Comments

The cost of GM or another large company like it failing is obviously large in terms of jobs and local economy.

However this would pale into insignificance compared with a failure of a software giant like Oracle (plus other big players like Microsoft and SAP). The level of reliance on systems from these companies would be the equivalent of turning the electricity off for many of the world's top companies.

It's a good job they remain in a reasonably healthy state.

Posted by PaulH at June 1, 2009 9:27 AM

"...they remain in a reasonably healthy state."

Companies like you mention here, PaulH, remain so partly because they are still (more or less) defining the "State of the art" in relatively new industries (in the historical sense.) But who's to say for sure that the day won't come when some upstart from Japan or India or wherever won't turn the computer software industry inside out? Are we so deeply invested in Microsoft's and Apple's operating systems that a revolution isn't possible?

Big Blue thought similar (although on a slightly smaller scale at the time) couldn't happen... flashback to a Tom Peter's slide circa 1999... "Bill Gates... richest man in the world..."

Secondly, what if Microsoft, Oracle, et al got caught up in "legacy costs" like GM and others? Historically speaking, big players keep getting bigger... but eventually they just become "bloated."

Who's to say we won't see some very painful "belches" still to come in our lifetimes?

Posted by Dan Gunter at June 1, 2009 10:24 AM

TP - Just wondering...did you feel the same way about your tax dollars when it came to the bank and insurance bailouts?

PaulH - You make a good point. I also wonder about the security mentioned as well as the national security of such intergrated systems of these large international firms. Welcome to the new world order of cyber insecurity, eh?

Dan - If the age of disruption lasted indefinitely we would all be a massive mess. There is no economic stability in merely whooping up the next failed company or pointing to its eventual demise. What's the value in that? Hype and hyberbole?

Posted by Judith Ellis at June 1, 2009 10:42 AM

You raise some very interesting points Dan

"big software" is being criticised for the maintenance models it uses - cloud computing is talked about as the way forward (not convinced of this on it's own) and a model that will undermine this. Big software is under threat.

But it is very very difficult to make change in the IT industry. IT is way more embedded in the DNA of operation than it was in the "big blue" day - To use my elctricity analogy again changing supplier would be the same level of upheaval as changing the voltage your factory uses. Not impossible but very difficult and expensive. Desktop Microsoft and Apple are not such strong examples but stop an Oracle or SAP system and companies simply stop operating - production, orders, accounts everything.

Ironically IT's image (fast paced, forward thinking, constant change) often hides a very conservative reality of customers - changing supplier is "bet your business" level decision- you don't take it lightly. For some comapnies upgrading to a new version of a system is 1 - 2 year project.

I agree that disruption is coming - the impact may be much broader than we think.

Posted by PaulH at June 1, 2009 10:42 AM

PaulH, no doubt the jury will probably never come to a clear and decisive verdict on these matters. We can't even figure out for sure who the jury is. Change is the only constant, as they say. The closest thing that comes to my mind to what we are contemplating here is the change from analog to digital television. Although it might have happened (eventually and very slowly at that), it was accelerated by a governmental decision pick a standard and go with it. The I.T. sector is definitely a horse of a different color, as systems are largely customized, yet built on a common platform (operating system... or two, perhaps three, depending on how far down in popularity you're willing to go.) Because we're talking about systems that all interconnect (take our financial systems, for example), it's not as though one player can simply say "We'll be down for a few days while we upgrade.) That's a FAR cry from someone simply not being able to watch television for a while after the "big switch" because they can't get a newer one yet. The television stations themselves, on the other hand, did take a HUGE hit here.

One local station was about to go on the auction block because the owners could not justify forking out $5 million to upgrade their transmitter to digital. It wasn't as if they had a choice of "stay with the old, crappy looking picture and hope to compete, or modernize?" A failure or delay in making the transition would cost them money in ad revenue, but it wouldn't necessarily cost their (viewing) "customers." Again, much different than dealing with the backbone of darn near everything we depend on (from banks to power grids.)

I think we will not see any rapid, wholesale transitions of anywhere near this magnitude in I.T. I'm with you in thinking that we've forced ourselves into living with incremental change there. Nature of the beast, I guess.

But could we see the government ever stepping up to a Microsoft-sized company and saying "You have an unfair lock on the industry... open up your source code... patent protections and copyrights don't apply the same to you because of industry conditions...?" I won't say it CAN'T happen, as my mind drifts back to the days of the great telephone monopoly breakup (divestiture.) Funny thing about that one is that now we've cycled to all the long distance and cell phone companies merging (decreased competition = closer to monopoly status again), followed by warfare between cable companies offering telephony and telephone companies offering cable and satellite providers saying "deal us in" on all of the above (oops... back to more competition.)

It's enough to make your head swim just thinking about it all.

It's truly a "Mad, mad, mad, mad world," ain't it?

Posted by Dan Gunter at June 1, 2009 12:06 PM

Tom, thinking about all of this has ME wanting to pose a question:

Have we put ourselves in a position of righteously trusting in the ability of a few "newer giants" to stay afloat and not eventually follow in the footsteps of the G.M.'s of the world?

Or have we created a modernized scenario for "MAD" ("Mutually Assured Destruction") in the event of the unforeseen failure of a Microsoft, S.A.P., etc.?

All it would take is some (perhaps well intended but misguided) governmental tampering and/or tinkering to possibly set off a chain of events of a magnitude unheard of. PaulH raised some interesting issues.

Posted by Dan Gunter at June 1, 2009 12:17 PM

Dan - I have long since given up trying to understand Gov Vs Software!

Vs Microsoft - massive anti trust cases for including a browser with an operating system - in the grand scheme of things (and given how fast the desktop market moves) a trivial event.

Oracle take over of Sun - a massive change of potential power in the market welcomed with open arms! I use the term potential as I think this is a big mouthful for even Oracle to digest.

I wonder would big Gov be prepared to step in and bail out big software in the event of a problem the same way it has done banks and now GM?

Posted by PaulH at June 1, 2009 1:13 PM

"I wonder would big Gov be prepared to step in and bail out big software in the event of a problem the same way it has done banks and now GM?"

Probably. Every government office I know of has at least one computer or terminal to a mainframe. They're over a barrel at least as bad as we are. At least with vehicle fleets they could keep them patched up until they replaced them. Or start buying Toyotas, Hyundais, Kias, etc. Would be sort of odd to see the government "forced" into replacing fleets -- might be a good time for THEM to invest in hybrids and further decrease our petroleum dependence, although they'd probably just raise the taxes we all pay on fuel to cover the cost of buying the hybrids. No matter how any of this goes, it would ultimately be our (the taxpayer's) tab to pick up.

And if you DO ever figure out "Government vs. Software," I want you to autograph my copy of the book you write on the subject. THAT would be an accomplishment -- or at least a gutsy undertaking! I hope you let me produce your video of it ;-)

Posted by Dan Gunter at June 1, 2009 2:11 PM

I'd like to take the last part of your post as a question: "If GM and other auto companies no longer define America, what are the companies that do?" And I'd like to hear the answer from folks outside the US.

Posted by Wally Bock at June 1, 2009 6:37 PM

Great question Wally. As a Brit I’ve NEVER defined the US through GM or other Auto companies as a matter of interest. I define the US more by entertainment than business. I also believe your culture of hope and enthusiasm are precious gifts. Your greatest asset as far as I am concerned is your optimism. It therefore surprises and saddens me when I see some of the negativity on this Blog from a small minority of people from time to time. It disappoints me too ‘cos I have this rose tinted view of you folks as eternal optimists. Once you folks give up, what hope is there?

As far as companies are concerned - Off the top of my head I immediately think of Disney, Harley Davidson, MacDonald’s, Google and NIKE. I’m sure given time I can think of more. How’s that for starters? :- )

Posted by Trevor Gay at June 1, 2009 7:07 PM

TP - $100B of taxpayer money for GM is what some sources say. The USA has a zillion cosmopolitan brands to define it world wide.

Imagine the poor UK though, our favorite colony - being reduced to the brand of "soccer hooligans led by a 1 person cult of Trevor".

Now that is a wicked googlie whose depths are still being discovered. Once the NHS cuts its pensions 90% - then cash flow shall resume (except for NHS rich pensioners) :>).

Posted by C Love at June 1, 2009 7:52 PM

C – You are absolutely right on NHS pensioners my friend - we have ALL the money :-)

"The USA has a zillion cosmopolitan brands to define it world wide" - it’s really interesting how your perception ‘within’ is so different from 'outside' looking in. You may think you have ‘zillions’ - I immediately only think of a handful and I suspect that is true of most UK citizens. In my opinion what defines the US best (like all nations), is its people, and not what they produce. As such the US has considerably more strengths than weaknesses. I hope you will continue to protect that image and celebrate it.

Yours etc

Trevor
Founder member of “Soccer Hooligans R Us”

Posted by Trevor Gay at June 2, 2009 2:27 AM

!TG

USA as "Debts R Us" &
"We Print Money" - is that our manufacturing comeback? :>)

Posted by C Love at June 2, 2009 6:01 AM

Ain't that the truth, C!

Posted by Judith Ellis at June 2, 2009 6:42 AM

JE - it is ironic that the presidents & administrations really caused a lot of fear to drop the markets maybe 50% more in places than otherwise - meanwhile those in the know have ridden those depths now up to new wealth "creation" :>).

Posted by C Love at June 2, 2009 8:14 AM

Outside v inside. I suspect the number of brands that define the US is actually somewhat smaller than zillions and somewhat greater than a handful. But then I don't know how many brands constitute a Trevor handful - perhaps hundreds...

Posted by RobCH at June 2, 2009 8:15 AM

Perhaps you have a point there, C. I also think that perhaps traders are not free of blame either, playing the market as a fiddle before a government announcement in order to manipulate it.

Posted by Judith Ellis at June 2, 2009 10:33 AM

One of my more recent "GM-moments" was in a letter from Kirk Gregg, Executive VP of Corning Inc. Mr. Gregg cited the ability of Corning's management to achieve $500 million net income increases in the years following the dotcom/telecom crash as a significant counterbalance to the failure of management to see the cliff ahead. This accented my experience of Corning executives and long-time employees as seeing no failure in manangement prior to the dotcom/telecom crash.

Posted by Stephen Garner at June 2, 2009 1:03 PM

Here's a question: Is America a legacy nation?

We have paired our economy with legacy companies who are paired with legacy products and legacy technologies.

Not only are tax dollars tied to these companies, but so is a workforce that should be retooling for a changing world, instead of gripping onto the old one.

Posted by DUST!N Staiger at June 2, 2009 2:41 PM

Stephen - I appreciate your point. Thank you.

Dust!n - Regarding a legacy nation, I'm not sure if I get your point, as taxes are paid by all corporations. So, all are a part of this legacy. No? But maybe the problem is all of these large conglomerates wedded nationally and internationally that are supposedly "too big too fail," whether its multiple brands of a car, bank, or insurance industry or any others like GE who also has tentacles everywhere, including finance.

BTW - Did we ever learn the names of those companies with big-time tax shelters in Switzerland? Was anything done about it?

Posted by Judith Ellis at June 2, 2009 3:19 PM

Tom,

Must reading regarding GM is David Brooks editorial in the NYT today

http://www.nytimes.com/2009/06/02/opinion/02brooks.html?_r=1&ref=opinion

Posted by Todd Spare at June 2, 2009 8:17 PM

Judith,

Sorry for the lack of clarity.

Yes, I'm speaking of the TOO BIGS. Tying our nation's success to some parts of our economy, while other (tax-paying) parts can keel over without dramatically affecting the whole.

We're espousing devolution - survival of the weakest.

Posted by DUST!N Staiger at June 2, 2009 11:00 PM

Dust!n - No, not at all. It was probably my understanding. I see now. Thanks for that. I completely agree with this statement:

"We're espousing devolution - survival of the weakest."

So true!

Posted by Judith Ellis at June 3, 2009 12:24 AM

Lovefest, Inc. employs "creative resurrection" whereby we humiliate, degrade, defile & generally torment our "associates" until their recession expectations are almost zero for any kind of a sane workday.

Then when we ease off a bit to re-imagine/re-create a new associate - which becomes heavenly for said front-liners. Sure it is a stroke of genius to "manage" this way & that is why we elites get paid the big bucks & drive several cars & still sneakily/righteously fly in our private jets. :>)

Posted by C Love at June 3, 2009 5:45 AM

Perhaps we need to figure out how to stop "bailing out" all the big oil companies (by letting them buy at whatever cost without the courage or ability to say "No") and how to put a stop to manipulation of our energy prices by foreign countries?

If big oil went "bust" for a while, foreign oil value could theoretically become zilch. Cutting the umbilical cord between supply and demand would force us to come up with some more workable (i.e. stable or sustainable) solutions.

A pipe dream, perhaps (no pun intended) but at least it's a slightly different (okay, cockeyed) way of looking at our oil/gas woes.

Posted by Dan Gunter at June 3, 2009 10:00 AM

I'm sorry, but this GM talk for the most part sounds a bit like dancing on GM's grave.
So we send people off to Iraq to fight for our freedom, but if we aren't careful, were going to be living the Kris Kristopherson song lyric
"Freedom's just another word for nothin left to loose".
Priase Ipods out the wazoo, but acording to Businessweek, autos are the most complex mass produced item in the world. How in the hell can we say we are cutting edge if we drop the autmobile industry?
Napolean mistakenly dismissed England as a "nation of shopkeepers". He thought they would be easy to beat in battle. He miscalculated because England had an industrial base to supply all those shops and got his Waterloo.
Some of the sentiments expressed on this blog (and championed that that great Industrialist (if making Powerpoint slides can be considered an industry) Tom Peters) might very well covert the US into a true nation of shop keepers. All our enemies will have to do is use google to find the locations of all our Starbucks (because that's were we will all be running our virtual companies from) and infiltrate them with undercover baristas who put poison in our Frapachinos.

Posted by dan at June 3, 2009 6:17 PM

If G.M. were to end up out of business, America would not be dropping the automobile industry, although we would be losing a major, long-time player in the industry. G.M. is not the only auto manufacturer in the United States. Unfortunately, they are in a very precarious position which involves enormous costs regardless of which direction this all ultimately ends up going in.

Human colonists built a new nation after reaching these shores. Perhaps foreign-based auto manufacturers will end up being the modern industrial colonists who are creating an all new auto industry in this nation?

Change is inevitable. What remains to be seen is what it looks like.

Posted by Dan Gunter at June 3, 2009 6:28 PM

dan (small d) - You have hit on a lot of what I've been thinking of late with regards to GM and our security. I have asked such of nation states in another post.

Dan - Your comment resoundingly sounds very silly to me, like a lot of brainless happy talk: "human coloninsts" (are there any others?), "new nation" and "foreign-based auto manufacturing will end up being the modern industrial colonists." Man, what are you talking about? Better yet, what are you smoking?

Are you and your bethrothed moving to Japan where there are wholly things Japanese? How about South Korea?

By the way, the south lost the war, Mr. Alabama. Get over it! It'll be alright, really. :-)

Posted by Judith Ellis at June 3, 2009 7:11 PM

In reviewing a number of the news articles and commentaries on the subject of the auto industry in the U.S., I am hearing and seeing more than a hint of "protectionism." It's quite fascinating to me that at a time when virtually everyone who claims to have an understanding of how business and economics works acknowledges that we are essentially now living in a "global economy" with virtually no isolation or insulation between countries and their respective industries, there are suddenly so many comments regarding how the U.S. is "losing the auto industry."

It smacks of protectionism and isolationism. The world simply does not work that way any longer.

I will say it 'til I'm blue in the face, if need be: auto manufacturing is alive and well in the U.S., we just can't claim sole ownership of it. But there must be SOMETHING that attracts foreign companies to invest and build here. It means jobs, revenue, and tax dollars. It also helps to drive techonology -- if by nothing but sheer demand for qualified workers -- in areas of this country that for a century or more were dependent upon textile mills that are now being moved overseas.

Major shifts. Change. It's happening whether we like it or not. We'd better learn to deal with it, embrace it, and make the very best of it. It could go the way of the textile mills and other industries: the foreign manufacturers could "pack up and go home," leaving us totally out in the cold.

We don't make the rules. We play the international version of the game of business now or we don't play at all. Some of what we're seeing are the effects of naively thinking we could protect ourselves. It simply doesn't work that way.

Posted by Dan Gunter at June 3, 2009 7:58 PM

I happen to believe that we as a nation allowed GM to fail. We became enamored with 'tech' and anything that is not 'tech' was allowed to flounder. In many ways, GM was their own worst enemy. True leadership on the national level could have helped save GM from itself. We have had two wars in the past 2 decades over oil. Oil is strategic. Oil is not strategic because is slippery, it is strategic because it is the fuel for automobiles. Therefore, automobiles are strategic. Would we allow any other country on earth to make better fighter planes than we make? No. Our latest figher jet outclasses anything anyone elese has and will keep that lead for 20 years. Our cars should be thought of the same way. In the early 1980's, we should have done (as a nation) whatever we had to do to get US made cars to outclass all other cars in safety, quality and energy efficiency.We should have forced GM to be great by passing regulations (and not rolling them back) to achieve these goals. We should have funded our car companies to help them achieve these goals.
In 1955, 800,000 people worked for GM and made a middle class wage. Today, over 1 million americans work at wal-mart for much less than a middle class wage. How in then hell can a honestly thoughtful person see any equivalence between Walmart and GM?

Posted by dan at June 3, 2009 8:05 PM

Say the name, my southern man, Dan. Say the name! :-)

"We don't make the rules. We play the international version of the game of business now or we don't play at all. Some of what we're seeing are the effects of naively thinking we could protect ourselves. It simply doesn't work that way."

This statement is as foolish as the one to which I referred earlier. Gibberish.

Who doesn't make the rules? Such rules are made daily; the question is by whom and to whose advantage. C's point in another post pointed to a kind of imperialism that I had not considered before. That makes by more sense than your "happy-talk" worn though "enlightened" words above.

You seem found of quoting what pundits write and speak. Protectionism. Oooooooh! This is a new kind of world! Yeaaaaah!

But what about that name, my southern man, Dan? Say the name! :-)

Posted by Judith Ellis at June 3, 2009 8:21 PM

"long live creative destruction, the true engine of longterm prosperity."

Tom, you are as empathetic as an aligator.

Posted by dan at June 3, 2009 10:22 PM

Intriguing intermingling of posts here. Tom talks elsewhere about why business isn't more like the military. dan talks about doing (like the military) whatever needs to be done to make US cars outclass the rest of the world. It's worth saying in response to both that in business terms the military - almost anywhere - is extremely inefficient. In answer to dan, a very good book to uncover what really makes the military tick is Boyd: The Fighter Pilot Who Changed The Art Of Warfare, by Robert Coram. It's the story of an extraordinary man, and also of the awful self-serving corruption (no way to put it more gently) of the US military procurement process. Boyd was the man who determined to see that US hardware should be better in combat than anything the enemy had. He found that that was not what the Pentagon, or the manufacturers, were interested in, and they fought him bitterly at every turn. Want to read why the F-111 entered service with a performance map that was inferior in every respect to its enemy counterparts? Want to hear how the Bradley Fighting Vehicle combat simulation tests were rigged, because its levels of troop protection were so poor? This will tell you. The sad fact is that if GM had been run on military procurement lines, its cars would almost certainly have been more expensive, less safe, poorer performing, and even less well tuned to what the market was asking for. And the company would have been even more bloated and bureaucratic. [A question now is whether the new cosy relationship between GM and Government is actually making this more likely.] Boyd certainly wasn't pissing on his country's flag; he was vocally demanding that the country gave the flag the quality and commitment it deserved, as its soldiers, sailors and airmen did, and as did he. The problem was that certain military people confused patriotism with obedience, deference, and maintaining the status quo. In America of all places, those qualities are surely not regarded as how best to serve your country.

Posted by RobCH at June 4, 2009 1:02 AM

FLAG BATTLE...

Lots of tension already over the forthcoming shutdown of the Michelin tire manufacturing plant here in Opelika, AL. For a taste of how emotional it's getting:

http://www.oanow.com/oan/news/local/article/flag_tribute_draws_criticism/74974/

Posted by Dan Gunter at June 4, 2009 8:51 AM

Speaking of the companies that define us...

One of the questions that I am kicking around in my mind is, how are people led at entertainment companies like Pixar. I am guessing that the company attracts employees who are both technically brilliant and artists. It would be like hiring Leonardo De Vinci.

Posted by Juanita Chavez Moshier at July 21, 2009 10:42 PM

The DaVinci parallel is a good one. Companies such as Pixar (a true innovator in the entertainment industry) are busily inventing new ways of producing entertainment, not just rehashing the old ways. That attracts people of a creative nature. It has to by definition, or Pixar would be unable to achieve the things they do. Leadership styles are largely (naturally) an extension of our deeper personalities and nature. Think back to the team that created the Mac computer. They were by no means an average team of average people. They were poets, artists, musicians... all dancing to a radically different drum. Each to his own drum, actually. But like a great jazz band, what came together was magic.

Groups like that often don't appear to even have what we would recognize or define as "leadership." They seem totally lacking in structure, policies, procedures, rules, etc. Often, there are no written mission, vision, or values statements. Instead, what they do have is a deeply internalized team mission that combines with inner purpose and passions , resulting in a mission that they all tend to gravitate toward and contribute to. A sort of synergy. One of the hardest things to do is to actually analyze and duplicate that sort of team. The harder you try, the worse the acts of technical analysis and trying to structure and force things to happen get in the way of cool things happening. I would love as much as anyone to be able to write a book on "How" to create teams like that. I don't think it's possible. Better to read books like "Zen and the Art of Motorcycle Maintenance." For it to happen, you almost have to detach yourself from it and just "let it happen."

Posted by Dan Gunter at July 22, 2009 8:15 AM