What if Steve Jobs was GM’s CEO?
In the continuing General Motors saga, Thomas Friedman, author of The World Is Flat
Now, I don’t really know what Jobs would actually do. But interestingly, when he came back to Apple he made some great decisions, many of which were actually very “startup like”. I was working at Apple in the early 90′s and can attest to the fact that the place was in a world of hurt. ”Rumor” had it that at one point Apple was teetering on bankruptcy as well so the comparisons to GM are reasonable if not at least instructive.
To start, the Apple turn around is an amazing success story and Steve Jobs did a few startup things to get Apple back on track. They include:
- Focusing on people
- Leveraging Apple’s strengths
- “Keeping it simple, stupid” aka KISS
- Made a few key bets
Focusing on People
Soon after Jobs returned, he started rebuilding the team with some great Apple Alumni and also lots of new people. And he invested in keeping some of the great talent already there. By the way, he also got rid of lots of the non or under performers. Here are a couple of examples on the executive team.
Jonathan Ive joined Apple in the early 90′s. I had the pleasure of working with him on a few projects including one code named “Lindy” which became the Newton MessagePad 110. He (and others that get less limelight) are incredibly talented designers and deserve credit for giving Apple the distinctive look and feel of todays products -- iMac, ipod, iPhone, you name it. He is an example of retaining an incredibly talented person who has truly delivered in Apple’s turn around.
Steve also recruited new people that filled gaps and holes in the team. Some were alumni from Apple, such as Phil Schiller, and others were new such as Timothy Cook, now Apple’s Chief Operating Officer. Cook brought years of manufacturing and operating experience from IBM and Compaq’s hardware business. This is something that Apple desperately needed in order to re-invent its supply chain for the 21st century. There is a great article about Cook in Fortune if you are interested in learning more. Fortune is suggesting that he is the likely internal candidate to become the next CEO of Apple… But replacing founders and CEOs is a topic for a future post.
So if Steve Jobs were CEO, my guess is that he would first focus on people and figure out who is great and should be retained and who should be brought in, either GM alumni or other folks, to fill in needs and gaps. This includes who should be replaced within the existing leadership team. And he would push this process deep into the organization to go beyond the executive team and focus on the whole company.
Leveraging its Strengths
When Jobs became at first interim CEO and then full time CEO, Apple had its share of challenges and lacked many of the strengths it has today. It did not have an iPod, or an iPhone and its computers did not have the cache they have today. But Apple did have some strengths and Steve played to them. Interestingly, many of its strengths were what many people thought were its weaknesses. One key strength to start was simply that it was different and its loyal user base was graphic designers and non mainstream PC users. It was not a Windows PC. Apple strengthened then built off of that position. It did this both in advertising and then in its products. Remember its ad campaign, “Think Different”? Read the text of its introductory ad which reaches out to those who challenge the status quo and don’t like rules. This was all about leveraging its strengths in its core customer base.
A key startup trait is don’t try to be all things to all people. Leverage your strengths and dominate one area profitably. This is what Apple did to start. They went back to their roots and leveraged that strength.
If Jobs were CEO of GM, he would do the same thing. Leverage a key strength. Without knowing all the details, my guess is that Jobs would focus on strengths of a few key brands -- Cadillac for high end luxury sedans, GMC for the best trucks you can buy, Chevrolet for mainstream affordable cars and Corvette for sports cars. And then the question is what to do with the rest…
Keeping it simple, stupid (KISS)
One of the other things Jobs did was to simplify and GM needs to do the same thing. When he came back there were lots of Macs with lots of configurations and Apple was still funding Newton which was bleeding money. I promise more detail on Newton later… What he did was focus and keep things simple. Apple simplified its product line by focusing on the high end graphic designer and workstation market and also the education and home market with the launch of the iMac. And it killed Newton and the whole effort to have other companies manufacturing Macintosh clones.
GM needs to do the same thing and cancel or sell off a lot of the stuff that is not making money. Start by killing Buick and Pontiac as they are simply re-labeled cars from other brands. Kill Hummer as it was a nice fad car but not a long term profitable market. Sell off Saab. Shut down or sell off Saturn as allegedly it has never turned a profit even though it has a pretty good brand.
Get back to a core strength and dominating 1 or at best a few key markets. Downsizing will be tough as lots of people have something to say about it (see previous post about GM and the friction in its infrastructure) but if GM does not then it will simply continue on its decline and eventually go completely bankrupt since after the US Government, no one else will step in to help… Now if it did all this, then what would be next?
Make a few key bets
Once Jobs got Apple healthy again, he started making a few key bits though not all at once. They included launching its own direct sales channel -- both apple.com and the Apple stores. This was a big bet because it had relied on others to sell its products and now was going to compete. It then launched the iPod and as it famously delclared, “Hell Froze Over”, and had the iPod support Windows. (GASP!). Apple too had to think differently and by supporting Windows with iTunes, it greatly expanded their market for the iPod. That one decision not only made the iPod a success but got many people that had never purchased an Apple product to consider a Mac and has driven sales of the Mac too.
If Jobs were CEO of GM, after making sure it had the right people, leveraging its strengths, keeping things simple, he would likely bet on just a few things -- a break through new product such as the Chevy Volt and maybe a new distribution channel.
The Chevy Volt is an attempt to make an electric car that works with today’s electric and gas infrastructure and is affordable. You can read more about the Chevy Volt here. It has the potential to be the kind of breakthrough product GM needs.
With respect to sales and distribution, isn’t it about time that I can go online, configure the car I want, give my credit card for a deposit and have the price be $1000 over their manufacturing costs, and then have the car delivered to my garage?
And of course, I am sure if Steve Jobs was CEO of GM, the cars would have amazing industrial design and be a delight to both drive and simply admire. GM could use some pizzazz too.
I don’t know if this is what Steve would actually do, or if it would even work, but it is fun to dream. Isn’t it about time that GM started to think different? Very differently? Let me know what you think…
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What if GM was a startup?
Over the past few weeks, a lot has been written about the auto industry and what they should do. As I read everyone’s advice, I keep asking,
“What would GM do if it was a startup?”
To start with, how would I explain the problem to the Board of Directors? The issue seems, well, pretty simple:
1. They are making cars that fewer people want to buy.
2. They are not making money on the ones people do buy.
Call me a simpleton, but that’s it. It is true the problems are exacerbated by a tough economy but has anyone heard that Toyota is teetering on failure? Honda? BMW? Mercedes? Even Hyundai? And another American car company, Ford, is opting out of any government assistance program. Toyota is as big (if not bigger) and they figured out how to profitably make cars people want. And even though all their sales have slumped and they are struggling, they were healthy to start and GM was not. This is not world wide auto industry problem but a company problem here in the US.
So what would GM do if it were a startup?
First, a startup would try to sell itself. GM has a market cap of $2.5 billion. For comparison, Toyota is at $106 billion. GM has approximately 25% market share and Toyota is approximately the same. If Toyota would not acquire them to increase their market share 100% at a cost of 3% of Toyota’s value, it highlights that there is a real problem here. But an acquisition is not going to happen because it is such a mess.
So as a startup, you have to make it work as a standalone company. And as a startup, GM would need to make more of the cars people want to buy and stop making the cars they don’t want. And also stop making cars that don’t make any money.
I know, I know, you are saying “very insightful”. Yet the fact is that GM has not made the tough or right calls – for years. Yes, parts of GM have improved. Cadillac is actually a good luxury car group. But they have effectively ignored the realities of the market and their situation. They don’t sell enough good cars at a profit.
Why? Well, for two big reasons that I can see. The first is a failure of leadership and the second is too much “friction” in the system created by the government and unions that get in the way of needed cost cutting and fixing the problems.
The leadership problem was exemplified in the CEO’s flying to Washington DC asking for a bailout in their corporate jets. Last time I checked, most startup CEOs fly coach. On Expedia and there is a roundtrip flight from Detroit to DC (non stop by the way) for $209 including taxes and fees. Private jet? $20,000. Let’s see, a savings of $19,791. One flight and that’s the profit on 10 or maybe 20 cars?
While no longer flying private jets does not on its own make them profitable but its a start and its an example of bad judgment. If such an obvious cost saver is blatantly ignored until one is embarrassed in the media, then it seems pretty obvious that the leadership team is not going to find nor make the more difficult decisions on how to cut costs and make quality cars. By the way, if a startup CEO flew a private jet other than during an IPO road show, they would be fired in a heartbeat. In summary, first step, let’s get some new leadership. As the saying goes, “It starts at the top.”
What about the government and unions? (I am an equal opportunity layer of blame on this one.)
Most startups would not likely have to deal with the government or unions. If GM were a startup, they would have demanded that the government and unions both need to get out of the way and stop causing “friction” against what is needed to make GM a profitable company.
Let’s start with one example of government friction. Both the federal and state governments have enacted a set of laws that make it prohibitively expensive to terminate a car dealership/franchise. The fact is that GM does not need thousand of dealers anymore. Could you imagine if a startup could not close an underperforming website or let go of an underperforming sales person because state laws protected the advertisers or that employee? That’s pretty much what’s happening in its simplest form with the car dealers. It cost about $1 Billion (yes, billion) for GM to close the Oldsmobile dealerships a few years ago. That’s friction.
I did a quick Google search and found eBay sells a car a minute and has sold about $20 billion in cars in its first few years since offering its auto site. That’s frictionless.
It’s about time we let GM sell cars the best way they can and get government out of the business of being an impediment to its success.
Last but not least, the unions too are part of the problem. No matter what we do, clearly this process will be very painful both for the overall economy and the many people employed in the auto industry. My heart goes out to people that have been working hard at the car companies and the companies in their supply chains. But we cannot inhibit the companies from making the necessary decisions about the compensation for its workforce – which is what unions are doing.
It is truly amazing that today the union presidents want to risk all its employees futures by not making wage concessions right now. It seems like the choice is accept lower wages or not have any wages left for anyone. Isn’t GM about to go bankrupt in 2008 or early 2009? A lot of good it will do to wait to make wage concessions until 2011 when their current contracts expire when GM itself could completely expire in 2009. I wonder if we let the union members vote for either lower wages or bankruptcy which they would choose?
A startup would immediately start over and offer to re-hire employees with new compensation that allow for profitable car sales. A startup would even pay less than market rates and also offer some stock options and equity in the company to participate in any long-term stock appreciation.
By the way, there is a place the government does need to help. It needs to invest in a massive job-training program to help the workers of all skills that lose their jobs find other jobs and careers. And the biggie is to also help deal with the pension and retirement obligations for the retirees. No small feat but this will truly help GM get out of this mess.
The auto industry is important in that lots of people work there but we need a profitable auto industry to survive. Subsidizing the auto industry (or worse nationalizing it) will cost more in the long run than taking the painful but necessary steps today by leadership, the government and unions.
This is a time for GM to stop and re-architect themselves for the 21st century. They should start from the bottom up and figure out how to do less in order to start making money. The government should allow the companies to close unprofitable parts of its business without additional expenses and the union needs to get out of the way in order to help protect the workers that will remain or risk having no one at all.
People have said that the car companies are too big to fail. Maybe they are too big to succeed?
UPDATE: April 27, 2009: NY Times today “Faster Cuts and More Loans Are Key to G.M. Survival Plan” http://bitly.com/pOdT5. It seems that is a all a bit obvious. Though what is really scary is that The US Government will become the majority shareholder of General Motors. Welcome to the new GM – Government Motors. Does anyone else think its a bad idea for the government to own a failing car company? Also, here’s another post on GM titled “What would Steve Jobs do as GM?“ Please feel free to share this with others if you think its interesting using the buttons below. And if you don’t like it, share it with people you don’t like just to bug ‘em… 
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It’s the people stupid, part II.
Thanks for all the feedback and emails about my last post It’s the people, stupid. One theme of the feedback was basically, “Thanks, stupid. Of course we know hiring great people is important. Now can we have something other than apple pie?”
I agree that the tough question is, “HOW to build a great team?”
Since that is a big topic, the next couple of posts, in no particular order, will tackle a couple of key parts of that question.
In building a great team, I suggest you start by asking if you (and the rest of the team!) can answer the question about what kind of team you are trying to build?
This is often referred to as culture. In my view, without knowing what kind of team you want, you can never get there. Culture matters because great companies have cultures that are a key part of their success. By deciding up front for what kind of culture you are striving, then you can hire and train for that type of culture. Without this, at best, you will end up with a team of great individual contributors that might not work well together. At worst, well, you may fail.
Think about Southwest Airlines. They have a distinct culture that is part of their success. Google does too. As does Amazon.com, Oracle, Starbucks, REI, and even my local bike shop. The key is not necessarily what culture, as many will work, but simply that you decide what kind you need to be successful, and you build a team that embodies that culture.
I am not saying culture is more important than a specific job competence, but without a cohesive team, long term success is hard if not impossible. Competence is typically thought of as figuring out if someone is smart, do they have the background and skills to do the job such as communicate, program, sell, etc.
But what if we start thinking about culture as a competence?
In her book, The Southwest Airlines Way
So, as a first thought about how to build a great team, figure out what are the relational competencies you need aka culture, make sure the team understands them, and start recruiting a group that demonstrates them. Having this will make a difference in everything you do – from recruiting new people to making products to having successful customers and relationships and probably having fun too.
The next posts will cover questions about recruiting other competencies, engaging the team, and the dreaded question of firing people.
Thanks for reading and feel free to subscribe to get automatic updates of future posts…
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It’s the people, stupid.
A common question I am asked is what made (and still makes!) Vontu a successful startup, company, team, division, etc. The answer is simple. People. Great people. It is one of the most important (and defensible) competitive advantages a company can have. It’s the same core belief that made Microsoft, Google, and so many other companies, sports teams, non profits, political campaigns, and others successful.
Some people argue that having a great idea is what makes a successful company. But how does a company create great products or ideas? Great people create great products.
Some people argue that having great sales execution or marketing campaigns are what make a successful company. Here too, great people ensure you have great sales and marketing.
A common quote used to describe this idea is “People first, strategy second”. Maybe it is even better to say, “People first, and EVERYTHING else second.” Why does this make sense?
Well, think about this question for a moment:
Would you rather have a great team with the wrong strategy, or the wrong team with a great strategy?
Clearly, it is a far easier to have a great team come up with a new strategy (or marketing plan, customer service effort, product feature, etc.) than it is to replace a mediocre team…
And what about customers first? You guessed it, without great people it’s hard to get great customers and even more difficult to keep them.
It really is the people, stupid.
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History repeats itself, again.
This morning I read an article in the NY Times about Twitter turning down an offer to be acquired for $500 million by Facebook. Now granted, it’s stock in Facebook and there are lots of questions about how Facebook is valued as well, but, according to Twitter, they are not making any money and have not figured out how to make money. And someone offers you $500M? It’s not like Twitter has any “secret sauce”. It’s a nice little utility feature for sending short messages to your friends. I follow a few people and again its a nice utility. And there are already a host of competitors.
This was the kicker from Twitter’s CEO -
“we haven’t studied the business cases much,” he said. “We literally have no business people in the company, so this isn’t an area we’re really focused on.”
Hmm, does anyone remember Pointcast in Web 1.0? Pointcast was this application that pulled news and other information from the web. According to Wikipedia, “in January 1997, News Corporation made an offer of $450 million to purchase the company.” 2.5 years later, they sold “for about $7 million in May 1999 to Launchpad Technologies” and the service was shut down soon after.
History does repeat itself.
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To Start or Not to Start
Given the world economic situation, a lot has been written about what to do if you are currently running an early stage, pre-profit, private company. Check out what Sequoia and Benchmark have to say.
Unfortunately, there has been little to no discussion about whether to start a new company.
While the challenges of starting a company in the midst of a downturn are obvious – less spending, layoffs, harder to raise capital, and many more, it turns that while not for the faint of heart, it is not impossible to successfully start a company during a downturn.
Microsoft and Apple were both stared in the mid 1970s during double-digit inflation, super high interest rates, oil shortages, high unemployment and slow economic growth. Cisco had 9 employees in 1987 when we experienced one of the worst single day drops in the stock market.
When we started Vontu, it was late 2001, we were a year into the burst of the “.com” bubble and only weeks after the terrorist attacks of Sept 11. Here are some lessons we learned about how we approached the problem and turned it to our advantage.
1. Start with a long-term commitment to building a real business.
If you have courage and commitment, you are at an advantage. Many people show up during the good times to say they are entrepreneurs when really they are just speculators trying to make a quick buck. If you are committed to the long term and building a company capable of getting to $100 million in revenue over the next 5-10 years, there is benefit to having less competition for everything from funding, people, office space, services, etc. That said, be sure that you are in it for the long tough rode that lies ahead.
2. It has to be a top priority for the customer.
We talked to lots of prospects that said data loss prevention was a top priority – not a nice to have but a need to have. (We did not come up with the category name until a few years later, but more on creating a category in the future…). We targeted the Fortune 1000 and asked prospects about the problem of how confidential information was being sent outside of their company, and what was the problem’s relative importance compared to everything else on their agenda – including cost cutting. One Chief Security Officer (CSO) of a Fortune 1000 told us the following story (paraphrased).
“We are in the midst of layoffs and have a team of people, locked up in a room 24 hours a day reviewing all outbound email for people trying to steal stuff on the way out the door. And also a major newspaper recently published an internal email from our CEO to its employees. The CEO sent me a note asking what we could do in the future to stop that type of information from getting out too. So yes, this is pretty important and I would spend money on something to help automate the solution…”
When the CEO is asking for something, that’s a good sign.
3. Hiring great people is a lot easier.
Once you decide to start, hiring, engaging and leading a great team is your most important job. In a downturn, lots of great people get laid off, quit their jobs and many are looking for something new because their big company has gone into cost cutting mode – which is not usually very fun. In a downturn, there is less competition for great people. People tend to want to work with great people building things versus cutting. (More on building great teams in a future post…)
4. Funding is a competitive advantage.
It is true venture investors are less likely to invest during downturns. Which means if you can get funding, you are at an advantage. There are likely to be fewer “me too” companies. Investors would call to tell us how new companies tried to raise money a few years after us saying things like “We are like Vontu, but for the small business market or We are like Vontu, but less expensive”. We’ve all seen categories that have 20 companies funded. How many social networks have come and gone? Because we started in the downturn, there were only a small handful of companies funded and many of them started 1-2 years after us and could never catch up.
5. Maniacal focus on frugal yet quality execution.
Once you have funding, a tough economic environment forces you to focus from day one. And that maniacal focus from the start helps to ensure greater success. When you have only 24 months of cash, everyone on the team should know the three most important things you need to achieve to get the next round of funding. For us it was 1. Hire a great core team; 2. Build the first version of our software; and 3. Get 3 brand-name, reference-able, paying customers (no freebies).
We did all this (and more), never looked back and now we have 50% of the Fortune 100 as customers, hundreds of awesome people on the team, and were acquired by Symantec for $350 million last year. To start or not to start? The answer to that can only come in hindsight, but you never know unless you try.
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Welcome
I plan to write on various topics including entrepreneurship, leadership, execution (getting stuff done type of execution…), technology, economics, and the occasional comment or two on cycling.
If you want to learn a little more about me, here’s a little bit of a bio.
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