas rather than too few, leading to dilution of resources, long time to market, and an inability to bring the biggest ideas to market.Thanks,Mike

re: How Should GM Innovate? Management first, products second

Chris,Nice post for entering the new year with something deep…but REAL.Following your line of though I think you should list another important issue along with Technology: VALUES. You can have a very powerful innovation infrastructure but if the ones who are in charge of the different initiatives going on have different values, then you get what the Physics now very well: different forces that sum up null although individually they are all there and everyone can feel them. You spoke about Apple. Apple’s ups and downs are clearly related to the presence of Steve Jobs in the company. How can we explain that? Is it that Steve Jobs himself is the only one that counts? All the others suddenly change from innovators to conservative and vice-versa?When you explore what’s happening with GM you can see that the CEO has a lot of trouble in assuming what the problem is except than financial crisis. And even after, he only admits that the core problem is related to 3 simple and very contained mistakes…So I think one can say that the main problem of innovation management is that you need to have true Innovators to manage that infrastructure. To be role models, not to pay lip service to it. To set correct values AND act on them.I know a lot of companies that invested huge amounts of money trying to “build a culture for innovation”. Do you know how many of them measured the basic intrinsic creative level of their employees? None. They measure everything except that small detail…So when the project ended it was fun. Nothing else (innovation related of course)…Let's see how long does it take until the congress understand that "the ones that created the problem are not the ones that are going to solve it"...Paulo JaneiroPS: have a nice flute of Champaign because 2009 is going to be good year for people with a vision.

re: How Should GM Innovate? Management first, products second

Yes, there is a systemic problem at GM:1- GM is in total denial that they have a serious quality problem.2- They have taken profits from vehicles and misdirected them.First the quality problem - no one will continue to buy automobiles that consume over a gallon of oil between 3500 mile oil changes. Mine did, and the engine was the GM flagship: Northstar. GM refused to correct it, under warranty I might add. I was shown a tech bulletin from GM headquarters that said this rate of oil consumption is considered normal for the Northstar engine. I also have connections with assembly line workers that are told how "tight" or how "loose" to build engines, which haved a direct relation to quality.As long as GM controls the fine print in its definition of quality - no one should buy their product.Now for proceeds from sales - mis directed - GM CEO was whining at congress about the need for better battery technology - "we are behind the Japaneese on this". Gee - I wonder why. The Chevy Volt is a joke, and industry experts question is viability (too complex) and no one would buy a car with only a 40 mile range. Meanwhile BMW has introduced a 160 mile range in its E-mini.GM has a huge systemic problem on many levels.

re: How Should GM Innovate? Management first, products second

Interesting article and very true! I think there is a level here where GM fails to recognize true innovation within its ranks. Dr. Jacqueline Byrd, author of The Innovation Equation wrote an interesting OpEd on this accessible through: http://zenstorming.wordpress.com/2008/12/30/innovation-ideas-santa-rudolph/

re: How Should GM Innovate? Management first, products second

GM has innovation, and it has an innovation process, and it has had a reasonable number of small successes over the years. Much less than Toyota or other firms in automotive. And much less than a 'top' innovator. From their own perspective, they have always done alright, from an outsiders perspective they have been awful.And yet, the whole company - and the rest of the US auto industry - is largely in the same position. The entire industry cannot innovate and be successful until the entire automotive ecosystem, from dealerships to tier 1 supplier relations is redrawn. They have been creeping towards the brick wall for decades, and now that it has struck, it is the US tax payer (or more specifically, their kids and grand kids) who will be paying for it.One observation (and by the way, I used to work for GM, back in the day). Almost everyone in management at GM has a relative who used to be in the UAW. And the cost of providing for the generosity of the 1950s through 1980s is what is killing the firm. I remember reading a story from last year that GM's finances were expected to improve 'naturally' in 2010 - 2011... as their retirees were likely to start dying off.As to how it gets fixed? In my view, it 'doesn't'. This thing hits the wall, keeps bumping against it for a year or so, and then the global economy goes to work on whatever duct-tape solution they came up with.More fun than a bag full of kittens... wearing party hats :)Mark TurrellCEO, Imaginatik

re: How Should GM Innovate? Management first, products second

There is a delicate fine line involved as larger companies seek a systematic solution to sustaining innovation without harming the "skunk works spirit" that gives innovation its power. We were disappointed recently when a large firm we know employed a consultant to develop what a leader called their "mature process for innovation" (is innovation ever "mature"?) and the product was an 80-page traditional process document that numbed minds and glazed eyes when it was presented to the front-line innovators in product development. It made us recall how the original power of the Deming-based quality movement became sterile as many firms established their "quality bureaucracies" and forgot that the original power came from the enthusiasm of the front-liners who generated the ideas. The same sterilization has occurred in other firms as they tried to adopt the Army's After Action Review, but failed to understand the source of its strength. Walking this fine line will be a critical task for leaders charged with sustaining innovation in any companies larger than the very smallest.

re: How Should GM Innovate? Management first, products second

Jim,Interesting thought...I agree. Any mindset and/or regimented process falls into obsolescence once its rallying cry (i.e., "the need for more ______ in mgmt") disappears. At that point, it either persists as a philosophy only and/or as a bankrupt and outdated process suited for a different time period and context. In either case, the cycle of business innovation must start afresh.Thus, the question I'm especially excited about probing is the "how." There is now consensus that "something new" will appear to replace and/or update our existing processes and models...but this consensus alone is only useful as a conversation-starter. Now, it's time to start talking about real-world stuff. Now that we're assembled, what kinds of processes do we need to build?Some have suggested that large organizations will disappear; my sense is that this view is too extreme (although it holds an important insight). Others hold that we merely need to update current management models -- which I believe is akin to "reinventing the wheel while still stuck in the mud." It's not new enough to adequately address the imperatives facing today's organizations -- problems borne of a digital-world context that did not exist when our current frameworks and processes were designed.Already, for instance, forward-looking organizations are mixing hierarchy and crosstalk much more fluidly than was once the norm. Although this trend is interesting, it's still unclear how it will condense into a coherent industrial system that powers stable, mature organizations in the Digital Age. This is still to be figured out. And that's why it's an exciting topic to be researching (for me) or working on (for many others).Cheers,Chris