The GM Solution: Life Boats, Not Life Support

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Once again, the entrepreneurial challenge will be to reconfigure old and new resources in a fundamentally new way. The "new thing" for autos will initiate a vast migration of assets—people, technologies, intellectual and digital capital, physical plants, cash, customers, relationships, companies—from the old automobile industry to new business models in a new competitive space.

Lifeboats, Not Life Support

First movers in this new territory stand to reap enormous benefits. But search as you might, the last decades yield nothing to suggest that the leadership of GM—or any of Detroit's Big Three—is capable of such a shift. GM ignored the life-threatening hazards of rear-mounted fuel tanks, once famously concluding that the estimated cost of $2.40 per vehicle associated with these liabilities was less expensive than fixing the problem, as I wrote in The Support Economy. They all ignored calls for quality and fuel efficiency. They ignored global warming, the pleas of suppliers, and the entreaties of dealers. They ignored their employees and then paid for their arrogance with unsustainable union contracts whose costs were passed on to customers. Then they ignored their customers, who repaid the favor by shopping elsewhere.

And in 2007, with over a million unsold cars in inventory, Mark LaNeve. GM’s head of North American sales and marketing, protested the need for change. “It’s not like we have some crisis,” he told the Wall Street Journal in its Feb. 9, 2007 edition.

None of this is exactly "rational" behavior, but it tracks with what institutional economists have observed: The more a practice is institutionalized (history, legitimacy, interdependence, codification), the more it is taken for granted, the greater the energy that goes into maintaining it, and the more relentless the resistance to change. In 2006, GM's CEO Rick Wagoner responded to the call for "new blood" in GM's leadership with this screed in Newsweek: "These are sophisticated problems with historical tails that run back 80, 90 years. The chance of someone coming in and understanding our business…is absolutely microscopic."

Even the courtly Peter Drucker, who had studied GM throughout his career, shook his head in bewilderment at GM's inability to change. "I am increasingly coming to ask", he lamented in 1995, "whether anything short of a General Motors breakup, either voluntarily or though a hostile takeover, is likely to enable General Motors…to make a successful turnaround."

The creative response won't be top-down, and it won't be led by anyone in the auto industry— or in Washington— whose name you already know. The creative response that brings about a new distributed green customer-centric business model for U.S. autos will be led by industry outsiders. They will be the renegades, drop outs, misfits, and weirdos whose pole star is the new consumer—not Establishment credo. By definition, we cannot predict who they will be, except that some of them have probably already been shunned by Detroit. The "new things" that emerge from their innovations can reignite jobs, economic growth, and wealth creation in ways that we can't foresee.

Can President Obama and the Congress do anything to help catalyze these new things? A century ago the federal government played an essential role in the success of a new auto industry with highways, legislation, licensing, and regulations. As new leaders emerge, their creative responses will be enhanced by federal support. This is likely to take the form of tax policies and legislation that complement new business models and practices, along with key infrastructure investments. Hydrogen filling stations? R&D incentives? Ubiquitous broadband? The right kind of creative public-private partnerships could be a showcase for President Obama's wider green technology initiatives.

As the GM ship sinks, many precious resources will need to be rescued and redeployed in new ways to do new things. This Titanic urgently needs lifeboats, not life support.

Shoshana Zuboff is the author of The Support Economy: Why Corporations Are Failing Individuals and the Next Episode of Capitalism. She was the Charles Edward Wilson Professor of Business Administration at Harvard Business School.