Guts

Take-Aways
Robert A. Lutz, former president and vice-chairman of Chrysler, turned the car
company around in the early 1990s.
Lutz is considered a product-development genius and a creative, irreverent leader.
Lutz believes that business success comes only from a strategy of opposites: tough
financial controls coupled with provocative and creative product development.
Lutzs Immutable Laws of Business, Number One: The customer isnt always right.
Two: The primary purpose of business is not to make money.
Three: When everybody else is doing it, dont.
Four: Too much quality can ruin you.
Five: Financial controls are bad.
Six: Disruptive people are an asset.
Seven: Teamwork isnt always good..

Chryslers Second Turnaround

In the early 1990s, Chrysler recovered from its second near-death experience and not
only enjoyed record profits, but it was also named Forbes Magazines "Company of the
Year." The man who was at the forefront of the car companys historic renaissance was
its product-development genius and iconoclastic leader, Robert A. Lutz, who was then
Chryslers president and vice-chairman.

He credits the firms turnaround to its embrace (at his urging) of a deliberately
schizophrenic corporate culture. He wanted tough financial controls coupled with a
rock-the-boat, provocative, highly creative product development process. This
strategy resulted in a large family of successful products, beginning with the radical
and enormously popular Dodge Viper sports car.

On May 7, 1998, Chrysler and Germanys Daimler Benz (owner of Mercedes) shocked
the international business world when they announced the merger of their companies,
the largest industrial merger to date. Chrysler had turned itself around to become the
worlds most profitable car company, one that Daimler - the gold standard of European
car makers - sought as a partner.

Who in his or her right mind believes the customer is always right? Not I. Ive seen
too many customers who hadnt a clue about what they wanted.
Robert A. Lutz believes that every organization must cultivate this split personality,
combining common sense with unbridled creativity. The leaders role, he says, is
maintaining the balance between the two. The dynamic tension between these two
elements enables companies to introduce new products and achieve record profits.
Embracing opposites is unusual in the business world, but it can bring about
innovation and financial success.

Lutzs personal life reflects the balance of opposites he uses in business. Hes a
vegetarian who loves a good cigar, a high-achiever who didnt graduate from high
school until he was 22 and a former Marine fighter pilot inspired by the lyrics of the
Rolling Stones. He went into the automobile business because he actually likes cars.

Betting on a category-buster takes guts. And since guts are in perennially short
supply, marketers often settle for what seems a safer course: making incremental
changes in existing products.
He translated his accumulated wisdom into Lutzs Immutable Laws of Business:

Law One: The Customer Isnt Always Right

Even though this flies in the face of everything that you may have been taught about
business and commerce, if youre honest youll admit that its true - the customer isnt
always right. Customers wishes are often misleading and, on surveys, they often tell
you what they think you want to hear or what will make them look good. Listening to
customers so-called preferences has landed many a carmaker in trouble - producing
altered models that no one buys.

Law Two: The Primary Purpose of Business is Not to Make Money

Youre probably shocked to hear this, too. Of course, a business must make money. But
companies that do make a lot of money almost never have that as their goal. Instead,
they tend to be run by enthusiasts who, in the normal course of meeting their own
tastes and curiosities, come up with incredible products and services that make
customers want to "rip their trouser pockets reaching for their wallets."

Quality has become a kind of Holy Grail, chased after by almost everyone. Yet few
of the chasers, I think, really know what they are chasing. They assume their idea of
quality is synonymous with the customers. It may not be.
To make money, a business must come up with products and services that demand
attention.

Law Three: When Everybody Else is Doing It, Dont

Its hard to resist fads, especially when those who profit from them invite you to play.
You can and should resist their influence.

Youd be surprised how many CEOs believe, thanks to what theyve read in the
business press (vive la fad cycle!), that the best way to generate breakthrough ideas
is to stick a group of employees in a room and let consensus be their only guide.
The media "fad spin cycle" works like this:
 An article is published that says that more and more companies, it seems, are doing X,
and then it goes on to list all of the benefits of doing X.
A CEO sees the article, sends it to his or her subordinates with a note: "Why arent we
doing X?" The note implies that the company wouldnt be in the fix its in today if only
it had done X three years ago.
When analysts are asked why the companys stock is languishing, they explain: "It isnt
doing X."
The company does X. It makes a big announcement and invests heavily in coffee mugs
that say, "Yesiree, were doing X."
The first article appears questioning the wisdom of corporate Americas headlong rush
toward X.
The business press openly criticizes managers who were too quick to embrace X.
Huge piles of coffee mugs go begging.
The first article appears advocating a whole new strategy, Y.

Is everyone opening a factory in some new market? Maybe you should, too - but not
because everyone else is doing it. Make your decisions based on the factors that really
count, not on trends or fads.

The kind of products we started building at Chrysler were, in reality, the kind of
products that we ourselves wanted to drive - cars and trucks that oozed passion, the
same kind of passion that we didnt mind wearing on our sleeves.

Law Four: Too Much Quality Can Ruin You

Quality has become the new "Holy Grail" that nearly everyone in business is chasing.
Yet few of the chasers really know what theyre chasing. They assume that their idea of
quality is the same as the customers. It may not be. When its not, consumers are
bombarded with quality they never asked for, didnt want and arent about to pay for
(let alone pay a premium for).

Ford had to recall 1.7 million trucks when it was discovered that the company put too
much anticorrosion coating on the lug nuts, so the nuts were coming loose, causing
wheels to drop right off the trucks. Imagine a conversation with an accident
investigator that begins, "Well, maam, the good news is, your wheels are entirely
corrosion free. The bad news is that theyre no longer on your car."

Its hard to predict with certainty which products will succeed. Indeed, some of the
most unlikely ones become the biggest hits.
An overzealous pursuit of quality has even, on occasion, been known to jeopardize the
reputations of brands already known for their excellence. Quality actually has less to
do with getting rid of negatives than it does with adding strong positives. Products
perceived as high quality arent always useful or practical. For example, womens shoes
seen in Vogue have little to do with walking comfortably. Given two extremes - "zero
defects with no delight" and "delight with a few squeaks in it" - the public will always
buy the latter.

Law Five: Financial Controls Are Bad

 Youre probably gasping again. The financial side of business is much too obsessed
with imposing the tight controls that Wall Street loves. Is it because they believe tight
controls cut waste? If they believe that, theyre wrong.

Tight controls harm in three ways:

Its time to stop the madness! Its time to out the idiots. Its time to expose fatuous
phonies for what they really are.

They can jeopardize an organizations ability to exploit big opportunities - When

Robert Lutz was at Ford of Europe, one of their cars was "getting murdered in the
market" because it didnt have a high-tech cassette tape deck. Ford of Europe would
only have had to spend $40,000 (the cost of engineering and tooling for the tape deck)
to protect an $8 million business. The finance division didnt want to do it.
Because measurements are based on past performance, controls tend to sanctify the
status quo. They promote a false sense of order and predictability. This gives the
impression that the future is solely a matter of extrapolation, prompting managers to
say such foolish things as, "That cant happen; its not in the five-year plan."
With financial controls, looser frequently is better - But if you make your controls too
loose, youll find yourself in the midst of chaos.

Law Six: Disruptive People Are an Asset

Corporate culture prefers people who dont make waves, who dont suggest new ideas,
who dont voice any concerns - in short, "yes" men and "yes" women who just follow
orders, dont think and keep their mouths shut. Yet, so-called disruptive people are
actually change agents.

When the going gets tough and the situation appears hopeless, thats when
inspirational leadership is the most needed and the most effective.
They create change, but since people most often resist change, change agents are rarely
liked. They are, by definition, innovators and catalysts. Every breakthrough or
invention in history has been at the hands of a change agent who would, ironically, be
seen by todays corporate culture as a pain in the behind who ought to be fired as a
poor excuse for a team player.

Observe and listen to so-called disruptive people. As Dr. Ernst Fuhrmann, Porsches
CEO in the 70s, noted, "Great employees are often the most difficult employees. But
not all of the most difficult are great employees." Collectively, though theyre "a pool
from which pearls emerge. Even the greatest change agents - those who, if given free
rein could take the organization to the top - have to learn to temper their behavior or
they could self-destruct. You need to be "just irritating enough to set change in motion,
but not so irritating that superiors and colleagues conclude that theyre better off
without you."

Seven: Teamwork Isnt Always Good

Teams, teams, teams, all you ever hear about are teams, as if they are a gift from
heaven, the answer to every problem in the universe, the ticket to the top of the
business heap. Teamwork isnt always the answer. Harnessed properly, teams can do
miracles - a team of just 80 people took Chryslers Viper from show car to show room
in only 36 months, a record at that time - but usually teams are not harnessed properly.
Most mediocre products of any kind, from movies to cars, result from too much
teamwork. Teams prefer the safe, the familiar, the middle of the road. They fear
originality.

Driving an organization toward beneficial change requires enormous energy,

conviction, persuasiveness, and ultimately, stubbornness.
An individual - such as Steven Spielberg - may possess the vision and courage to
suggest a Schindlers List, but not a team. Teamwork demands compromise, and
breakthroughs do not come from compromise. Yet, many CEOs believe the best way
to generate breakthrough ideas and innovations is via team consensus. The truth is,
most groups end up devoting far more time and effort to the practice of teamsmanship
- promoting group harmony, smoothing and protecting egos - than they do to working.
Consensus usually kills innovation, instead of creating it. Innovation cant survive the
permission process thats part of teamwork. Fear, coupled with some team members
inability to put ego aside and understand an innovative vision, can quickly kill
anything daring. If everyone has to agree to the idea before it can be considered viable,
progress and innovation will always suffer.

Teams are bad at initiating provocative ideas and, when entrusted with someone elses
great idea, teams usually mess it up. Teamwork almost ruined Chryslers Viper. The
Viper was designed specifically to appeal to a particular kind of car buyer, not to
everyone. A "car marketing plan" team came up with a modified proposal to create a
bunch of different kinds of Vipers, so that it could now be a car for everyone. This
would have stripped the Viper of its biggest strength - uniqueness - and it wouldve
also more than quadrupled the cost. Senior management turned down the teams
proposal and Viper as originally conceived went on to stardom.

The Idiot Constant

Teamwork without strong leadership leads to waste, bad decisions and failed products
and services. Leaders must demand originality, not consensus and compromise.
Assign each team a leader who will insist that hard choices be made. Remember, too,
that teams are no different from any aggregation of humanity: The percentage of idiots
remains constant. They will comprise 20% of every team put together by anyone, for
any reason. What can a leader do about this? Raise standards so that the 20% of
employees at the bottom drop out. More importantly, you can make sure that the idiots
dont end up in management. The biggest reason why the Dilbert comic strip is so
popular is that the "Dilbert Principle" really is true: Today, idiots dont just rise to their
level of incompetence (as the famous Peter Principle stated); todays idiots are being
promoted straight into management without being competent at anything. They know
all the buzzwords, all the jargon and all the rules of the game, so they fake a true
understanding of issues. That means, its time to out the idiots.