Quick! Which is bigger: San Antonio, Texas or San Diego, California? It’s San Diego. And here’s the kicker: a classroom of German students is more likely to get the right answer than you are, for one simple reason: more of them have heard of San Diego than San Antonio. Try another one. Should GM build the new Chevrolet Malibu? Despite auto industry execs’ huge salaries, you, a car guy or gal, are more likely to get it right than GM's top execs. And for the same reason: your gut instincts are more reliable than factual analysis.
In his book “Blink: The Power of Thinking Without Thinking,” author Malcolm Gladwell points to a growing body of evidence that puts the kibosh on the notion that decision-makers always do their best work when they’ve got plenty of time and exhaustive information at their disposal. Gladwell says that decision-makers often do a better job using less information and less analysis. In situations as diverse as heart attack diagnosis, military planning and running an NBA franchise, fast reactions win the day.
Of course, this axiom doesn’t apply to every situation. Automakers need smart analytical people with reams of data to design combustion chambers, purchase steel, manage currency fluctuation risk, and other complicated information processing tasks. But at the top management level, executives would make better decisions by being ‘fast and frugal’ with both time and information.
Imagine the meeting where GM decided on whether or not to green light the Pontiac Aztek. No doubt GM’s in-depth statistical analysis indicated a ready market for the Aztek’s unique combination of abilities. (Lest we forget, the Aztek was Detroit’s first CAD-CAM creation.) A semi-informed enthusiast would have taken one look at the mutant minivan and questioned the product design department’s sanity right from the git-go.
Bad decision-making mars the history of The Big 2.5. Instead of anticipating gas price instability with large fuel economy improvements, Detroit bet the farm on large SUVs. Instead of dealing with the ‘jobs bank’ and related issues, management simply signed off. Instead of engineering one class-competitive minivan, GM spread its TWAT-winning design over four brands. And so on.
Decision failures of this scope and type occur for one of two reasons. First, ego and self-interest. A doctor refuses to believe that a four-step chart can diagnose chest pain better than he can. An NBA general manager imagines he sees potential in an underachieving player. A high-level GM executive sees the Uplander as a hit that will shower him with reflected glory. Thus smart people make dumb decisions.
Second, an environment of excessive informational analysis subverts ‘fast and frugal’ decision-making. A doctor looks at charts rather than the patient. A general in a war game overwhelms his subordinates with orders and intelligence, rather than freeing them to react to battleground conditions. Or as GM managers discuss the details of the Impala SS, no one stops to ask “Why the heck is this Corvette-engined thing front wheel-drive?”
Gladwell notes that fast, frugal and information-sparse decision-making tends to produce conservative, obvious and safe decisions. This would seem to run counter to the “Bold Moves” rhetoric currently infecting Detroit. But safe, obvious moves are exactly what The Big 2.5 needs.
Successful automakers follow a remarkably simple formula: build a car people want and keep making it better. The Porsche 911, the Chevrolet Corvette, the BMW 3-Series, the Toyota Corolla/Camry, and Honda Civic/Accord are all decades-old models, updated every few years. Sometimes, even the domestics get this right (Ford Mustang, GM pickups, Chrysler minivans). Selling last year’s model with slight improvements is a safe, obvious and profitable course.
In contrast, it takes “courage” to design, build and market a “revolutionary” minivan to ‘active-lifestyle’ Gen-Xers; or launch an Audi-shaped Ford sedan; or build a hot looking sports car with less luggage space than Margaret Thatcher’s old handbag. In general, Detroit’s biggest collective ‘bold’ decision is to constantly ditch existing models in pursuit of The Next Big Thing, whether it’s a so-not-an-SUV Crossover or a B-segment fuel sipper. That’s delusional aggressive management at its best.
Decades of deliberate data-rich decisions have left the Detroit automakers in their current predicament. Ford’s hiring of CEO Alan Mulally– who has promised to “recognize our reality and deal with it”– may indicate that a new breed of management is coming. Alas, Ford pulled Mulally out of Boeing’s bean counter hangar, not the one with burnout marks and oil stains. GM’s Wagoner never met a car he didn’t like; his Car Czar Bob Lutz is egomania’s poster, um, “boy.” And DCX’ LaSorda neutered the one designer who could have rescued his company (Ralph Gilles).
Again, smart men all. But one wonders if any of them are capable of making the piercing glimpses into the obvious that their employers’ need to survive.
Tagged as
69 Comments on “The Big 2.5’s Bosses: TMI?...”
Back to TopLeave a Reply
You must be logged in to post a comment.
You can also login using Facebook Connect.
The higher up you are, the less you can see of what’s happening on the ground.
It shouldn’t matter how far up the chain you are, someone at the executive level should have realized that the Aztek was going to get torn apart in the press for its looks.
It shouldn’t matter how far up the chain you are, one of the executives 2yr old children chould have realized that the Aztek was going to get torn apart in the press for its looks.
Here's an example of how this principle would work in another business (running an NBA franchise) Extracted from an e-mail chat between Malcolm Gladwell and ESPN.com columnist Bill Simmons: http://proxy.espn.go.com/espn/page2/story?page=simmons/060303
Great article! one little nitpick…
According to several internet links, the estimated population for San Antonio has, in fact, surpassed San Diego.
http://www.infoplease.com/ipa/A0763098.html
Does anyone else see the wonderful irony in the statement :
“In his book “Blink: The Power of Thinking Without Thinking,” author Malcolm Gladwell points to a growing body of evidence”
What an on-target article (especially for us armchair quarterbacks and CEOs).
There is something to be said for the groundbreaking vehicles – the minivans, the SUVs (for many years), the original 2-box hatches. But even these were designer-driven and market accident, not focus-group derived.
At the end of the day, Toyota and Porsche, two of the most profitable companies in the world, are intent on breaking little new ground (new for them maybe, but not to the auto world). Porsche even learned the hard way the importance of sticking to what it is good at – the failure of the proper GT cars (924/44 and 928) and success of the Boxster and Cayman.
It shouldn’t matter how far up the chain you are, one of the executives 2yr old children chould have realized that the Aztek was going to get torn apart in the press for its looks. If only the Exec did not have a Nanny raising his children.
Speaking of which, I wonder if Mulally/Wagoner could even begin to figure out how to change the oil in a Edge/Acadia.
Great Article Eric !!!
Of course, this axiom doesn’t apply to every situation.
comparing germans guessing populations in america /= auto enthsiasts greenlighting the new malibu, which of course I think they should.
It will serve as a higher volume car, unlike the insignificant Aura as mentioned here. Especially if the impala moves RWD and uplevel.
Definitely some food for tought though.
I don’t think the blink hypothesis applies to all of this. To the Aztek, sure. But it seems to me the execs were probably going with their guts when they went for the big SUVs, whereas it would have taken some in depth study to convince them, say, around 2000, or even Sept 11, 2001, of the immiment danger of high gas prices.
Bad decision making mars the history of all automakers. Honda throwing the first gen Odyssey up against the Chrysler minivans? Who greenlighted that? Toyota Previa and T-100 (or for that matter, the Toyopet)??
The difference is learning from your mistakes. Japanese companies have a culture of learning and continuous improvement that don’t exist at GM/Ford/Chrysler. And it’s not that they are profoundly knowledgable, they just don’t know any other way of doing business. Over here, we are trying to infuse that culture and those concepts into an existing, individualistic, hero worshipping way of looking at things. It’s a tough slog.
Maybe Lt. Commander Scott said it best: “Fool me once, shame on you, fool me twice, shame on me”
oh, and BTW, the SSR was GM’s first all math car, not Aztek. Quite a bit of the Aztek structure dated back from the old A-bodies.
doctorv8:
Great article! one little nitpick…
According to several internet links, the estimated population for San Antonio has, in fact, surpassed San Diego.
http://www.infoplease.com/ipa/A0763098.html
Land mass.
Maybe a lesson from the Chinese is in order? Remember during the night of the Y2K changeover the chinese government required every CEO of an airline in china to be flying in a plane. How is that for motivation to make sure things go right?
Maybe Bill Ford should have been forced to drive his companies best seller – the taurus. Think maybe ford would have bothered to update it once in a while if the CEO was forced to drive it everyday?
The only reason I respect the new Ford CEO is because he was driving a Lexus and had another one on order when Ford came begging, I mean calling.
“it takes “courage” to … build a hot looking sports car with less luggage space than Margaret Thatcher’s old handbag.”
Is that in reference to the Solstice/Sky? Because if so, at the car show the guy showing off the Sky was making a big thing about how it’s actually got more luggage space than the Boxster, Z4, S2000, Miata, and whatever else is in the class.
Brian Tiemann:
Solstice:
Trunk volume, top up… 4 CF
Trunk volume, top down… 2 CF
MX5:
5.1 cu.ft. either way
RF,
Regarding land mass….If that’s the case, then San Antonio has ol’ Saint Doug covered…and it’s only gonna keep growing, with no geographical obstacles for hundreds of miles, except for sister city Austin to the north.
http://en.wikipedia.org/wiki/List_of_United_States_cities_by_area
Okay, but that’s the Solstice. The Sky has either 5.0 or 5.4 cu. ft., depending on which stat you look at:
http://www.edmunds.com/new/2007/saturn/sky/convertible/compact/100743154/specs.html
Then again, Edmunds has the same numbers for the Solstice as for the Sky, so I don’t know what to think.
Interesting article, but it ignores the reality of running a modern corporation: shareholder lawsuits. Executive and board-level personnel demand as much information as possible is to invoke the business judgment rule: in case of a shareholder lawsuit, the Courts will defer to the decision of the executives so long as it can be established that they acted in good faith even if the ultimate outcome is bad (this is a very condensed of explanation of this concept). Among the factors considered by the Court in invoking this defense is if the exeutive/board was well-informed at the time the decision was made. Hence the demand for (too much) information. A shoot-from-the-hip decision is contrary to the business judgment rule.
I think the true problem is not so much TMI as much as it is how to analyze and use the information. Executives need to know how to ignore crap and focus on useful information. Easier said than done and relying on “fast and frugal” decision in a vacuum or without experience, IMHO, is foolishness.
Brian Tiemann:
No need to think, just use Google Image Search.
Sky trunk (bulge is gas tank, I think):
http://us.autos1.yimg.com/img.autos.yahoo.com/ag/saturn_sky_roadster_2007_other_7_346×270.jpg
MX-5 (NC) trunk:
http://www.familycar.com/RoadTests/MazdaMX5Miata/Images/Trunk.jpg
Aha! That’ll teach me to think instead of blink. ;)
(Edmunds also lists 5.0 or 5.3 for the MX-5, but they also don’t differentiate between top-up/down or for the PRHT-vs-ragtop version. I like this whole a-Google-is-worth-a-thousand-words thing.)
jsc: the article stated that the “fast and frugal” approach tends to favour safe decision making, so it would be generally unlikely to lead to lawsuit-worthy bad decisions.
Besides, shareholder lawsuits would usually be about major business decisions such as acquisitions, sale of divisions, entry into suspect partnerships, etc. Absolutely these decisions need to be analyzed and due diligence done.
I can’t imagine a suit over the decision to greenlight (or kill) a project, or any of the myriad smaller decisions that executives need to make on a regular basis.
jsc:
Recent research coming from John Coffee, Professor of Law at Columbia University, suggests that the threat of shareholder lawsuits does little to nothing to alter CEO and executive behavior. Popular D&O (Directors and Officers) insurance policies effectively indemnify them by paying for legal defense, settling cases, and paying verdicts.
Full text of his November 2006 Columbia Law Review article on the topic is available here:
http://www.columbialawreview.org/pdf/Coffee.pdf
As an engineer who has to deal with corporate accounts nearly daily, I can tell you with a 90% degree of confidence that the problem lies in the environment from which the executives are borne. They are nearly all lawyers or accoutants.
As the regional engineer for my company, I rely on my experience to make many a judgment call. I have to forecast construction costs 3, 5, 10+ years out. I understand which construction tasks will comprise 75% (usually mass excavation) of the budget so I focus on trying, as best I can, to develop an accurate cost for those tasks. The other 25% is usually in the noise.
Accountants, on the other hand, want 100% justification for every single cost associated with a project. They are rather unhappy when their sums do not match up and they will hound you for days for economic justification. All they see are numbers, they can not, for the life of them, see the real world.
This is the environment which has shaped the auto executives.
Edmunds also lists 5.0 or 5.3 for the MX-5, but they also don’t differentiate between top-up/down or for the PRHT-vs-ragtop version.
mazdausa.com lists 5.3 cu ft for both models. Soft top folds onto the rear deck, PRHT folds into a well behind the seats and in front of the trunk. Neither top impacts trunk space.
http://www.youtube.com/watch?v=rTN9jAA-n5Y
As Allen Ginsberg said: “First thought, best thought”.
tracy,
I respect the new Ford CEO because he is doing exactly what you thought Bill Ford should have done. He is driving different Fords everyday, to and from work. I doubt Wagoner ever drove an Uplander home. Or maybe he finally did, and then the next day was the day GM killed its minivan line.
“A high-level GM executive sees the Uplander as a hit that will shower him with reflected glory. Thus smart people make dumb decisions.”
When I saw the web press conference launching these new mini-vans, I wondered if Maximum Bob had lost his mind. When they parked the new Uplander next to the DC vans, Odessey and Sienna, did they really think they would compete? Really?
Please correct me if I am wrong but didn’t Chrysler develop the first CAD/CAM car from Detroit? Early 90’s I thought.
“Gut” is what got Detroit in this mess in the first place. Gut and ego, the nemeses of highly vertical American companies.
The Detroit cycle is:
1) Good idea
2) Bad data
3) No clear answer
4) Go for the gut
The TOMOCO cycle is:
1) Average idea
2) Bad data
3) No clear answer
4) Work ass off to get good data
5) Clear data
6) Clear answer
7) Make it look like there was some gut involved so the product is at least a little sexy
Gladwell is a gadfly who needs to sell a book. ToMoCo is showing the world that gut is wrong, statistics are right, and you never, never choose yourself (career, dinner plans, family plans) over the good of the product.
If I’m not mistaken, Mulally drove only Lexus cars until recently, while Wagoner has driven only GM cars…his entire career.
And Mulally is educated as an engineer, while Waqoner studied Finance.
Hmm…I wonder which one knows “cars” better?
A camel is a race horse designed by a committee.
People get promoted until they are no longer competent, or even further.
I once went to an engineering meeting, where marketing had to be invited. 16 people showed up.
The subject: Choosing between 1/2″ and 5/8″ washers.
Which is why I work for myself, thanks.
Brian: The trunk in the solstice/sky is awful. Even the pictures don’t do it justice.
Top up, its a decent volume but a pain to get to (opens backwards, and you have to relatch the top when you close it.) Top down, it is hideous: you can’t even fit a regulation carry-on in it. My GF’s motorcycle carries more, more conveniently, than a top down solstice/sky.
Compare with the miata, which is larger in the trunk, both top up AND top down. The Miata Power Hardtop doesn’t even take up any trunk space, up or down. Heck, an Elise is about as practical as the Solstice/Sky twins.
We were within 10% of getting a Sky in the next year or two, until we saw what an awful job GM did with the trunk and top.
Also, just sit in one. The ergonomics are hideous. ITs 90% right. But that 10% makes a huge difference.
Wagoner has driven only GM cars…his entire career.
Clarification — Wagoner, like all GM execs, has driven specially-massaged and quality-checked GM cars that are parked in an executive garage every day with mechanics on duty to take care of any problems or glitches, small or large, gas them up and wash them.
They don’t have to deal with annoying interior bits breaking off, gaskets that fail after 30k miles and somesuch. Their car breaks and can’t be fixed by the end of the day, they just pick up another car from the executive pool.
Make them buy their own cars from a dealer and face all the hassles and degradations that us unperfumed masses endure with their products. Then have a pool of competitors’ products they must drive occasionally for comparison. Let the general manager of Chevrolet feel the embarrassment of stepping from his division’s Cobalt into a Civic.
That’s a real shame. I was having a hard time coming up with reasons not to buy one; it just looks so dang good on the outside. I even sat in it at the car show, and it didn’t seem too awful; but unless I’m planning to make it a complete weekender car with no need for anything but a toothbrush, I guess that’ll be a deal-killer. Pity.
windswords: I recall Chrysler making a big deal of designing the second generation Intrepid entirely in CAD. So yeah, I think you’re right.
Funny, with the Solstice/Sky we’re rehashing Lutz going with his guts, not to mention a guy who wrote a book called “Guts”. The looks and drive are great, but the details leave a little to be desired, sort of in the way the Viper is but at 3/4 scale.
Per that recent WSJ article (12 hood struts and headlight switches), Mullaly sounds like he has his head in the right place. Or is that just PR?
starlightmica: Having guts and a gut instinct is great– as long as you're not a complete ignoramus, a bully or a bombast, your instincts are right, and you don't go off half-cocked.
Example not given : Bob Lutz.
I reckon Mulally knows his onions when it comes to parts sharing and general operational inefficiencies. But the real worry is that Ford's culture simply won't budge– at least not in time to save the farm.
Am I the only person who still thinks the soulstice looks like a large jellybelly with headlights?
Lately, I’ve been reading some editorials that have had counterpoints or supplemental points in previous editorials. This one goes hand-in-hand with an editorial about the “corporate mypoia” experienced by GM in their glass towers.
I’ve never had a problem of parts breaking off in a GM car, and I’ve driven a few of them and put a lot of miles on them. The texture and feel of some interior panels is questionable to be sure, but parts breaking off? I’m very skeptical of this.
Chrysler unveils world’s first ‘paperless’ car – October 1997
http://exn.ca/Cars/home.cfm?ID=19971023-03
The 1998 Chrysler Intrepid will enjoy the distinction of going down in the history books as the world’s first ‘paperless’ car.
reckon Mulally knows his onions when it comes to parts sharing and general operational inefficiencies. But the real worry is that Ford’s culture simply won’t budge– at least not in time to save the farm.
Bullseye! Mulally did an awesome job with The Boeing 777, he is a very talented man and a great team player and knows how to motivate people to do their best. Like you said, will he be able to motivate the Ford culture to see it his way. He has his work cut out for him!
Thanks dean and DIYer, I couldn’t remember if it was the first or second generation Intrepid that was “paperless”. A quote form the link provide by DIYer:
“Chrysler maintains the Intrepid is “the world’s first car designed, assembled, and proven on computers.” Not a shabby claim in the insanely competitive global auto market. But behind that claim is an innovative computer software program that made it all happen.
Called CATIA – an acronym for Computer-Aided Three-dimensional Interactive Application – the software was originally intended for the aerospace industry. But Dassault Systèmes – the French company that makes it – figured that it would also have applications in the automotive world. “
Thanks T98. If this is true, this has to be one of the most ridiculous things I have ever heard of. Who came up with this idea? If it were the brass then they are shutting themselves off from their own products and customers. If its the other way around, then it would seem that the line employees are afraid to stand behind their products. Either way, GM loses out in a big way, how many products are made better by an executive team having a bad experience with their own products? It just follows that at least some of your customers are going to have the same perception.
Unbelieveable!
It’s no coincidence that Donald Peterson, the best car CEO America has seen for a long time, if not forever, was neither a lawyer or accountant. He was a total “car guy”, and worked in vehicle development all his career. He more than saved Ford in the 1980’s.
This Mark Fields character sure seemed to come out of nowhere all of the sudden. Like before a month or two ago when he first stepped onto the scene; I’d never seen or heard of him before. He reminds me a lot of Jerry Seinfeld. Same with you?
IAMVince:
Read it again with your eyes open. No-one has ever claimed that GM custom-build a one-off vehicle for Rick Wagoner. I can see why your attitude is getting you banned.
Cars for executives are the pick of the crop off the assembly line, as are cars destined for evaluation by the automotive press. They receive extra quality checks and scrutiny. GM has an executive garage with staff on hand to quickly fix any mechanical problems, loose interior trim, unexplained noises and other annoyances reported by senior executives when they arrive for work. Cars are gassed up and washed, ready for them to drive home.
I imagine this pampered situation is not unique to GM by any stretch.
You might say this is to be expected for senior executives of an auto company, but it leaves executives isolated from, and uncomprehending of, the problems and irritations experienced by average consumers who don’t have mechanics, pump jockeys and car washers on-call at their workplace at no personal cost to them.
@rtz
Fields has been around quite a while, and speaking the Ford mantra, but he got additional exposure with the docudrama spots – that’s probably when he began registering on the radar.
rtz
Fields headed up Mazda (very successful), then moved to PAG in London where he had an unsuccesful stint (some of the biggest loses PAG had to date during his tenure) and was rewarded with a promotion back to Dearborn?!!
Bless him, he’s only just given up his use of the corporate jet to fly home at weekends. Now has to use regular airlines but still has his fares paid for by FUFOMOCO. Surely he can afford to buy his own ticket if he won’t relocate his family from Florida or wherever they live.
IAMVince:
And of course at Honda and Toyota, the chairmen probably don’t even get a company car! Truly laughable.
When I worked there, the Marysville, Ohio Honda plant had several RLs and NSXs at the ready when big wigs were in from Japan.