GM on the Skills You Need to Manage Disruptive Innovation

By Scott Kirsner |  February 3, 2014

Few companies can lay claim to General Motors‘ global brand recognition — or its heritage of innovation. The Detroit automaker, founded in 1908, gave us automatic starters, tail fins, air bags, the catalytic converter, and the Corvette. But GM has also been recovering from a 2009 bankruptcy and a massive bailout by the U.S. government. (The Treasury Department sold the last of its GM holdings in December.) In 2012, it cut about 100 jobs in its advanced R&D team.

2013 was a rebound year, however: GM’s stock price rose 40 percent, and it re-entered the S&P 500. In January 2014, GM’s head of global product development, Mary Barra, was named CEO.

InnoLead editor Scott Kirsner spoke with Clay Phillips, director of technology and business support at GM, about how the automaker is retooling research and development in the wake of bankruptcy; why some of its attempts to create internal innovation groups failed; and the skills necessary to cultivate disruptive innovations. Phillips also shared his vision for a “new personal mobility model” that is emerging in the 21st century, and will present a challenge to any company connected with the transportation industry.

Q. You spent time in the Navy, and like to talk about innovation as an exercise in intelligence (although not the “spying” kind.) What does that mean at GM?

A. I served as an intelligence officer with the US Navy — with a reconnaissance squadron aboard aircraft carriers and then in D.C. covering the Middle East. Most high value intelligence — in the military and in business — has to do with blindspots, the “unknown unknowns.” Your job is finding them, defining them, and then dealing with them in creative ways before anyone else does.

In the Navy, success meant beating the bad guys before they knew what hit them and getting all the pilots back on deck in one piece. In business, it means creating and sustaining a unique competitive advantage in a market for superior growth and economic returns.

Q. What does your team there look like?

A. I report to the CTO, who is also the VP for Global R&D, as well as the President for our corporate venture capital arm, GM Ventures. The team is very small and diverse — a blend of technically-oriented business people and business-oriented technical people. Some are fairly early in their careers, others more experienced.

Q. You’ve run multiple innovation groups at GM, some of which you shuttered. What are some of the lessons you’ve learned that might be helpful to other innovation officers?

A. In the course of my career at GM, I’ve seen many attempts at innovation organizations. Many had an initial impact but were not long-lived. Factors that led to their demise included: 

      1. Being called out as a dedicated organization responsible for innovation…implying that others were not.
      2. Too much process- and template-driven work. Templates and processes are fine for routine work, but they make people’s brains go numb when applied to fuzzy front-end creative work.
      3. They were either too close or too far from the product development organization – the “Goldilocks effect.” Too close and you can only work on incremental change that the product development organization can adopt easily; too far, and you are doing clean sheet, blue sky projects that can trigger anti-bodies. They’re just seen as too risky and too far-fetched.

Q. A lot of companies struggle with whether they should build or buy. We’ve talked to some companies that are great at internal development, and others that prefer to leverage outside parties, either startups or universities. Does GM have a preference here?

A. We do both, but are consciously trying to do more open innovation work that leverages universities, known automotive suppliers, start-ups, and companies that don’t have a history in the auto sector.

Q. You’ve done lots of thinking about large industrials moving to “mobility models.” Tell us about that.

I subscribe to the view that the auto industry is going through a fundamental disruptive transition from a 100+ years old industrial model that is highly capital and labor intensive, highly regulated, runs on global-scale economics, high volume factories, highly-engineered and designed products, and a distribution system based on inventories, franchised dealers, and user-owner sales transactions.

Demographics, regulations, economics and several advanced technologies (materials, electrification, connectivity, etc.) are converging and leading to an emerging personal mobility model that could lead to cheaper, safer and more efficient personal mobility. Here’s a slide I use to illustrate some of this:

These new models for personal mobility are emerging are being driven by market trends, such as urbanization, and the growing acceptance of sharing versus owning various products. Think about Airbnb and Zipcar. At the same time, there are technologies that are enabling new capabilities for vehicles, such as electrified propulsion; high-speed connectivity between vehicles, people, and infrastructure; and advanced sensors and controllers that allow for autonomous vehicle operation with little or no human control. The integrating function for all of this is the data that feeds and is generated by this eco-system, and creates the potential for new value propositions, mobility options and customer experiences.

Neanderthals and more modern humans appear to have coexisted for a period of time. The industrial and mobility models will probably coexist for a long time too. But I have no doubt that this is a fundamental transformation that is creating big opportunities and threats for existing and new stakeholders. The market should decide who prevails, but a lot of the more interesting developments are playing out in less than free market economies, which adds another wrinkle.

Building on the evolution analogy, ultimately, I think the DNA that will make a difference between winners and losers will be the ability of organizations (public and private) to anticipate change, embrace disruptive innovation, and then move with agility to take advantage of the opportunities — all with an eye on delivering a better mobility experience for consumers — cheaper, safer, more pleasing, and more sustainable.

Q. The last time I visited GM’s R&D campus was about 10 years ago. What’s changed since then?

A. Instead of feeding many projects with a little money and resources for a long time, now we’re focusing on fewer bigger, bolder plays. The idea is to develop them hard and fast and be agile, and get them into products or services quickly. And if some things don’t make it, we’re going to pull the plug – which we’ve done in a few instances.

When you were here, we were working on hydrogen fuel cells. There was a lot of economic and technical optimism about those, and there was a ton of progress made, but commercialization remained a long-term play. Coming out of bankruptcy, we’ve really got to be working on stuff that pays the rent and makes money nearer-term.

Q. It seemed like there was also a dismissive view of hybrids at that time — a belief that consumers didn’t actually want them.

A. I was part of the team that did the initial competitive and strategy assessment on hybrids a decade ago. GM concluded that we were going to put our hybrids in full-size trucks drawing technology from what we had learned at Allison Transmission, which did hybrids for buses.

So while Toyota was focused on hybrids for small cars, our analysis was that we could save more fuel with a system applied to larger vehicles. It missed the market and customer view. Pickup drivers want a pickup truck — they don’t care as much about fuel consumption — and people inclined to more sustainable transportation want smaller vehicles.

Q. But after that you did the Chevy Volt, which got a lot of attention.

A. While the Volt isn’t a high-volume seller compared to mainstream models, it has been a success technically and for Chevrolet and GM’s image. It does what we said it would do – it delivers electric vehicle performance, excellent fuel economy, traditional range, and it’s fun to drive. When we were going through bankruptcy, we stuck with the program and delivered a very satisfying and award winning vehicle. We’re now launching a Cadillac version – the ELR – that draws on Volt technology.

Q. Your world must be getting interesting when you see companies like Google starting to do automotive R&D, with their self-driving cars.

A. I think companies like Google are looking at the car as a platform that houses other sources of value, like computing and connectivity elements. I think they could be right in the long run. But they don’t understand the auto business, and the auto business doesn’t understand them. I think more cross-pollination between these industries could lead to a collaborative and constructive outcome. The data industries are moving at a much faster pace, however — I think they’re impatient with the auto people, so they may try to leapfrog.

Q. There is a GM presence in Silicon Valley, right?

A. We have a small R&D office in Palo Alto — some testing facilities and a tech scouting outpost and a GM Ventures manager. There’s also a team that focuses on advanced infotainment and telematics technologies. They bring a lot of interesting new ideas and contacts to the company. But one challenge is that it’s three time zones away from headquarters. Another challenge is that the mainstream product development organization has a lot on its plate. They’re trying to meet so many economic, technical and regulatory requirements to get a high quality product out the door. Sometimes, the new and more radical ideas are seen as too disruptive — they add risk to the programs, and these are people paid to take risk out of the programs.

The west coast office helps introduce the mainstream organization to new opportunities and threats that are emerging rapidly in areas that didn’t exist just a few years ago. Grains of sand can be an irritant to oysters, but some become pearls.

Q. You’ve done some things to try to better organize to identify and embrace disruptive technologies.

A. What I was asked to do last year was put a team together to partner with each of our project leaders looking at about a dozen or so disruptive technologies — things that are disruptive or transformative for manufacturing, the whole vehicle, a subsystem of the vehicle, or a business model.

For each area, there’s a technical lead that’s identified, but they’re being funded and guided in a different way than a conventional R&D project. They’re being treated like mini-startups. My team helps do the strategic due diligence, focus on the value proposition, the commercial relationships, the contract terms and timetables and intellectual property nitty gritty. (See the slide below for Phillips’ take on the skills necessary to embrace disruptive innovation.)

Q. What sorts of things do you do to help those mini-startups, if your principles are trying to embrace open innovation rather than do it all here?

A. Our first step is running the value proposition litmus test on these technologies. Is there a significant benefit for a consumer? What’s the commercial value to GM? And because a lot of this requires partnering with other companies, we address the basic questions of who do we need to work with, why would they want to work with us, how do we attract them?

Q. You’re getting ready to leave GM in March. How have things changed in your tenure?

A. GM R&D has a deep and long history of invention. In the past, it operated with a model closer to universities. Post-bankruptcy, and especially over the past two years, it has pivoted to a more aggressive innovation model. We’re using fewer and more business-oriented metrics. Our time horizons are shorter. We’re not afraid to kill things that aren’t likely to succeed, and replace them with ones that are.

The culture change has been about moving from invention to innovation, being more agile, more nimble. Creativity has always been around. But we’re focused on applying it faster, and challenging internal and external paradigms that get in the way.