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Corporate DNA

In a post on letting GM fail, I discussed what I called "corporate DNA"

A corporation has physical plant (like factories) and workers of various skill levels who have productive potential.  These physical and human assets are overlaid with what we generally shortcut as "management" but which includes not just the actual humans currently managing the company but the organization approach, the culture, the management processes, its systems, the traditions, its contracts, its unions, the intellectual property, etc. etc.  In fact, by calling all this summed together "management", we falsely create the impression that it can easily be changed out, by firing the overpaid bums and getting new smarter guys.  This is not the case - Just ask Ross Perot.  You could fire the top 20 guys at GM and replace them all with the consensus all-brilliant team and I still am not sure they could fix it. 

All these management factors, from the managers themselves to process to history to culture could better be called the corporate DNA.  And DNA is very hard to change. ...

Corporate DNA acts as a value multiplier.  The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation....Every company that has ever grown rapidly has had a DNA that provided a multiplier greater than one... for a while.

But things change.  Sometimes that change is slow, like a creeping climate change, or sometimes it is rapid, like the dinosaur-killing comet.  DNA that was robust no longer matches what the market needs, or some other entity with better DNA comes along and out-competes you.  When this happens, when a corporation becomes senescent, when its DNA is out of date, then its multiplier slips below one.  The corporation is killing the value of its assets.  Smart people are made stupid by a bad organization and systems and culture.  In the case of GM, hordes of brilliant engineers teamed with highly-skilled production workers and modern robotic manufacturing plants are turning out cars no one wants, at prices no one wants to pay.

This seems to match the take of many insiders

To John Shook, a former Toyota manager who worked at a joint-venture plant run by the Japanese company and GM in Fremont, California, that explains why the two automakers are in such different shape today. When it comes to engineering and manufacturing, Shook says, Toyota and GM are about equal. Where they differ is in their corporate cultures.

“Toyota is built on trial and error, on admitting you don’t know the future and that you have to experiment,” Shook said. “At GM, they say, ‘I’m senior management. There’s a right answer, and I’m supposed to know it.’ This makes it harder to try things.”

The whole Bloomberg article this comes from is quite good.  Its pretty clear that GM had every reason to anticipate the current mess 3-4 years ago, and basically fiddled while the cash burned.  My strongest reaction from the article was, please let me have an epitaph better than this one:

Wagoner, a 31-year GM veteran, was the embodiment of its culture, an apostle of incremental change. Exciting as a Saturn, quotable as an owner’s manual....

Posted on December 12, 2008 at 10:00 AM | Permalink

Comments

At GM, they say, ‘I’m senior management. There’s a right answer, and I’m supposed to know it.’ This makes it harder to try things.

Just imagine how many times that attitude gets multiplied once you add a new level of 'Congressional DNA'!

Posted by: Doug Murray | Dec 12, 2008 10:25:25 AM

Doug,
That would create a mutation, God only knows what would come out of it, but it wouldn't be pretty.

Posted by: JIMC5499 | Dec 12, 2008 1:37:47 PM

never fear doug, i'm sure they would never appoint an "auto czar" who didn't know all the right answers.

Posted by: morganovich | Dec 12, 2008 1:43:49 PM

The addition of Congress wouldn't be a mutation, it would be a malignant tumor.

Posted by: Craig | Dec 12, 2008 8:05:21 PM

I'll never forget an incident when I was going through Toyota Production System training at Fremont over 15 years ago. I saw a line of men in white, collared shirts and ties across the factory, and asked my hosts who they were. My hosts replied that Toyota was forced to provide their TPS training to GM managers as a condition for operating their Fremont plant, and those were GM managers in their two week TPS program.

"Two weeks?" I said. The program I was in lasted three months. "Who can learn TPS in two weeks?" I asked.

My host shrugged and said, "Nobody, really. But GM says that's all they can spare of their busy managers' time."

That was when I began to trade long Toyota and short GM--an investment strategy that has paid for my kids' private schooling, and now college.

Posted by: mhodak | Dec 12, 2008 11:09:17 PM

Big business, like big government, has no reason to change. They know if they keep things the way they are, no one can touch them. So they squash the competition and rig the rules in their favor.
Innovation is risky, but has the potential for great rewards. But when you already have money and power, why would you want to risk losing any of that? I read an artical that really brought it home to me. I thought " why didn't one of the "big 3" do this"? Because they don't WANT to change. This is the artical. http://www.foxnews.com/story/0,2933,465329,00.html.

Detroit will fall eventually, because they can not and will not change.

Posted by: wolfman | Dec 13, 2008 5:23:59 AM

My hosts replied that Toyota was forced to provide their TPS training to GM managers as a condition for operating their Fremont plant, and those were GM managers in their two week TPS program.

You're not kidding about this are you; Toyota was forced to provide training to their competition? No doubt, then, that when I take the biological maening behind the word "host", it becomes clear that GM 'suits' are nothing more than parasites.

Posted by: LowcountryJoe | Dec 13, 2008 5:38:34 AM

this explains a lot . . .

http://tinyurl.com/5jcfaz


don't think TPS destroys this many trees.

Posted by: Fred from Canuckistan . . . | Dec 13, 2008 9:56:02 AM

"Your note kidding about this, are you..."

I would not kid you about this. I suppose one could view GM managers as parasitic in this context, but even as parasites, they proved themselves supremely incompetent.

Posted by: mhodak | Dec 13, 2008 3:24:53 PM

Big establishment and business entity has their own unit of production cost and most especially they have the so called business asset it does not matter most whether they are pretty much sure that thy are have some expensive costing regarding on the DNA production or the so called the physical appearance of certain entity.If you think that your week is shot because you had to apply for a payday loan, you might want to rethink a little bit. Picture this – you get on a plane, for a relatively short two-hour flight from New York City to South Carolina, and then all of a sudden your plane goes down, and crashes into the Hudson. Grumbling over a payday loan application wouldn't seem so bad anymore. A plane crash is exactly what happened to flight 1549 out of LaGuardia en route to South Carolina, when the plane endured a bird strike. Bird strike is when a plane flies into a flock of birds that gets sucked into the engines then gets shot out the other side. Larger birds, such as the Canada Geese that this plane hit, tend to foul the blades in the engine fan, and then the engine goes out. Both engines on this flight stopped, and the plane was steered magnificently by the pilot into a gradual descent and a soft water landing. There were no fatalities whatsoever, and all passengers were recovered without serious injury. If you want to know more, fly on over to the payday loan blog at personalmoneystore.com.


Posted by: Nathaniel L. | Jan 25, 2009 11:51:39 PM

Corporate DNA acts as a value multiplier. The best corporate DNA has a multiplier greater than one, meaning that it increases the value of the people and physical assets in the corporation.

Posted by: Diploma of Systems Analysis and Design | Dec 14, 2011 11:33:10 PM

Changing your DNA is tough. It is sometimes possible, with the right managers and a crisis mentality, to evolve DNA over a period of 20-30 years.

Posted by: SMSF Investment Strategy | Dec 15, 2011 1:58:00 AM

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