How the iPhone Got Tail Fins—Part 1 of 2
(Page 2 of 2)
the long service life of Ford and GM cars (8 years for Fords Model T, 6 years for everyone else) retarded sales of new cars. In 20 years, U.S. car ownership had risen from 0 to 80 percent of American families – the market was approaching saturation.
Now cars would have to be sold almost entirely to people who already owned a car.
The Crazy Entrepreneur
After success as a leading manufacturer of horse-drawn carriages, Billy Durant was one of the few who saw the writing on the wall and got into the car business. Although he wasn’t a technologist, he was an entrepreneur with a great eye for acquiring car companies run by technologists. His keen insight was that several carmakers combined under one company umbrella would have more growth potential than one brand on its own. Like most founders, he was great at searching for a business model but terrible at in large company execution. When his board fired him, Durant bought a competing company called Chevrolet, built it larger than his last company, and used Chevy stock to buy out his old company—General Motors—and threw out the board. Yet a few years later under his brilliant but reckless leadership GM was again on the brink of financial disaster and his new board fired him. (Durant would die penniless managing a bowling alley.)
Durant’s ultimate replacement – an accountant named Alfred P. Sloan—would turn GM into the leading and most admired company in the U.S.
Over the next decade Sloan would implement a series of innovations which would last for over half a century. And catapult General Motors from the number 2 car company (with one-quarter of Ford’s sales) into the market leader for the next 100 years. Here’s what he did:
Distributed Accounting Unlike Ford, GM was originally a collection of separate companies. Distributed Accounting turned those fiefdoms into product divisions each of which, could be focused like Ford’s mass-produced lines. But Sloan went further. He figured out how to centralize financial oversight of decentralized product lines. His CFO created standardized division sales reports and flexible accounting, and allocated resources and bonuses to the GM divisions by a uniform set of rules. It allowed GM to be ruthlessly efficient internally as well with its dealers and suppliers. It got the division general managers to fall in line with corporate goals but allowed them to run their divisions freely. GM became the prototype of the modern multidivisional company.
Car Financing. Realizing that Ford would only accept cash for car purchases, in 1919 GM formed GMAC to provide new car buyers a way to finance their purchases through debt.
Consumer Research. Every since his days at Hyatt Roller Bearing, Sloan, and by extension GM, was relentless about getting out of the building—they had an entire department that studied consumers, dealers, suppliers.More importantly, Sloan led by example. He visited dealers and suppliers, listened to customers and was tied tightly to his head of R&D Charles Kettering.
All this would have made General Motors a well-run and well-managed company. But what they did next would make them the dominant company in the U.S. and eventually put tail-fins on the iPhone.
Part 2 explains it all.