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Successful transformation starts at the top: the importance of good leadership

Munich, December 2023

Successful transformation starts at the top: the importance of good leadership Munich, December 2023

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total of 7 Chinese car manufacturers presented themselves impressively at the IAA with large stands and high-quality, innovative vehicles. However, brands such as Fiat, Peugeot and Jeep were not represented. The profound change in the automotive industry cannot be denied.

The industry is undergoing massive changes that go beyond new drive concepts and designs and lead to a reorganization of brands and market shares in Europe and worldwide. The uncertainty in the German automotive and supplier industry is noticeable, and managers must actively shape the transformation to remain competitive. 

In the midst of transformation processes towards electric drives, agile supply chains and autonomous vehicle technologies, a better balance is needed between leadership and management. Management controls and monitors the present. It focuses on business processes, plans budgets and organizes the necessary resources. Leadership, on the other hand, focuses on future viability. It creates an environment and a culture in which the company can be successful in the long term by breaking down rigid thought patterns and motivating employees to help shape the change. 

However, there is no standardized definition of leadership, and it requires regular discussion so that individual scope for interpretation can come together. The basic prerequisite is a shared understanding of leadership attitudes and mindsets within the leadership team. This significantly impacts the way they make decisions, treat their employees, and shape the corporate culture. Without debate and reflection within the leadership team, individual mission statements develop and inevitably lead to contradictory behavior and decisions. For example, a „charismatic manager“ or a „good coach“ is not automatically a strong leader. There is no doubt that these are desirable qualities. However, they can also be a risk for a company, as seen in the DeLorean Motor Company in the early 1980s. Its founder, John Z. DeLorean, was a charismatic but controversial engineer who quickly gained fame and influence at General Motors and is still considered the youngest department head in the company’s history. Through his courage, self-confidence, and innovative spirit, he quickly made a name for himself outside the automotive industry. However, his business practices, his personal lifestyle and his financial and strategic decisions quickly led to problems and ultimately to the collapse of the company. 

If charisma alone is not enough to successfully transform a company, what are the decisive elements?  

Our observations reveal that successful leadership teams possess five specific characteristics, drawing inspiration from Jim Collins‘ principles: 

1. „Entrepreneurial spirit“ characterizes managers who are distinguished by a unique combination of two essential qualities. Through personal humility, they focus on teamwork and devote their ambition to the good of the organization rather than their own personal recognition. In addition, they are highly committed to the long-term success of the organization through professionalism, high work ethic, high standards and willingness to take tough decisions. 

Eiji Toyoda is an example of true „entrepreneurial spirit“. During his 15-year presidency, Toyota became one of the leading automobile manufacturers, setting new standards for quality, efficiency, and continuous improvement. Rather than personal enrichment or self-promotion, Eiji’s focus was on improving the company and promoting the Toyota Production System. 

2. „Fanatical discipline“ involves setting a clear performance framework that must be demanded and adhered to with the utmost rigor. Even under the most unfavorable conditions, no restraint is granted, even if it seems tempting due to short-term profits or external pressure.  

Although his disciplined approach is not without controversy, and his leadership style attracts both admiration and criticism, Elon Musk is a living example of fanatical discipline. His enthusiasm and dedication to his products became clear in 2018. During this time, there were reports that he slept on a couch in the factory to monitor production processes and intervene immediately in the event of problems to achieve the ambitious production increases.

3. „Empirical creativity“ encompasses the relentless urge to first subject innovative ideas with experiments, facts and figures. Instead of putting extensive resources into an idea from the outset, the „bullets first, cannonballs later“ approach is pursued. 

For centuries, „Hongbao,“ traditional red envelopes filled with money, have been cherished in Chinese culture, especially during Chinese New Year. In 2014, Tencent transformed this tradition by introducing a digital version on WeChat. In an advertising campaign, around EUR 70 million was digitally distributed, marking the success of this innovation. This breakthrough paved the way for WeChat Pay, allowing users to link their bank accounts for seamless digital transactions. The founder, Allen Zhang, is integral to WeChat’s cult-like success in China, akin to Steve Jobs in the USA and Europe, with a staggering 1.3 billion active users. 

4. „Productive paranoia“ aims to identify and anticipate future challenges and problems at an early stage before they occur and the ability to react decreases. Productive paranoia represents a sensible form of prevention and risk management. The key motivation of leaders with productive paranoia is not to take past success for granted and remain self-satisfied. Instead, they think about what dangers may lurk in the future and what reserves need to be built up for protection in the form of time, money or even knowledge. 

Alan Mulally, the former CEO of Ford Motor Company, became known for his pragmatic approach to the automotive business and his use of big data for decision making. Unlike GM and Chrysler, Ford did not have to turn to the US government for funds from the Troubled Asset Relief Program (TARP) during the financial crisis of 2008/2009.  With empirical data and well-founded analyses, Ford had already prepared itself for economically uncertain times and reacted early to changing consumer preferences with more economical models, such as the Superior Fuel Economy Package of the Ford F150 in 2009. 

5. „Radical Candor” is a catalyst for transformation by encouraging controversial thinking and creating an environment that values diverse perspectives. Conventional thinking is broken, and innovative solutions are identified by encouraging active listening and open conversations. Conflicts are not seen as an obstacle to be avoided, but as a source of creative tension for collective learning and growth. With curiosity and openness, leaders lead through conflict to solutions.  

 

Netflix embodies radical candor, with a culture deeply ingrained in seeking a „diversity of thought.“ Originating from Reed Hastings, co-founder and CEO, this conviction is rooted in the belief that diverse perspectives foster creativity and enable agile adaptation to changing conditions. Netflix actively encourages debates, where decisions prioritize the quality of proposed solutions over authority or charisma. The company operates on the principle that the best idea, regardless of its origin, prevails. Embracing „Fail Fast and Learn,“ Netflix recognizes that not every idea succeeds, fostering experimentation and risk-taking crucial for innovation. In acknowledging that failure is a natural part of the process, individuals are not solely held responsible for setbacks, contributing to a culture of continuous improvement.  

The escalation of competition from the Far East is not a passing challenge but the emerging norm. The demand for continuous competitiveness and innovation places unrelenting pressure on companies and their managers. Resilience is key. For leaders steering their companies through transformative times, the emphasis is not on embodying all leadership characteristics individually. Instead, the goal and challenge lie in cultivating and fostering these qualities within the leadership team. 

Successful leadership teams create trust as the basis for all actions

Leadership teams wield numerous levers to navigate effectively. They must inspire through their actions, setting an example for others to follow. Establishing a culture of openness requires the management team’s receptivity to feedback, offering employees a platform for expression. Personnel decisions, serving as guides for valued behaviors, necessitate a commitment to entrepreneurial thinking. This, in turn, demands the creation of structures fostering innovation, risk-taking, and efficient problem-solving. Actively shaping the organization enables the desired culture to flourish. Transparent resource distribution clarifies priorities, fostering not only understanding but also trust. Trust, the cornerstone for effective collaboration, forms the basis upon which a culture of success is constructed. By proactively engaging with these levers, managers not only shape the present but also chart the course for the future of the company.   

Good managers are made, not born

Continuous training and development are indispensable for managers to keep pace with evolving requirements and successfully guide their companies. While empathy and a commitment to personal development are prerequisites for managerial suitability. Further, essential leadership skills can be honed through targeted training, encompassing active listening, adept handling of resistance and conflicts, and the ability to make tough decisions.  

As challenges confronting management teams multiply, skills such as decision-making under uncertainty and maintaining operational effectiveness gain prominence. Shifting away from the mere „management“ of existing standards and plans, managers must rethink strategies for the future. Regular self-reflection on leadership performance becomes imperative for continuity and personal growth.  

At Berylls, we offer support to management teams and executives in identifying strategic areas of focus and deriving actionable insights for leadership aspirations and performance. Our commitment extends to providing comprehensive assistance through team development, coaching, and capability building. 

Discover how Berylls can elevate your leadership team through tailored development programs. Navigate to our website for more information on our comprehensive support. 

Authors
Laura Kronen

Partner

Peter Eltze

Partner

Peter Nuck

Project Manager

Laura Kronen

Laura Kronen (1980) is a partner at Berylls by AlixPartners (formerly Berylls Strategy Advisors) with a focus on transformation. She is passionate about moving people and organizations forward. With over 18 years of industry and consulting experience, her focus is on transformative challenges in the operations context – from executives to individual employees, at manufacturers and suppliers. She helps her clients align strategy, structure, and culture in their respective market environments to build resilience.

Prior to joining Berylls, Laura Kronen worked at PwC Strategy&, Volkswagen AG and Audi. She holds a diploma degree in industrial engineering from the Karlsruhe Institute of Technology (KIT).

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Peter Eltze

Peter Eltze (1964) joined Berylls by AlixPartners (formerly Berylls Strategy Advisors) as a Partner in November 2015. He began his career in the medical technology division of an integrated technology corporation, and became a project manager at Malik Management Zentrum St. Gallen in 1996 before being appointed Partner in 2001. From 2003, in his role as member of the executive board, he was in charge of Management Education & Development. Since the end of the 1990s, Peter Eltze has advised companies in the automotive and mechanical engineering industries. At Berylls, his consulting activities focus on integrated organizational development (strategy, structure, culture), transformation management, and executive development.
Education in wholesale and international trade; administrative sciences at the University of Constance, Germany.

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