Big changes apt to require new leaders

In this tough economic environment, if you wait too long to envision and implement transformational changes, you are out of the game. That holds for every industry under attack because of obsolete business models, including newspapers and big pharma.

When organizations are in trouble, transformational change almost inevitably requires new leadership at the top . . . New leaders at the top can bring a novel perspective, unburdened by the need to justify strategies of the past and not stuck in a narrow way of thinking, e.g., that the current plan is the only option. As the saying goes, it takes a new broom to sweep clean. Even when executives who presided over a period of decline admit mistakes, it is nearly impossible for them to stir up the organizational energy needed for a turnaround. Those failed leaders symbolize the weight of past losses. People tend to interpret their actions as self-justifying, chosen to rewrite past history. After all, if the old CEO had wrong ideas in the past, why should people believe he or she has the right idea now? For GM's Wagoner, as the problems got worse, the loss figures got bigger, and little else appeared to change, his credibility slipped into the negative zone too.

Now is the moment for every company to do what GM failed to do fast enough and imaginatively enough: rethink everything. What is the core of your offering that takes you into the future, and what is just legacy, continued out of sentiment? What new ways can you combine products or services to produce new value? What new partners would extend reach and capabilities?
blogs.harvardbusiness.org/kanter

Bankruptcy may be best. Also commenting on the auto industry's dire straits was entrepreneur Philip Greenspun, who last year argued bankruptcy, rather than bailouts, would have been a wise option for GM and Chrysler.

Every time GM and Chrysler are in the news, the stock market crashes. The companies contribute little to GDP, nothing to GDP growth, and nothing to US corporate profits, the basis of value in the S&P 500. If GM and Chrysler were to disappear and dynamite their factories, the remaining domestic auto plants (Ford, Toyota, Honda, Nissan, Mercedes, BMW, et al) could produce sufficient quantities of vehicles to satisfy current and expected demand. GM and Chrysler had only about a 30 percent combined domestic market share and demand for vehicles is down by more than 30 percent.

Had GM and Chrysler reorganized under Chapter 11 last fall, investors wouldn't be constantly reminded of these American failure stories, emblematic of our nation's decline into special-interest squabbling. The companies would be out of Chapter 11 by now with greatly reduced liabilities, lower costs, and similar levels of production. We could have news stories about growing software, energy, and biotech companies.
blogs.law.harvard.edu/philg

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