What the Newspaper Industry Could Learn from GM About Do or Die Innovation

As newspaper companies lose billions in market capitalization and innovation-minded journalists battle newsroom “curmudgeons” shell-shocked by the rapid pace of change amid increasingly dire economic realities, a lesson in burn-the-rule-book transformation might come from an unexpected source: General Motors (GM). That’s right, the once-dominant car maker that missed every trend that has led to Toyota’s (TM) dominance, from quality to environmentalism, is betting the farm on a radical approach to a radical new car — and risks going down in flames if it fails.

Most media types probably thought Nick Carr’s article in the July/August Issue of The Atlantic, “Is Google Making Us Stupid?,” was the most interesting and relevant to media. But Jonathan Rausch’s piece on GM’s last ditch effort to transform itself by producing the world’s first mainstream electric car (after it failed to do so in the 90s), is a tale of do or die innovation that everyone in the newspaper industry — and media generally — must read.

Here are some of the key passages:

When one of the world’s mightiest corporations throws everything it’s got at a project, and when it shreds its rule book in the process, the results are likely to be impressive. Still, even for General Motors, the Volt is a reach. If it meets specifications, it will charge up overnight from any standard electrical socket. It will go 40 miles on a charge. Then a small gasoline engine will ignite. The engine’s sole job will be to drive a generator, whose sole job will be to maintain the battery’s charge—not to drive the wheels, which will never see anything but electricity. In generator mode, the car will drive hundreds of miles on a tank of gas, at about 50 miles per gallon. But about three-fourths of Americans commute less than 40 miles a day, so on most days most Volt drivers would use no gas at all.

That March, the group laid its conclusions before Rick Wagoner and the rest of the top leadership. Preuss and Larry Burns, who runs the company’s research operations and is regarded in the industry as something of a visionary, did not pull punches. GM had to show a real change of mind on the environment and sustainability or remain Toyota’s doormat. It had to lead on plug-ins or get left behind in yet another new market. It had to restore credibility damaged by the mishandling of the EV1, the abdication on hybrids, and the repeated failure to deliver on promises. It needed not just one more in a long series of research programs and concept cars but a real-world product, one ambitious enough to impress even the cynics.

The group proposed a plug-in that would drive at least 10 miles on a charge. It would be a cool, stylish, high-tech car, marketed to trendsetters. They called it the iCar.

The company then made a series of decisions that look, in hindsight, startlingly audacious. Instead of becoming a safer bet as it ran the internal slalom, the iCar became more ambitious. Its target range on a single charge increased from “at least” 10 miles to 40—the outer limit of what seemed possible. Not a few outsiders think this decision was misguided; a 20-mile battery, say, would still allow many commuters to drive gas-free most days, and it would be easier and cheaper to build. But Lauckner, always pushing, insisted on a car that the public would perceive not just as saving gasoline (that was Prius territory) but as replacing gasoline. The Volt, as the iCar was eventually renamed, had to be perceived as severing the umbilical cord between the car and the gas pump, and nothing less than the longest feasible gas-free range, he believed, would accomplish that.

Perhaps most audacious of all was a decision to allow unusual public access to the Volt program. The industry’s standard procedure is to develop new products, especially risky ones, out of sight, unveiling them only when proven. GM decided to do exactly the opposite. The PR department flung open the doors. GM executives discuss the program’s progress as publicly as if it were a bill in Congress. They show off photos of batteries under development. They promise to let reporters ride in test cars. They lead them through the labs and design centers and even into the wind tunnel. They run ads, for instance in this magazine, touting the Volt in the present tense, as if it already existed. By earlier this year, expectations were so high that President Bush was commending the car, and it had developed a national grassroots following. This article is itself a product of the fishbowl strategy.

All the talk about “saving newspapers” is focused on finding new business models to keep doing what they’ve always done — which is like GM looking for a new business model to sell the kinds of cars it made in the 50s and 60s. What the newspaper industry, if it is to survive as such, must find is a radical new value proposition for news — something so audacious, so self-evidently valuable that, if it can find a way to deliver it, would lead to the rebirth of newspaper journalism.

Is this a panacea? Of course, not. Nor is it for GM:

On the other hand, if it fails, it will fail in full view. GM will have given its critics the most spectacular example yet of a broken promise, and Toyota will look prudent instead of timid.

Despite its head start, GM will have to fight to be first. In January, after a year of watching GM bask in the Volt’s publicity, Toyota reacted. At the 2008 Detroit auto show, Katsuaki Watanabe, the president, announced that Toyota would produce a lithium-ion plug-in car of its own, and would have it on the street in test fleets “not at the end of 2010, but earlier than that.” Toyota was talking about a few hundred experimental cars in a controlled setting, not tens of thousands of cars in dealer showrooms, a much less ambitious goal than GM’s. But Toyota is famous for under-promising and over-delivering.

In February, Tesla, the Silicon Valley company, announced plans for an electric sedan with a gasoline-powered generator, like the Volt—but set to arrive a year earlier, in late 2009. In March, BMW said it might produce an electric car for the U.S. market, and in May, Nissan said it would have one in test fleets in 2010. The drumbeat seems likely to continue. Simply by announcing the Volt, GM has attracted a bevy of competitors, bringing the electric car’s mass-market advent from over the horizon to around the corner.

A bold new vision won’t immediately turn the economic tide, but it could turn the tide of defeatism.

GM is using the publicity to excite the public, of course. It is also using the publicity to push itself. “We thought it would be a motivating thing to do,” Wagoner says. “Certainly it gets everybody aligned”—not always easy in a giant corporation. And GM wants credit for trying, which it never received for the EV1. “If it fails,” Harris says of the Volt, “we want people to know exactly why it failed. It wasn’t lack of commitment or passion on our part; we hit a hard point we couldn’t get around.”

GM’s leaders, needless to say, do not particularly welcome the competition from a business point of view. But they relish it from a psychological one. When I asked Larry Burns, the R&D vice president, how he felt about Toyota’s plans, he said, “Paranoid, because they’re good.” But the real answer was the grin that spread across his face as he recalled Watanabe’s announcement and said, savoring each syllable, “He was a follower.”

The newspaper business is being crippled by competition, which, like Toyota in the case of GM, is doing a better job of delivering what the market wants and needs. GM realized that to survive it couldn’t just catch up to the competition — they had to surpass it — and it had to do so by delivering the holy grail for consumers.

How can newspaper companies surpass the competition? How can they be better than Google (GOOG)? Those are the kind of questions that newspapers should be asking — and then pursuing bold answers.

Newspapers need to stop trying to save the old business or searching amorphously for new business models and instead figure out what needs are going unmet in the market for news — and then be first in the market to deliver breakthrough solutions.

And they need to do it FAST:

Moreover, improvements were being incorporated as fast as they could be conceived; the battery would be on its second generation in January, its third in June. “It’s incredible,” Turner said. “The design they’ve come up with for thermal changed 10 times before they delivered the first battery.” And all of this was before the arrival of a competing battery that might be as good or even better, designed jointly by the Massachusetts-based company A123 Systems and the German company Continental A.G. “We’re inventing and creating on the critical path,” Turner said. He was using the industry jargon for the countdown to production, when time is money and delays can cost millions. “I’ve got guys trying to release things before they’re actually invented.

Comments

[Paul Killinger:]

Well, you're sure right about one thing. GM has an equal or better chance at surviving than the Daily Blurb. At least people still need to drive.

The Volt, however, is a different question. Its initial cost and reliability are very likely to be less than stellar, not to mention the daunting learning curve to actual consumer acceptance of such a radical automotive technology.

GM's recent decision to bring several successful foreign sold vehicles here is a real home run, however. These cars average some 40 mpg, are affordable and already proven sales winners.

They should keep the General's ship from sinking until we see improvements in subsequent Volt models, especially when our government gets its nose out of the energy choice debate and leaves this vital matter to market forces.

The only rear danger here is if Washington keeps meddling in energy markets. If they continue on their path of poor arbitrary choices, the subsequent economic depression will negate any smart moves by GM or any other players in the automotive industry.

2008 Jul 21 01:36 PM

[billsoldest:]

Your statement -- that the "competition ... is doing a better job of delivering what the market wants and needs" is absurd since this is an evident reference to Google.

It's absurd because Google is an aggregator of news, i.e., it assembles a pastiche of information on a subject using various sources. Among these sources are the New York Times, the Journal, AP, etc., all of which are at least partially print-based.

So you're saying that Google, which relies on newspapers for its sources, is doing a better job than newspapers are doing. While you're thinking over that illogicality, try to provide an example of a news source that is better than the New York Times of providing what "the market" is after. Since the Times is the most comprehensive, serious, imaginative, best-written and edited newspaper in the world, that might prove difficult.

Comparing newspapers to GM, therefore, doesn't quite work, though you're right: newspapers do need to reinvent their revenue model.

By the way, your reference to Turner in the last quote lacks a first reference, so the reader doesn't know who you're referring to. First references are fundamental in journalism.

Maybe you should be able to prove that you could get a job at a good newspaper before you set yourself up as an analyst.

2008 Jul 21 02:14 PM

[Paul Killinger:]

The NY Times WAS one of the best newspapers in the world at one time, perhaps. (Ironically, just as GM was the leading manufacturer of automobiles once.) Now, with all due respect to you, I can say as a reader of 50+ years, it's a biased, liberal piece of junk! (Hmm, maybe that's reflected in today's stock price, as well.)

2008 Jul 21 02:49 PM

[User 230096:]

It's hard to see the Volt being a huge hit. It looks ugly, like a tank trying to be green. The Prius is a hit not just for being greener, but for looking greener. People want to look the part too. If we're gonna change the world, I want it to look different too.

2008 Jul 21 08:06 PM

[Paul Killinger:]

Good point, my friend. We'll get to see how next year's new GM models are received first. They are European-based Prius look alikes, and they'll be on the market here a good year ahead of the Volt.

2008 Jul 21 11:51 PM

[Doug Korthof:]

GM has no intention of releasing large numbers of VOLT. It's all a PR ploy. GM has stated to NHTSB that the VOLT won't be produced in more than tiny number through 2014, and should not be counted in GM's supposedly desperate struggles to meet MPG standards.

GM's EV1 was never marketed by GM, never offered by sale by GM, and was sabotaged orginally by GM's failing Delco batteries. It was Toyota that proved that NiMH batteries were successful, and GM had to react; it reacted by selling control of the NiMH patents to Chevron, which then funded a lawsuit against Toyota, collecting $30M after which Toyota ALSO stopped producing an EV.

These EVs are still running, over 100 miles range, proving that GM's "quest" for 40 miles range is just a dodge and a lie. They had a serial hybrid in 1969 (Oldsmobile) and 1999 (a version of the EV1). GM is just trying to delay things until gas prices come down; only the gullible believe GM.

2008 Jul 22 10:44 AM

[Paul Killinger:]

Doug,

Thanks for your informative post.

I'd have to say I agree with your general premise about the General. Born out of the chaos of swallowing or bankrupting dozens of competing auto companies (...much like Budweiser, incidentally), they've never proven themselves to be anything other than jerks, much less upstanding corporate leaders.

But it is what it is, as the kids would say. Now, as Americans, we find ourselves forced to root for their survival. And, owing to their political importance, one way or another they probably will.

Altogether a sorry state of affairs, I'd say.

2008 Jul 22 11:18 AM

[grandfunkle:]

The fly in the ointment is a 1,000 pound gorilla. What journalist isn't set up for Google alerts for local news? How often is the alert a url to the newspaper's website and a story written by that weary journalist? Proprietary lines are gone. We originate the copy, but we can't protect it. It now add value to Google's or another's product. Ebay is doing the same thing newspaper classifieds do — selling things. The local newspaper peddles it to the local market, eBay peddles it to the world. Where's the value? We should all hope the merger between eBay and Gannett goes well.

2008 Jul 24 09:38 AM