Decentralization and Strategic Maneuvers at GM

What I learned from reading My Years with General Motors by Alfred Sloan.

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[2:40] There are ideas worth billions in a $30 history book: Henry talked to me on several occasions about a book by the former chairman of General Motors. He told me he had learned a very important concept from that book, which he wished to use in the growth of Teledyne. . .during a very difficult economic time of recession, General Motors had needed additional funds to finance their growth and had a plan to sell bonds to the general public. The bond sale was a complete failure, and the chairman (Sloan) had written in his book that it had taught him an important lesson. It was that for a corporation to grow and to have a strong financial base, it needed to have, as part of itself, an interest in substantial financially oriented institutions. So General Motors had started GMAC and invested in other financial groups. As a result of his interest in this idea, Henry had decided that at some point, he would seek out financial organizations we could acquire. We began acquiring a number of financial and insurance companies, which was a significant change from our usual aerospace, metals, industrial and consumer company acquisitions.

[5:45] Alfred Sloan had a singular focus: General Motors and the Hyatt Roller Bearing Company, have been almost the sole interests of my business life.

[6:28] Alfred Sloan’s perspective on work: I simply took the view that we should go at the job vigorously and without hampering restrictions. I put no ceiling on progress.

[12:22] Billy Durant came up with the idea for General Motors. Alfred Sloan perfected it: Durant’s pioneer work has yet to receive the recognition it deserves. His philosophy was an emerging one in the Model T era and was afterward to be realized not by him but by others, including myself.

[19:08] The accumulated intelligence of mankind is what makes us special amongst all other species Everything is built upon the foundation before it: It has been called to my attention that Eli Whitney, long before, had started the development of interchangeable parts in connection with the manufacture of guns, a fact which suggests a line of descent from Whitney to Leland to the automobile industry.

[29:20] Alfred Sloan had a great perspective on problems. They are temporary and we can fix them: Economic declines have a way of shaking out the weak ones in business, and we had weaknesses. Some people cannot see beyond a slump, but I have never yielded to economic pessimism and in times of decline have kept in mind the eventual upturn of the business cycle and the long—range dynamics of growth. Confidence and caution formed my attitude in 1920. We could not control the environment, or predict its changes precisely, but we could seek the flexibility to survive fluctuations in business. I mention this because confidence is an important element in business; it may on occasion make the difference between one man’s success and another’s failure.

[33:15] Sloan on how difficult Henry Ford was to compete against: With Ford in almost complete possession of the low—price field, it would have been suicidal to compete with him head on. No conceivable amount of capital short of the United States Treasury could have sustained the losses required to take volume away from him at his own game. 

[38:40] Alfred Sloan on committees: I have often been taxed, by people who do not know me, with being a committee man—and in a sense I most certainly am—I have never believed that a group as such could manage anything. A group can make policy, but only individuals can administer policy.

[44:20] General Motors was able to overtake Ford because they widened a niche: It was that plan, policy , or strategy of 1921—whatever it should be called— which, I believe, more than any other single factor enabled us to move into the rapidly changing market of the twenties with the confidence that we knew what we were doing commercially and were not merely chasing around in search of a lucky star. The most important particular object of that plan of campaign, which followed from its strategic principles, was, as I have said, to develop a larger place for Chevrolet between the Ford car below and the medium—price group above, a case of trying to widen a niche. That was all, in the beginning, despite the completeness of the plan with regard to the whole market.

[56:40] Alfred Sloan knew the car market was changing. You didn’t make sales by having the best car. You made sales by being different. David Ogilvy called this idea “a positively good product”: In the past, just about every advertiser has assumed that in order to sell his goods he has to convince consumers that his product is superior to his competitor’s. This may not be necessary. It may be sufficient to convince consumers that your product is positively good. If the consumer feels certain that your product is good and feels uncertain about your competitor’s, he will buy yours. If you and your competitors all make excellent products, don’t try to imply that your product is better. Just say what’s good about your product – and do a clearer, more honest, more informative job of saying it. Sales will swing to the marketer who does the best job of creating confidence that his product is positively good.

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