In the 1980s General Motors sought to regain its supremacy by replacing people with robotics, a strategy that was ill conceived from the start.
While the company embraced the automation solution without really understanding its limitations, the story is also one of ineffective organisational learning and failed corporate governance. Sydney Finkelstein suggests that lessons from an analysis of a near $45bn investment strategy hold resonance today as much as they did in the 1980s.
General Motors (GM) has sat at or near the top of the Fortune 500 for decades. Populated by such legendary management figures as William Durant, who created GM by consolidating dozens of smaller carmakers, and Alfred Sloan, the man responsible for GM’s modern decentralised structure and broad product line, GM dominated the automobile industry.
Over time, in the face of competitive threats by foreign carmakers and changes in industry dynamics, the dominant company struggled. When Roger Smith became CEO, he set out to transform the company, shovelling billions of dollars into factory automation in an attempt to cut labour costs and catch up with the Japanese. When the dust settled, GM’s market share had slid from 48 per cent to 36 per cent during Smith’s tenure, a slide that has continued to the present day when GM’s share comes in at under 30 per cent.
“General Motors was the model for industrial organizations of the 20th century: powerful, stubborn, monolithic and authoritarian, its prosperity based on the relentless march of its assembly lines.” Mark Potts and Peter Behr, “Some advice on saving GM from itself”, The Washington Post, November 16, 1986.