CAN YOUR BUSINESS AVOID THE ERRORS OF THE US AUTOMOBILE INDUSTRY?

The woes of Detroit are examined in an article by Umair Haque on Harvard Business Online, as he highlights the six crucial mistakes made by the US automobile industry and advises on how to avoid them.

Haque argues that Detroit followed old rules in business where new, 21st century rules need to be established. These new rules, he says, can be used by managers everywhere to start preconceiving, reinventing, and revolutionizing their own organizations.

The first mistake of the automobile industry was to 'choose evil'. "Detroit chose lobbying, marketing wars, and low-cost hardball - to always and everywhere try to socialize costs and privatize benefits," explains Haque. However, in the 21st century, moral imperatives are also strategic imperatives: "doing good - for customers, employees, suppliers, or society - is a radical strategic choice that unlocks new pathways to innovation and growth".

The next mistake was 'selfishness' to serve self-interest, where, for instance, Detroit lobbied to oppose stricter fuel efficiency standards. This should be replaced in the 21st century by 'purpose' for self-interest. What's needed is "a more enlightened self-interest: one factoring in a longer timescale, fuller contingencies, and an honest and broad consideration of hidden and unintended consequences to people, society and the environment".

The third mistake was to 'maximize destructiveness', destroying the ability of others to imitate or commodities others. But now businesses should 'get constructive', letting demand spark and fuel co-creation, co-producing from a pool of shared resources and allowing value activities to be co-managed.

The fourth mistake on the list is 'seeking differentiation'. "Why pay a steep premium for a Buick if it's just a Chevy with slightly nicer trim?" asks Haque. Instead, real 'difference' should be sought so the distinction and demarcation is one of reality and not just perception.

The fifth lesson from Detroit is to seek 'crisis' rather than 'agility'. "Industrial-era corporations seek agility... by insulating themselves from real-world economic pressures," explains the author. But, he adds, this leads to the dilution and sapping of incentives for innovation and renewal.

The final mistake of Detroit was to seek "a nakedly competitive advantage - against suppliers, dealers, consumers, and society alike". In the 21st century advantage should be sought 'for' and not 'against': "far more radical, potent, and disruptive are corporations who can use market power to create an authentic advantage for buyers, suppliers, customers, consumers, and society, not against them," concludes Haque.