Critical Thinking Leading Innovation and Value Creation

1. Critical ThinkingLeading Innovation and Value Creation Andrew L. Urich, J.D. Puterbaugh Professor of Ethics & Legal Studies Spears School of Business Oklahoma State University aurich@okstate.edu www.andrewurich.com

2. What Happened to GM?

3. GM History • 1950’s - Half of all cars in the US

4. GM History • 1980 - 853,000 to 284,000 worldwide

5. 1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

6. 1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

7. 1999 “The most versatile vehicle on earth”“Lifestyle support vehicle”

8. 1st Q 2009Passenger cars • Toyota 19.4% • GM 15% • Honda 12.4% • Nissan 10.2% • Ford 10.0% • Hyundai 6.2% • Chrysler 5.2% • Mazda 3.4% • BMW 3.2% • VW 3.2% • Kia 2.6% • Subaru 2.6% • Volvo 0.8% • Saab 0.2%

9. Critical ThinkingDon’t try this at home! • I prefer being given the correct answers rather than figuring them out myself. • I don't like to think a lot about my decisions as I rely only on gut feelings. • I don't usually review the mistakes I have made. • I don't like to be criticized.

10. What is Critical Thinking? • Making decisions and taking action based on reason, evidence and analysis. • Detect and avoid thinking traps. • Reflect on the justification of one's own beliefs and values. • Understand the logical connections between ideas. • Metacognition: thinking about thinking.

11. What is Critical Thinking? • Using your brain to create value for yourself and your organization! • Value • Superior analysis and judgment • Intelligent decision making • Focus on what matters • Identify drivers of value • Face reality

12. Value FocusJD Power Top 10 Reliability 2004 2007 • Buick 145 Porsche 110 • Lexus 145 Lincoln 114 • Cadillac 162 Buick 115 • Mercury 168 Lexus 115 • Honda 169 Mercury 121 • Toyota 178 Toyota 128 • BMW 182 Honda 132 • Lincoln 182 Ford 141 • Subaru 192 Mercedes 142 • Jaguar 197 2004 2007 • Buick 145 Porsche 110 • Lexus 145 Lincoln 114 • Cadillac 162 Buick 115 • Mercury 168 Lexus 115 • Honda 169 Mercury 121 • Toyota 178 Toyota 128 • BMW 182 Honda 132 • Lincoln 182 Ford 141 • Subaru 192 Mercedes 142 • Jaguar 197 2004 2007 • Buick 145 Porsche 110 • Lexus 145 Lincoln 114 • Cadillac 162 Buick 115 • Mercury 168 Lexus 115 • Honda 169 Mercury 121 • Toyota 178 Toyota 128 • BMW 182 Honda 132 • Lincoln 182 Ford 141 • Subaru 192 Mercedes 142 • Jaguar 197 2004 2007 • Buick 145 Porsche 110 • Lexus 145 Lincoln 114 • Cadillac 162 Buick 115 • Mercury 168 Lexus 115 • Honda 169 Mercury 121 • Toyota 178 Toyota 128 • BMW 182 Honda 132 • Lincoln 182 Ford 141 • Subaru 192 Mercedes 142 • Jaguar 197 Acura 143

13. Value Focus • BMW “We don’t make automobiles [we make] moving works of art that express the drivers love of quality.” • GM: Car guys and bean counters– no marketing

14. Value FocusLoss of Trust & Respect • Trust Issues • Consumers • Dealers • Workers • Beat up suppliers • Banks, Public opinion • Shareholders - Bondholders • Truth irrelevant when trust doesn’t exist

15. Value FocusLoss of Trust & Respect • Loss of commitment • Playing favorites • Keep you head down and get along • Stop working start having meetings (Sr. VP of Nothing) • Lack of Fun • Innovation • Creativity

16. Lack of Diverse Opinion(Face Reality) • Group think • Stability over conflict • Continuity over disorder • Status quo over change • 50 year old decision making structure • Conformity over rebellion • Same design centers • Run off renegades • De Lorean fired at GM -- Iacocca fired at Ford

17. Market Value versus Cumulated Strategic Investments at General Motors • 1980 GM = $13 Billion • 1980-1997 $167 Billion or $332 BillionR&D and capital spending • 1997 GM = 40 Billion

18. Ross Perot on the Subject • From 1980 to 1985 GM spent $45 billion in capital investments but only increased worldwide market share by 1%....... • "For the same amount of money, we could buy Toyota and Nissan outright, instantly increasing market share to 40%.” • Gorilla dust

19. Optimistic IllusionsAsk Rick Wagoner why GM isn’t more like Toyota. (69/70) • “We’re playing our own game – taking advantage of our own unique heritage and strengths.”

20. Distortion of RealityLet’s ignore gas mileage

21. Distortion of RealityNo money in small cars

22. Who’s Reality Bob Lutz • Global warming “is a total crock of [expletive].” • “Hybrids like the Toyota Prius make no economic sense.”

23. Strategic ThinkingThe key to strategy is what you don’t do

24. Strategic ThinkingJapan has robots we need robots

25. Sequel: Fuel Cell 9/2006 Due 2010 • “Leapfrog the Japanese” • “A Game Changer”

26. Volt: Electric Car 12/2006 • “A game changer” • “Beat the Japanese at their own game”

27. Bureaucracy & the Status Quo • Risk taker to Risk avoidance • Cash poor to Cash comfortable • Contribution to Playing favorites • Opportunities to Problems • Marketing & sales to Finance & bean-counting • Momentum to Inertia • Working to Meetings • END

28. Does Bureaucracy Materialize Out of Nowhere?

29. Applications • Have you clarified exactly how you create value for Chesapeake? • Focus on value creation and avoid activities that are not central to your strategy. • Appreciate and seek diverse (and contrarian) points of view • A fun and exciting atmosphere fosters creativity and productivity • Rage against bureaucracy and the status quo.

30. ApplicationsManagement Issues • Leader sets the tone • Processes often get in the way • Bloomberg abolished titles • Conflict breeds creativity • Presentations– one-way communication • Promote and reward risk taking and attempts at innovation

31. ApplicationsJack Welch Bureaucracy Busting • Be relentless and outrageous • Celebrate impassioned boundaryless people • Love the people who hate meetings • Encourage managers to swing for the fences • Create a culture of excitement • END

32. Critical Thinking • “There is no reason anyone would want a computer in their home.” President of world’s second largest computer company (DEC) arguing against the PC in 1977

33. Critical Thinking • “The world potential market for copying machines is 5000.” IBM turning down the eventual creators of Xerox

34. Critical Thinking • “I think there is a world market of about five computers.” Founder of IBM in 1943

35. Critical Thinking • “Who the hell wants to hear actors talk?” Warner of Warner Brothers arguing against the need to add sound to silent movies

36. Critical Thinking • Obama and McCain spent $1 Billion on their 2008 campaigns – Absurd? • Coca-Cola spent almost $2 billion trying to get us to drink sugar water in 2008.

37. Critical Thinking • “Sensible and responsible women do not want to vote.” President Grover Cleveland, 1905

38. Critical Thinking • “We don’t like their music and guitar music is on the way out anyway.” Decca record executive turning down the Beatles, 1962

39. Critical Thinking • “Television won’t last because eventually people will get tired of staring at a plywood box every night.” Daryl Zanuck, 20th Century Fox Movie Producer, 1946

40. Critical Thinking • “Everything that can be invented has been invented.” Commissioner of US Patent Office arguing to President McKinley to close down the Patent Office in 1899

41. Why Don’t They Give Us an Owner’s Manual For Our Brain?

42. The Brain’s Inner WorkingsThe Wiring • 100,000,000,000 neurons (brain cells) • 15,000 synaptic connections each • By age 15 half are gone and the superhighways are up and running. • These mental pathways become the filter–producing recurring patterns of thinking, feeling and behavior. • Examples: Empathy–confrontation–authoritarian–dogmatic–emotions–tolerance for uncertainty.

43. The Brain’s Inner WorkingsThe Parts • The brain is full of zero sum games • Ever find yourself feeling conflicted? • Competing modules • MRI research on picturing yourself as old • Stanford study • No payments until 2010 • Disagree– brain off Agree-- pleasure • Parts of the brain • Amygdale-fear responses • Fleeing the stock market like you are fleeing a lion • Prefrontal cortex – recently evolved – controls voluntary actions • Logical and analytical • Limbic system - oldest physical part of the brain • The rat brain – Impulses gut reactions

44. Amygdale: Fear Responses • Total US Stock Market • 1982 value = $1.2 Trillion • Return 1982 to 2007 13.3% • Theoretical 2007 value $28.2 Trillion • Actual value $18.7 Trillion • Lost to market timing $9.5 Trillion • NASDAQ • 9.6% Return 1973 – 2002 • 4.3% Actual average return to NASDAQ investor • Zweig, Jason, Money Magazine, December 2007, page 76

45. Your Strength • Strength is a recurring pattern of thought, feeling, or behavior that can be productively applied. • Strength is more important than experience, brainpower, and willpower. • You cannot teach strength.

46. Your Strength • What to notice, what to ignore • What to love, what to hate • Your motivations, ego, altruism • How you think - practical or strategic • Your attitude - optimistic or cynical • Your filter is your Strength

47. The Strength of Great Accountants • Innate love of precision • Happiest moment is when the books balance • Gallup survey

48. Using Your BrainYour Unique Strength + Critical Thinking = Success • Your value and ability to prosper and reach your goals come from: “sensing, judging, creating, and building relationships.” • Thomas Stewart, Intellectual Capital • We all have the same information – it’s what you do with it that counts.

49. Punch-line • Early in life we get theories of the world – the theories make sense – but making sense is not the same as being correct. • Beware of your Brain’s wiring! • Your brain is programmed

50. ApplicationsUsing Your Brain • Exploit your strength! • Don’t correct weaknesses, work around them. • Skills and knowledge can be taught, Strength cannot. • Here’s what we can change! • Core beliefs • New skills and knowledge • Your values • Self-awareness • Capacity for self-regulation • Hidden strengths