tutorial-6_case_applications-too big to change_and_designing for dollar

Tutotrial-6 Robbins & Coulter

Managing Change and Innovation Ch-06& 07

Managers as Decision Makers

HES3380 Engineering Management 1 Sem1, 2014

Case Applications

Too Big to Change?

No one could have imagined it. After all these years, many thought it was too big to fail. Yet,

on June 1, 2009, General Motors Corporation (GM) filed for Chapter 11 bankruptcy protection, the

second-largest industrial bankruptcy in history (WorldCom was the largest). GM, which had not

made a profit since 2004, declared in its filing that it had $172 billion in debt and $82 billion in

assets. As any competent business student could tell you, that ratio does not make a balance sheet

balance, especially when the company’s equity is worth little.

Fritz Henderson, who was named CEO of GM on March 30, 2009, was a numbers guy, but he

knew the company’s culture had to change. His vision of the new organisational culture revolved

around four guidelines: risk taking, accountability, speed, and customer-product focus. The problem

was that GM had tried before to reinvent itself, with mixed success. “GM’s past is littered with the

buzzwords of culture change. . . . It has struggled to impose cultural change across the highly

bureaucratic company in which brands, departments, and regions operated like self-governing and

competing states within a federation.” But, GM’s executives said, this time would be different. After

all, there was the bankruptcy and the selective elimination of entrenched leadership. Were things

really changing, though? Despite his well-intentioned plans, Henderson was fired by the board on

December 1, 2009. Some felt he wasnot radical enough to change the company. His replacement

was the person appointed by the Obama administration’s car czar to oversee the automaker’s

revival after bankruptcy, Ed Whitacre, the well-respected retired chairman and CEO of AT&T.

The challenges Whitacre faces in changing GM’s “plodding” culture are vast. A recent

meeting of the CEO and other top executives illustrates why. The meeting was called to approve

plans for a new generation of cars and trucks. Before the executives could go through all the

pictures, charts, and financial projections they had prepared, Whitacre stopped them to ask why

they were having meeting in the first place. “Y’all have checked all this out pretty thoroughly. I

imagine you are not going to approve something that is bad or unprofitable, so why don’t you make

the final decisions?” He let the plans stand and suggested that the group disband its regular Friday

sessions. And it is not just the top executives who did this. In the past, even minor decisions were

mulled over by committee after committee. Whitacre is trying to change that. Pushing authority and

decision making down into GM’s multilayered organisation and slicing away at the bureaucracy are





big parts of the cultural changes Whitacre is attempting. Changing GM’s entrenched corporate

culture is not going to be easy, but it is necessary if GM is going to become the automotive icon it

once was.

With the changes Whitacre initiated, GM achieved profitability in the first two quarters of

2010. As was his intent all along. Whitacre stepped down as CEO in early August 2010 and was

replaced by Daniel Akerson, a member of the company’s board of directors.

Discussion Questions

1. How would you describe the organisational culture at GM? Why was decision making so

slow – “plodding” as one analyst described it?

2. Why do you think the previous CEO’s (Mr. Henderson) attempts to change the organisational

culture might have been lacking?

3. What changes is Mr. Whitacre making to the culture of GM?

4. What types of resistance is he likely to encounter? Using Slide 15 (Techniques for reducing

Resistance to Change), what would be the best ways to address that resistance? Be specific.

Designing for Dollars

Great product design is absolutely critical for most consumer products companies. But how

do these companies know when a design feature will pay off, especially when every dollar counts?

How do they make those tough decisions?

Suppose you are the product development manager for a whitegoods manufacturer who is

considering manufacture of a front-loader washing machine. To date, the company has only

manufactured top-loader washing machines, as the majority of washing machines sold in Malaysia

have been top loaders. However, you have increasingly become aware of the growing trend towards

front loaders in some sectors of the market, and you have decided to get together with the

company’s industrial designer to review what you know about the pros and cons of the two different

types of washing machine. Below is a list of your first brainstorming session.





Points in favour of front-loader washing machines:

• Lower water usage.

• Suitable for under-counter usage in kitchens or bathrooms.

• More fashionable.

• Usually physically smaller than top-loaders.

• Can add a drying element to completely wash and dry in the same appliance.

• Tumble dryers can be placed directly on top, saving space.

• Probably more attractive for retirement villages and apartment living.

• Could be made with a stainless steel case to match other appliances. (But so could a

top-loader)

Points against front-loader washing machines:

• Smaller loads than most top-loaders.

• Cannot add cloths after washing cycle starts

• Cycle times are usually much longer due to pauses between directions of rotation of

washing action.

• Most front-loaders on the market have up to a three-minute pause at the end of a

washing cycle before the door of the machine can be opened. This seems to annoy

many people.

• Usually only have a cold water connection, hence the need for a water heating

element for hot and warm washes.

The decision you are faced with is a tough one. You know that your company has vast

experience in making top-loaders. It would be simpler and less costly to continue making top-loaders

because a changeover to making front-loaders would result in higher tooling and design work in

making the transition. Certainly, initial costs will be higher, which will mean that the purchase price

will need to be higher than for a similar top-loader. On the other hand, you cannot deny that there is

a strong market towards front-loaders.

You know that your CEO would want to know what the return on investment would be –

that is, would it pay off financially – in manufacturing front-loaders. However, both you and the

industrial designers who have been asked to investigate this business opportunity are not in a

position to answer that question. All you have is a gut-feeling that you ought to get into this segment

of market.





In an endeavour to answer this question you decide to research the field and see whether

you can find some information to help you build a case that you can take to your CEO. As you search

for information, you learn that when one of your competitors, Whirlpool, faced a similar problem,

they looked at what other ‘design-centric’ companies such as BMW, Nike and Nokia did. Surprisingly,

only few of them had a system for forecasting return on design. Most of them simply based future

investments on past performance.

Delving further into the overseas literature, you discover that, when confronted with a

similar problem, Whirlpool had found that a focus on customer preferences worked much better

than a focus on bottom-line returns. If the product development department could objectively

measure what customers want in a product and then meet those needs, the company could realise

financial returns. The design group at Whirlpool had created a standardised company-wide process

that puts design prototypes in front of customer focus groups and then gets detailed measurements

of their preferences about aesthetics, craftsmanship, technical performance, ergonomics and

usability. Whirlpool then charts the results against competing products and the company’s own

products. This metrics-based approach gives decision makers a baseline of objective evidence from

which to make investment decisions. This meant that design investment decisions at Whirlpool could

be based on fact, not opinion. This ‘new’ decision-making approach at Whirlpool had also

transformed the company’s culture, and led to bolder designs since the designers could now make a

strong case for making those investments.

Having found this information about how Whirlpool went about transforming its decision-

making process, you now think you can begin to build a convincing case for the introduction of front-

loaders that you can take to your CEO.

Discussion Questions

1. Would you characterise product design as structured or unstructured problem?

2. Describe and evaluate the process Whirlpool went through to change the way design

decisions were made. Describe and evaluate whirlpool’s new design decision process.

3. What criteria does the washing machine design group use in design decisions? What do you

think each of these criteria involves?

4. Do you think this decision-making process would suit linear or non-linear thinkers? Give

reasons for your answers.

tutorial-6_case_applications-too big to change_and_designing for dollar

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