Chapter 5: Marketing

5.1 Innovation and the Constancy of Change

Rick Wagoner

I want to talk about change, innovation, and the long-standing relationship between General Motors and the Sloan School of Management. The relationship between the Sloan School and GM is based on a rich history and solid results. GM and Sloan share a common heritage of cutting-edge research, real-time business applications, and bottom-line contributions in business and education.

Today, GM and the Sloan School remain, in many ways, reflections of the man who largely defined both institutions—Alfred P. Sloan.

At GM, Alfred Sloan set out to build a different kind of auto company—one that embraced his belief in, as he put it, "a car for every purse and purpose"—one that rejected the prevailing notion, in 1918, that customers could buy a car in any color they wanted, so long as it was black.

At MIT, Alfred Sloan had a vision of a different kind of business school, one that promoted a closer association between science, engineering, and industry. Sloan imagined a school that did more than just teach best practices—he foresaw a school that helped define them.

And I think we can all agree that it's no stretch to say that Sloan achieved more than even he thought possible, at both institutions. Under Sloan's direction, GM went on to become the world's most successful automaker. And under Sloan's influence, the Sloan School went on to change the paradigm of management education forever.

And yet, successful as GM and Sloan have been over the years, we're both in the process of reinventing ourselves today. Frankly, we have little alternative. As Sloan, himself, said, "There is no resting place for an enterprise in a competitive economy … no company ever stops changing." And that's as true today as it was in 1918, as true for MIT as it is for GM.

So, how do we deal with the constant changes that we find ourselves confronting every day? Let me offer a little story.

Last year, the city of Detroit marked its 300th anniversary, and one of the things the city did to celebrate was open a time capsule that had been sealed in 1900. In the time capsule were some 55 letters from prominent business and community leaders at that time, and it's interesting to note that not one of those letters represented the auto business.

In 1900, the auto companies were, in many ways, the dot.coms of their day. In fact, for most people in 1900, cars were little more than an expensive novelty. As Sloan put it, "many bright automotive ideas ended with a horse and a towline."

Consider the case of Billy Durant, founder of GM, whose single best decision may have been to bring Alfred Sloan into the company. From 1914 to 1920, when GM was just one of a number of speculative auto companies, investment capital poured into the auto industry. During that period, GM stock soared more than 5,500 percent.

In the early 1920s, however, the overcrowded automobile industry failed to deliver on expectations, and auto stocks plunged. In six months, GM lost two-thirds of its market value. In a panic, Durant began to borrow huge amounts of money and buy back shares, in a futile attempt to prop up the company's stock price.

To make a long story short—after a wild ride, GM eventually recovered. The upshot is that as uncertain and challenging as the auto industry is today, in some ways, it's really not so different from our industry of 100 years ago. History shows us—and the dot.com debacle is just the latest example—that one of the few constants in our world is change, and unless you keep up with it, you'll be history yourself.

At GM, we think the answer to keeping up with this change—or better, staying ahead of it—lies in innovation. GM built its reputation, and its position at the top of the global auto industry, primarily because of its commitment to innovation—product innovation and business innovation.

In fact, you could argue that Alfred Sloan's greatest contribution to society was his "invention" of modern business management. Under his leadership, GM was a pioneer in market research, retail and dealer franchising, cost accounting, the annual model change, vertical integration, and much more.

But, Sloan's GM built a great track record of product innovation, as well—from the self starter and electric headlights, to safety glass and the fully automatic transmission—technologies we don't even think about today, but which revolutionized the auto industry 50, 60, 70 years ago.

At GM, we're very proud of our innovation history—but, of course, we can't operate in the past. As Thomas Jefferson put it, "The past is a good place to visit, but I wouldn't want to live there."

My point is simply this—it's innovation that got GM where it is today, and it is continued innovation that will enable us to succeed in the years to come.

Of course, I should point out that not all of GM's past innovations have come out exactly the way we intended. From the ill-fated coppercooled engine of the 1920s to the Corvair of the 1960s, from the Rotary Engine of the 1970s to our assembly-line robots that painted themselves in the 1980s—we've had a few miscues.

But that's part of the innovation process. We don't stop every time we swing and miss—we regroup, learn from our mistakes, and try again. In fact, my favorite quote from Sloan's famous tome, My Years with General Motors, is this: "Each new generation must meet changes—in the automotive market, in the general administration of the enterprise, and in the involvement of the corporation in a changing world. … The work of creating goes on." And it does go on. In fact, we've been doing a lot of "creating" at GM, lately—working hard to really turn our company around and get it back on the road to vibrancy and growth. And while we continue to face plenty of challenges, we're also making some good progress—in our quality, our cost competitiveness, our financial results, and most important, in our new products. This is the kind of innovation that Alfred Sloan would have expected of GM—just as he would have expected the kind of progress and innovation that you are driving these days at MIT and the Sloan School.

Long before the days of GM and MIT, the Greek philosopher Heraclitus pointed out that "Change alone is unchanging." As he put it, "You can't step twice into the same river." Of course, his words still ring true today, but that river he talks about—it seems to flow faster all the time.

The rate of change in today's world is extraordinary. At GM we work hard to keep ahead of it. And we want to recognize the organizations that work equally hard to help us remain ahead of it.

The Sloan School of Management is a great example of just such an organization; and at GM, we want to recognize the role it plays in preparing business executives who understand and value the need for innovation. I am therefore pleased to announce a gift from GM to the Sloan School of Management, to be used for the creation of a new award to honor excellence in marketing science theory.

The award will be called the "Buck" Weaver Award, in honor of Henry "Buck" Weaver, the first director of Consumer Research at GM—and, we believe, the first in the auto industry—in the 1930s.

Weaver pioneered many market research methods that we take for granted today. He had customers designing their own cars, helped link GM styles with designs outside the auto industry, and—truly radical—helped GM build cars with the features that customers said they actually wanted.

"Buck" Weaver was way ahead of his time—he was "delivering the future" in the 1930s, just as the Sloan School does today. The "Buck" Weaver award will be presented by MIT to an individual who has made significant contributions to marketing science theory and relevance over the course of his or her career. MIT will present the first award next spring.

At GM, we're proud to play a part in ensuring that the Sloan School continues to build on its extraordinary reputation for innovation and the recognition of innovation excellence.