Auto Bailouts and the Innovators Dilemna
All this talk of bailouts over the last few weeks, and now the talk of bailouts for the major U.S. automakers, makes me think of one of the lessons regarding Christensen’s Innovator’s dilemma.
One of the excellent points Christensen makes is that successful companies, so invested in the ideas that made them successful, invest in old ideas despite evidence they’re no longer viable. This explains why WordPerfect resisted making a Windows version of their best selling word processor, why Microsoft initially resisted investing in the Internet, and why dozens of once market leading companies fell off the map.
So when I hear talk of bailouts of failing organizations, particularly auto manufacturers, I can’t help but see it as an innovators dilemma type problem. By investing in an old idea, and the old guard of the U.S. auto industry, we slow the next wave of change from happening. We enable thousands of people to believe their old ways and skills are still viable, instead of motivating them to seek out new skills, products, or roles that have a chance at thriving in this decade and the next.
When you’ve been successful with an idea for years, an idea you’ve put your life into, its hard to recognize it’s time to pull the plug. Odds are high you’ll need someone else to pull the plug for you. Like in that cliched scene in a zillion medical shows when the heroic doctor refuses to stop giving CPR to a favorite patient, someone has to tap you on the shoulder and say “Hey. It’s over. Time to move on.”
If it were not for the larger financial crisis I doubt there would be much support for auto bailout plans. Chapter 11 can work quite well. It was the primary system used to resolve the collapse of the U.S. Steel industry in the 1970s. Pittsburgh survived, and with 15 years began to thrive, in much the same way Detroit might. It won’t be fun, but needed changes rarely are.
$25 billion to hold on to the past is guaranteed to return less on that investment than $25 billion spent to pave the way for the future.