Greek legends tell of King Gordius who tied a rope on his chariot into a complex knot and an oracle who foretold that the person who untied the knot would become king of Asia. Ambitious warriors tried and failed to loosen the knot probably, as scientists presume, because Gordius spliced the ends together, formed a knot, and then wet the rope. When it dried in the hot sun, the knot could not be untied.
Then Alexander arrived with his sword and took a completely different approach to solving the problem. Now we call that “out of the box” thinking or creative problem solving. Some critics called it cheating, but others said it was the only way to solve an otherwise unsolvable problem.
Is your industry tied up in a convoluted, unsolvable knot? Do all the executives who started working in the industry right out of college or business school think alike? Does your industry need an Alexander? And, if so, how do you assess an Alexander hired from outside your industry to effect change? How do you predict his or her actions?
Today’s Wall Street Journal reviews how outsider Sergio Marchionne turned around almost bankrupt Fiat SpA. He junked numerous industry truisms:
-Close plants to cut costs as sales decline, but he reversed a decision to close a troubled Fiat plant and he kept all of Fiat’s plants open. He slashed management and overhead instead.
-Closely guard your proprietary technology for its competitive advantage, but he sold Fiat components to as many competitors as possible.
-Build a working prototype of a new model, but forget the prototype, he said, but do what the customer focus groups want.
-Ally with larger companies to gain buying power, but he negotiated a cancellation of Fiat’s contract with GM and allied with smaller auto makers such as Turkey’s Tofas and India’s Tata Motors.
How would an analyst have predicted what actions Marchionne would take at Fiat?
Simple, he made similar moves previously as CEO at Swiss firm, SGS SA, the market leader in goods inspection where he more than halved the number of management layers and cut expenses. (“Fiat SpA CEO Sergio Marchionne (LLB ’83) in Darwinian Battle,” by Mathias Ward, Feb 25, 2004, Bloomberg) SGS is also partially owned by the Agnelli family who are the largest shareholders in Fiat. The family nominated him to the Fiat board in 2003 and hired him as CEO in June 2004 based on the SGS turnaround.
A quick Google search revealed his past actions in this case, but other outside-of-the-industry hires may take more research effort to understand what he/she will do to make your competitor more of a threat.