What GM and Apple Can Learn From One Another
By Chris Haak
All of us at Techshake are obviously dedicated car buffs. Gasoline (or perhaps diesel fuel) runs through our veins, and our joints are lubricated by Mobil 1. But several of us are also serious technology geeks. It pained many of us to see what this industry has gone through over the past two years, and yet, rising from the wreckage of laid-off workers, closed auto plants, stiffed shareholders and bondholders, and a government on the hook for some $50 billion-with-a-B in bailout funds, we’re beginning to see an exciting round of outstanding new vehicles.
In the so-called ‘malaise era’ of the 1970s and 80s, small, efficient, and – most importantly – reliable Japanese imports swept into a post oil embargo America and ate the American automakers’ collective lunches. Followed by their breakfasts, dinners, and desserts as well. This time, it feels different. Propulsion technology has sufficiently advanced so that cars can be fun-to-drive and efficient. Big block V8s are no longer required (nor are they even produced anymore) for screaming fun in a new car. Who needs a big block when the 2011 Mustang GT’s 5.0 doubles the 1993 Mustang GT’s 5.0’s horsepower output (412 vs. 205)? And yet, the 2011 Mustang GT with the six-speed manual is rated at the same 26 miles per gallon highway rating that the 105-horsepower 2.3 liter base Mustang achieved with a four-speed automatic. Quadruple the horsepower with the same fuel economy sounds good to me. Domestic cars in large part have similar (sometimes better, sometimes worse) quality scores to Japanese cars. Let’s look at this issue more closely.
GM, Ford, and Chrysler earned their poor reputations thanks to decades of arrogance, ignorance, neglect, and overproduction. And I’m still not 100 percent convinced that the last vestiges of arrogance and poor decision making have been exorcised from these three companies. Some consumers are willing to give these three companies a second chance. I did, and while the experience is not a dream come true, I don’t regret it.
After a dozen years of owning nothing but late-model but not new GM cars, I was ready to buy my first new car in summer 2003. After sampling various makes, models, and body styles, my wife and I headed to the Honda dealer to look at an Accord. The car was a revelation: it was quiet, refined, comfortable, and perfectly assembled. I ordered a new Accord a week later, and subsequently bought two other Japanese-brand vehicles over the next several years (though all three were built in the US.) It was definitely the beginning of a trend.
When we bought the second one, we didn’t really consider any domestic-brand products. The third one, though, which wound up being a Sienna minivan, marked a personal turning point for me, in which I felt that GM’s offerings were competitive with those of foreign brands. I very nearly bought an Enclave, but due mainly to convenience and pricing reasons, went with the Sienna. Then, a year later, I again considered a few imports, but they didn’t seem to offer the style or pricing of the then-new Cadillac CTS, so I signed on the dotted line for a Cadillac.
The good news for GM is, though I’m no longer loyal to GM as I once was, I am still willing to consider GM products. The bad news for GM is, I am only willing to consider GM vehicles, not to automatically assume they are what I want to buy. Whoever makes the best-performing, most efficient, best looking, most comfortable car with a decent brand name will get my money the next time I’m buying.
GM’s litany of problems from the 70s through the 90s are well-documented. Some of them have been addressed, and some of them have not. There are still long-in-the-tooth, uncompetitive models in dealer showrooms (Cobalt, Aveo, DTS, and Lucerne to name a few). Interiors now look good, but don’t always feelgood. But what GM lost over those decades, and what will be nearly impossible to get back, is receiving the benefit of the doubt from a majority of consumers. Like me, many of GM’s former buyers were fiercely loyal to the brand, and assumed that a lemon like a Vega or Oldsmobile Diesel was just a fluke. Get two or three lemons, and that fluke becomes a pattern, and that loyalist becomes a skeptic at best, or a former customer at worst.
What does all of this have to do with Apple or the perception gap? Giving the Detroit Three the benefit of the doubt for a moment and assuming that domestic-brand cars are as good as or better than their Asian and European rivals (to some extent, JD Power, Consumer Reports, and TrueDelta, bear this out), why is Hyundai still eating Chrysler’s lunch? Why does Toyota sell twice as many Camrys as Chevrolet sells Malibus? We can blame the perception gap. The perception gap means simply that the reality that most of the cars sold by GM are as good as the competition’s are lost on millions of buyers, because there is a gap between the actual decent quality of the vehicles and the perception that GM vehicles offer only poor quality.
Shifting gears (and industries) from automobiles to consumer electronics for a moment, consider the situation that Apple finds itself in with the iPhone 4 “antennagate” glitch. If you hold the phone a certain way (which happens to be the way I naturally hold my phone), your skin interferes with the cellular antenna, and your call might drop in low-signal areas. And yet, in spite of this problem, which the company denied was a problem at first, and only under public scrutiny actually admitted there was some sort of issue, Apple continues to succeed. Why?
I was struck by the parallels between GM circa 1971 and Apple circa 2010 when I read an opinion piece in the Wall Street Journal by Jay Greene entitled, “.” The crux of Mr. Greene’s argument was that because of the goodwill that Apple had built up with its customers, they were willing to cut Apple some slack for the glitches in iPhone 4 reception. In other words, they were willing to give the company the benefit of the doubt. That same benefit of the doubt that many auto consumers are unwilling to give to General Motors.
Mr. Greene delves a bit further to his thoughts as to whyApple has such goodwill from its customers. The answer: design. Below is a quote from the article, but with the bolded words representing edits that I made to the quote to make a point (the original quote will follow).
How is that possible? The reason is design. And not just the design of the Vega, which looks slick and—despite the engine and rust issues—still does more things better than just about every other car available. It’s selling well because GM’s decade-long focus on design has bought it significant goodwill among consumers.
“Honestly, it doesn’t faze me. I know GM and I know they fix their mistakes,” a 22-year-old student, Ross Beck, told the Associated Press on July 16. GM’s customers are willing to cut the company some slack because of its reputation.
It’s hard to imagine anyone making the statement above in 2010 about a GM car, but that’s basically what people said in 1971 about the Vega. After all, it was a good-looking car, was fuel efficient, and apparently drove well compared to its contemporaries.
The original quote from the article about the iPhone 4 is below:
The reason is design. And not just the design of the iPhone 4, which looks slick and—despite the antenna glitch—still does more things better than just about every other mobile phone available. It’s selling well because Apple’s decade-long focus on design has bought it significant goodwill among consumers.
“Honestly, it doesn’t faze me. I know Apple and I know they fix their mistakes,” a 22-year-old student, Ross Beck, told the Associated Press on July 16. Apple’s customers are willing to cut the company some slack because of its reputation.
Once upon a time, GM found itself at the same crossroads that Apple finds itself at today. In GM’s situation, poor decision making was hidden by the company’s immense size; neither the Vega, nor the Oldsmobile Diesel, nor the X-Cars, nor the Fiero, nor the Quad 4 were problems big enough to kill the company individually. But taken together, each of these problems removed the perception of “GM quality” from a few hundred thousand buyers’ minds, and they went elsewhere for their cars. Peel away a few hundred thousand buyers per year, while competitors like Honda, Toyota, and Datsun/Nissan are churning out honest, reliable (though at times, rust-prone) transportation, and it’s easy to see how GM’s market share dropped from over 50 percent to below 20 percent in the ensuing decades. The company took its eye off the ball, took its success for granted, and hungry competitors ate its lunch.
I don’t mean to suggest that all hope is lost for GM, or that GM’s ultimate fate – a trip through Chapter 11 – will someday befall Apple. Apple is led by an impressive management team and its execution is top-notch most of the time. But the company also needs to keep its eye on the ball, keep its eye on competitors, and continue to surprise and delight its customers. Should it do that, it will likely be able to continue its run as the world’s largest technology company (as measured by market capitalization) the same way GM was the world’s largest automaker for seven decades.
GM can learn a lot about how to rebuild customer loyalty by studying what made Apple successful over the past decade, while Apple can learn a lot from GM’s mistakes over the past decade to learn how kill customer loyalty, and hopefully avoid GM’s past mistakes.