Chapter 7 – Designing Organizational Structure

Video Case: GM Global Research Network

Drivers want cars that are expressive with a strong sense of identity. Automobile manufacturers spend millions of dollars to design vehicles that will resonate with buyers. Years before new models go into production, engineers are at work seeking the next level of innovation in design and functional and safety features. To lay the groundwork for new generations of cars and trucks, General Motors has built a new business model that partners with other companies and uses an extensive global network of researchers and engineers.

Competition in the auto industry has pushed manufacturers to focus on innovation. To innovate, venerable GM has changed its business model to reflect the technology revolution and to use technical capabilities from around the world. The days of the old business model with the “lone wolf researcher” are gone, says Alan Taub, executive director of global research and development. “We really are in a team environment for innovation and a global team environment.” That requires a network of research minds both inside the company and from universities and research labs, not only in the United States but all over the world. Today for every two researchers and engineers working inside GM labs, there is one external partner. GM has recruited engineers and scientists from North and South America, Europe, the Middle East, China, Taiwan, India, and Korea.1 This global research network enables GM to tap into a vast pool of technological expertise. When GM’s hydrogen-powered fuel cell vehicles reach the market, the technology will reflect many global influences.

The world’s largest auto maker for many decades, GM manufactures vehicles in 32 countries and sells in 200 countries. Changing a business model in such a large organization is a huge undertaking. It’s much simpler to work with people down the hall than to encompass talent throughout the world. The change requires a workforce that is global, mobile, and comfortable working with many different cultures.

GM’s new research model is evident at the GM Sweden Science Office at Saab headquarters in Trollhattan, Sweden. GM’s purchase of Saab Automotive in 2000 gave the American company a brand sold worldwide and fueled its global research and development. Saab, introduced in 1950 by a team of aircraft engineers, is known worldwide for unique design, innovative interiors, engineering strengths like turbo engines, and safety. A $26 million agreement with the Swedish government supports GM’s automotive research in Sweden. Through this venture, the company hopes to use the Saab core expertise to coordinate and expand all research and development efforts in Europe and beyond.

At the University of Michigan in Ann Arbor, the GM/U of M Collaborative Research Lab conducts projects in advanced vehicle manufacturing and engine systems. There, collaboration with GM researchers as well as partners around the world provides unique perspectives. Like the Sweden Science Office, the GM/U of M Lab is part of a strategy to leverage the automaker’s global engineering resources, relationships, skills, and knowledge to increase the quality of research. GM has increased R&D expenditures despite its struggles to maintain profitability in recent years. This new global research approach is expected to bring a healthy return on investments by developing new competencies.

Three areas key to GM’s research are powertrain control, electronic control and software, and hydrogen and fuel cells. GM researchers say the fuel cell and hydrogen technologies provide an opportunity to relieve our 98 percent dependence on petroleum as an energy source for vehicles.
A fuel cell engine, with one tenth an internal combustion engine’s moving parts, is expected to provide enormous design opportunities. Combined with research on advanced materials, fuel cell development could make the car of the future safer, friendlier to the environment, and more affordable—an advantage in reaching new global markets.2

With about 12 percent of the world’s population of 6 billion owning cars or trucks, the auto industry has lots of room for expansion. Experts estimate that global annual sales could reach 65 to 70 million vehicles in 2010, with much of the expansion in China, India, Russia, and Brazil. As part of its globalization strategy, GM has partnered with Fiat Auto, Opel/Vauxhall/Holden, Isuzu, Subaru, and Suzuki, which produce smaller and less expensive cars than typical entry-level vehicles in the United States. Some of these alliances have enabled GM to sell in Asian markets more quickly.3

Discussion Questions

1. How does technology influence organizational structure at GM? What other factors should managers at GM consider when selecting a structure?

2. Which organizational structures do you equate with GM’s old model of research? Which structures do you equate with the new model?

3. What must GM managers consider as they move from the old structure to the new structure?

References
1”Interview – Larry Burns: Global Search,” The Engineer, September 19, 2005, p. 30.
2The Engineer.
3Larry J. Howell and Jamie C. Hsu, “Globalization Within the Auto Industry,” Research Technology Management, July/August 2002, pp. 43-49.