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The Corporate DNA is not a mythical term. It is much more than Corporate Identity. It is not the same as branding. It is a sense of history that reflects in the way a company conducts its business. It is entirely internal.
To be a successful person, you must first know yourself. The same is true for corporations.
I worked at Ford Motor Company (F) in the early 2000s during the time that the company faced multitude of problems. Its tires were exploding on the highways and Explorers were rolling over. Try as hard as it may, it could not find a way of eliminating squeaks and rattles from its cars. Employee turnover was high and it was losing money. Purchasing Jaguar and Land Rover was not the panacea that it hoped for and its partnership with Mazda was not entirely successful in imparting the quality and process learnings that Ford hoped to gain.
Fast forward to the Great Recession and the collapse of the Detroit automakers. GM and Chrysler entered bankruptcy and Ford was the only holdout that refused the taxpayer bailout. I was mildly surprised with Ford’s decision to tough it out on its own but when I look back at my first day as an employee at Ford, it all made sense.
Sense of History and Continuity
The story of Henry Ford has been told countless times and there is hardly anyone with any interest in American business that is not familiar with it. Every new employee at Ford is welcomed by the Ford’s Corporate Historian (wish more companies had this office) taking them through Ford’s history, evolution and how the company’s vision today fits in this context. The employees walk out with a sense of awe, and certainly a sense of their place and role in continuing this story of achievement and success. It helps that Ford family has stayed involved in the business.
During the reign of Jacques Nasr when every thing seemed to be falling apart, this practice continued. Bill Ford eventually took over and brought back the realism and renewed the sense of family within the company.
Unity in Vision is a Key Predictor of Business Success
As a business consultant I have worked with the senior executives in each of the Big 3 Detroit automakers. I have found that GM has some of the smartest, most driven and committed executives, while many at Ford left me unimpressed with their skills. The difference though is at GM, executives were committed to their own careers, not necessarily in line with the company’s vision, if it existed. A company made up of average employees will generally out perform a company of geniuses if all their skills, effort and passion were directed towards a single purpose or vision.
How does a company do this?
Employees will believe in a goal or vision if the management believes in it. By refusing to take the bailout and go it alone, Ford communicated to the employees that the company as a whole is focused on one single idea, all the way from the top. This above all, is what has sparked the remarkable turnaround at Ford.
By choosing to take the bailout, GM (GM) and Chrysler sent an entirely different signal. Chrysler is probably stronger under Fiat today after countless changes in management and GM has been shored up by the tax payers and will probably do well for some time. But if I were to bet my investment dollars one one of these automakers, it will go to Ford.
The Corporate DNA can Fracture
If the company does not tend for it. I have previously written about HP losing its Way. Compare the story of HP (HPQ) with that of Apple. Apple (AAPL) prospered when Jobs came back to the fold and brought back the passion and the creative spark that has been part of the Apple’s DNA. HP can perhaps regain its Corporate DNA but under Meg Whitman I seriously doubt that will happen.
There are NO Long Term Competitive Advantages Left Unless it Comes from Within
Some may be quick to point at branding and other forms of competitive advantages. They exist and they may exist for a long time but they can as quickly go away unless the company is true to itself. As a management consultant, we use to sell ideas and concepts and process improvements to our clients. But the fact of the matter is, we sold these same ideas to anyone who would pay for it. Ford used our services, so did GM and Chrysler. Using these ideas did not impart any advantages, it just ensured that they did not fall behind.
Take for example Huggies and Pampers. They are both great brands and there is quite a bit of advantage to Kimberly Clark and Proctor and Gamble in terms of better margins due to their brand position. However, these two brands compete viciously in the market. Eventually this competition will become expensive enough for both of them (those brand consultants are not cheap either) that their advantage will go away. The only way to survive is to continue to innovate and differentiate and that has to come from within.
So Warren, you are betting on the wrong horse buying GM shares. Ford is resilient and will thrive, much better then GM. Bet on the corporate dna.