All Things

With calls for yet another government bailout, right after the last one, it’s hard for Americans not to be really frustrated about the state of the domestic car industry. I’ve been watching its decline my entire life. It’s kind of like watching the slow decline of Sears (starting maybe a decade later), which was so big and dominant, it’s taking a very long time, but when it comes the end may be pretty ugly.

For a business starting out so high on the totem pole, it can be quite a challenge to acknowledge a severe turn of events. This happened in the car biz by the late 1960s, but I really think Detroit is still - after four decades - in denial. They’ve never had their Sputnik moment, their Pearl Harbor or 9/11. Instead, they’ve been like the frog in the pot that’s slowly warmed up.

Congress has made sure the frog stays reasonably comfortable, but for how much longer? American cars have improved quite a bit in recent years, but do GM, Ford & Chrysler get it yet about how relentlessly competitive the auto biz is nowadays?

They need to entirely overhaul their company cultures, because it’s not going to get any easier by just surviving to 2010 or whenever. Detroit automakers must get rid of their quick-fix mindset and adopt company cultures that embrace continuous improvement and place engineering & quality above marketing. Otherwise all the king’s (president’s?) men aren’t going to be able to put humpty-dumpty’s brand back together.

Zappos.com CEO Tony Hsieh really hit the nail on the head recently when he pointed out that a company’s culture and its brand are really two sides of the same coin (Video, quote at about 9:20). Detroit doesn’t seem to get this. Unless they overhaul their entire businesses, then their brand message is never going to stay aligned with reality for long.

Cadillac is just one example. Way back in 1990, the GM division won the Malcolm Baldridge National Quality Award, and appeared to be on its way to establishing a quality reputation for its product line. Sadly, the other day I was looking at the current Consumer Reports, and several of Cadillac’s most prominent models are listed as not recommended by CR because of less-than-average reliability.

Maybe today’s Cadillacs are quite a bit better-made than those of a decade or two ago, but so are Toyotas, not to mention Hyundais and even Kias. Consumers are smarter, too.

I know there’s some folks in Detroit who’ve been working really hard for a long time trying to make things better and I’ve been rooting for them as much as anyone, but until the leaders there get past the idea of just surviving the current crisis and start thinking strategically, any government bailout is probably just money down the drain. It’s the culture that’s got to change.

I’ve been reading about the rekindled Microsoft/Yahoo talks; perhaps it’s a good sign. It just seems so obvious that Microsoft doesn’t yet understand the internet, and so inevitably can’t really take it seriously enough. It’s got a dozen years of half-hearted efforts under its belt and not much to show for it, other than the dominance of Internet Explorer, which continues to slowly lose share to Firefox.

A BBC report quotes one analyst, Matt Rosoff, as saying, "I do not understand what Yahoo would get out of the deal, including that there are people there who don’t want to work for Microsoft." Well, that really says it all!

Nowadays, there are a lot of people who are trying to get away from Microsoft. After 27 years of being their customer, and 23 years of using a Mac, I’ve learned to pick and choose their offerings, rather than just drink their kool-aid and swallow the whole enchilada. I don’t at all want them to go away, but it would be really nice if they would be honest with themselves, accept what their true strengths and weaknesses are, and stop trying to be all things to all people, in order to keep most all the pie to themselves. That strategy is just not working anymore, and after years of disappointments, the reality is starting to be generally acknowledged.

As I’ve noted before, I thought MSN Spaces (where I have my personal blog) was one of the better things they’ve done, but they’ve made it increasingly Windows-centric as the Live Spaces rollout has continued, which has made it clunkier and more difficult to use, at least for non-Windows/IE users. I don’t expect Microsoft to be Apple, but after all their years of vaunted usability testing, they still don’t get basic design principles.

Everyone knows that Toyota’s cars aren’t that stylish, but they’re well-made, and Toyota (as it has recently) will put the brakes on to ensure a consistently high-quality product. Microsoft isn’t going to have the style of Apple, but they need to develop some decent processes like Toyota, so they can produce a quality product that meets customers’ needs.

Quality is a long-view strategy. In the short run, Toyota sells a bit fewer cars because they last longer, but in the long run, they sell a lot more, and pretty soon even more than GM. Bill Gates once said that his favorite business book was Alfred Sloan’s My Years With General Motors, but the days when one company could dominate a global market and put out mediocre products, in a strategy of planned obsolescence, are long past.

At least Microsoft is reaching out to a company that has some insight. I’ve always thought Yahoo was a bit clunky itself, but they are innovative and do understand the potential of the internet. Maybe Microsoft is at last acknowledging that they don’t get it, and that their culture needs to change.

I suggest that they start by returning to a more inclusive strategy on their online offerings. Don’t automatically expect users to be running all Microsoft software (e.g. IE and Windows), and so don’t penalize users who are using some MS software, just because they aren’t using all Microsoft software! In an era of open source and global markets, all that strategy will do is ensure that eventually no one will be using any Microsoft software.

Microsoft has to accept that they can no longer expect to get the whole pie, except for the crumbs, and that they better be glad for whatever share than can get, without coercion. They still have a lot of talented people; if they revitalize their culture and get their processes right, they could still do really well, and I hope they manage to pull it off.

I wrote about Ford’s selection of former Boeing Commercial Airplanes President Alan Mulally as its new CEO on my blog AeroGo. As I note there, I don’t agree with William Clay Ford’s assertion that there are many parallels between Boeing’s recent challenges and Ford’s.

In a narrow sense, maybe yes, you can say that Ford needs to renegotiate union and supplier contracts, etc., but really Ford Motor Co. has been its own worst enemy, and is much more a victim of its own ineptitude and lack of decisiveness as any external circumstances. It was only a few years ago that it was the strongest of the Big Three, and now it appears to be the weakest.

If you want to draw parallels, a much better comparison could be made between Ford and Apple Computer than Ford and Boeing. As a long-time Apple user, I can assure you that Apple has long been its own worst enemy. Even when Apple did make outstanding products at intelligent price-points, for years it would suffer severe logistical problems that cut into the potential gains. Even in recent years, I suspect continuing skepticism of Apple’s ability to ramp up production of hot products is one reason folks underestimated its iPod business for so long.

The difference with Apple now is that it finally has a clear, focussed direction for its products and the brand is healthy again. In the same way, Ford needs to make up its mind what kind of car company it is and develop clear differentiators for each of its brands, whichever ones it decides to keep.

It wasn’t too many years ago that William Clay Ford was declaring that Ford was going to be a leader pushing for better fuel economy and lower emissions. Along came a few problems, and apparently that vision was tossed, and now, with gas prices up and highly dependent on truck sales, the failure to follow through on that vision is really hurting them.

Product-driven companies like Apple and Ford must set a course and stick to it long-term, and not constantly adjust to every external up and down, whether in the market for their products or their stock. Even recently, nearly a decade into Apple’s turnaround, analysts were calling Apple’s plans for the Mac unrealistic, that they needed to focus on market share, etc. Of course, the reality of the computer business has long been that significant market share gains are made on the mistakes of one’s competitors, mistakes which are all too common, and which even Microsoft has been making of late.

In other words, stability and staying the course are far too under-rated. On the other hand, there is one crucial difference between Apple and Ford - even when things were their worst, Apple had large cash reserves, something Ford may not be able to count on. But any “quick fix” that damages the Ford brands will probably just end up making things worse.

The sad thing is, William Clay Ford’s “greener” vision for Ford may well have been on the mark, and it’s a shame they didn’t stick to it. Perhaps a return to his vision coupled with Mulally’s demonstrated management ability can turn the company around. As with Apple, there’s probably a lot more life left in the Ford, Lincoln, Volvo and Jaguar brands, at least, if they can set a clear direction and stick to it. For a few years things may not look so good, but a consistent product vision will eventually yield leading products and strongly-differentiated brands.

InformationWeek is reporting on new navigation features for GM’s OnStar system, now 10 years old. OnStar hardware is to become standard on all GM vehicles in 2007. The service, which costs $16.95 per month or $199 per year, has been heavily advertised in recent years and now has about 4 million users (although a substantial portion of those may be recent car buyers who have yet to actually pay a subscription fee, since the first year’s subscription is included in the vehicle purchase price).

The new plan, Directions & Connections, according to GM’s feature comparison chart, will cost $34.95 per month or $399 per year. I just have to wonder if this is really going to be an attractive package for many people, when you can buy quite nice, portable GPS navigators and databases for only a few years’ worth of just the extra cost of the new plan.

An interesting comparison might be made to Apple’s .Mac service, which costs $100 per year, but has been steadily adding features without a price increase. While I haven’t yet signed up for .Mac, every year the value improves, so I won’t be surprised if I do eventually subscribe. Apple’s focus on increasing the value of their pricey service seems more prudent than GM’s looking to squeeze revenue out of OnStar, especially since either service may do a lot to stimulate customer loyalty.

On the other hand, neither vendor has done anything, as far as I can tell, to develop their service into a platform for third parties, which might be the more lucrative source of revenue in the long run, especially as subscribers increase. It seems to me that with services such as OnStar (where the system is only used rarely, at least in situations that require a human operator) or .Mac (online), much of the cost will be setting up and maintaining the system, with relatively low marginal cost per user.

Apple seems to at least understand that .Mac’s value improves as more of its software (e.g. iPhoto, iSync) ties into the service. GM might do well to remember some wise words from its old competitor, Henry Ford:

“The man who will use his skill and constructive imagination to see how much he can give for a dollar, instead of how little he can give for a dollar, is bound to succeed.”

I wrote about these in my personal blog, Light Side.