OliveLit ViewPoint

OliveLit ViewPoint

Incredible Turnarounds 

Albert Einstein is alleged to have once remarked, “Insanity is doing the same thing over and over again and expecting different results”. A swift rattle of our history and it becomes clear that it doesn’t need a genius like Einstein to come up with such a discovery. It is rather obvious. Our history is rife with examples of entities that have nose dived fast down the quagmire, only to be halted and  turned around by the induction of a radical change, more often than not, in the top leadership. In fact, more incredible a turnaround, more radical is the leadership change that drove it. Be it corporate or nation, the same ‘mind set’ change formula is evident behind all the turnarounds. The turnaround might be gradual, but the change that triggers it and puts it along the turnaround path, invariably has been radical and at the top.

Take our household friend Nokia for example. The company that today has more outlets than McDonalds globally, was, would you believe it, making toilet paper, rubber boots and truck tyres until the late 80s! And it was losing money fast; more than a billion dollars annually, to be precise. Amidst all the despair, in 1988, Kari Kairamo, Nokia’s serving CEO, committed suicide and the end was nigh! Amid the shambles, a team in the company’s small electronics and mobile phone division under the leadership of one Jorma Ollila, whittled away at the idea of making digital calls on mobile networks. GSM was still in development phase with a doubtful future. “There was a lot of disillusionment with the spec and the difficulty of the technology,” Ollila recalls. “People were saying we wanted a racehorse, but some committee got into the design process and we ended up with a camel. But we continued because we believed in digital.” On July 1, 1991, the first call ever placed on a commercial GSM network was made by the prime minister of Finland – on a Nokia phone.

Ollila’s turnaround of the GSM project impressed the Nokia board to the extent that they made him the CEO a year later. He divested all other areas of the company and radically hedged all its bets and focus on mobile phones. By the end of the 90s, Nokia had become the largest mobile handset company in the world and one of the most profitable companies to invest in! Instead of flogging dead horses within the company and trying to improve its existing core but dying businesses, Ollila convinced the Nokia board and the management on what the world would look like in the next 10 years and which product would be shaping it. The radical vision and conviction of one man had halted and then turned around a ship that was heading for disaster.

The same radical change is evident as we move onto bigger pictures; South Korea was a third world down trodden country that followed an ‘incredible turnaround’ story and became one of the most technologically advanced and economic powerhouses of this world. In just around 50 years, it went from a scrapping third world per capita income country of under $ 1000 to a per capita income of over $ 30000! In the 50s, it was close to the likes of other under developed countries such as India and Pakistan in terms of per capita income. It had the same level of poverty, civil unrest and battles with the military as that of India and Pakistan. Even now, in North Korea it has a militant neighbor with an army of several million that stands on its borders and openly publicizes nuclear weapons and provocative rhetoric quite regularly. Yet, the South Koreans did not let the politics of fear hamper their development, nor did they fall for conspiracy theories of foreign intervention. Putting their historical grievances behind them, they even built strong economic ties with their once bitter enemies like Japan. After the end of the Korean War in early 50s, South Korea achieved rapid economic growth with per capita income rising to roughly 14 times the level of North Korea. Today both India and Pakistan struggle around a per capita income of under $4000 while South Korea is at a whopping $30000! So what made the incredible ‘Miracle on the Han River’ possible?  The answer lies again in the leadership change at the top; a leadership that had a vision and exercised full power to ensure the implementation of that vision without compromises.

The Korea civil war from 1950 to 1953 had completely shattered the country’s economy. The period from ‘53 onwards, despite foreign aid, showed little signs of growth. In 1961, an authoritarian yet highly visionary Park Chung Hee, took over as President and transformed South Korea. So much so, that his tenure that turned around a hopeless sinking country, widely came to be known as the ‘Miracle on Han River’. Despite being a military General and despite the abhorrence of military takeovers in a country’s governance, the visionary change and it’s no nonsense implementation in Park Chung’s case is what needs to be understood and emulated, irrespective of whether he was a military man or not. He formulated the country’s first 5 year development plan for mobilizing all the country’s internal resource to build a ‘self supporting’ industrial economy. His emphasis was on increasing exports, industrialization and above all, education. At the root of Korean economy’s rapid expansion and one of the fundamental building blocks of the Miracle was the importance placed on education. He directed the state to establish a public compulsory education system. This allowed Korean labor to become highly skilled while labor expenses remained relatively low.

For industries, his motto was to treat ‘employees like family’. This instilled a high degree of motivation and loyalty in the Koreans, resulting in a productivity that was 2.5 times higher than their American counterparts, despite only getting one tenth of their wage.  It is pertinent to know that Park’s 5-year plan did not bring about an immediate self-reliant economy. Previous years of sham economy took its time to disappear. But the path was right. The ambitious 5 year plan was simply on the lookout for better policies in modernizing and preparing for long-term economic success. The government’s efforts were designed to bring about policy reform. The result was that within 25 years -between the years 1961-1996- South Korea experienced an unbelievable turnaround and economic boom. This kind of economic turnaround seemed so unlikely and impossible to achieve that it was considered a “miracle.” No international analyst before 1960 could have predicted something like this could happen to the country.  South Korea began a strong economic recovery after this point, eventually becoming the 11th largest economy in the world with a per capita income exceeding $10,000 per year and more than 70% of its population claiming to be middle class.

Despite all of Park Chung Hee’s no nonsense, and at times dictatorial and authoritarian policies, one thing is certain; South Korea would not have gone through an economic revolution if it weren’t for the radical change that brought this man to the fore.

To acid test the presence of the ‘radical change at the top’ formula behind all incredible turnarounds, let’s examine an industry that lies on the other end of the spectrum; relying to a relatively lesser degree on planning and logic and more on adrenalin and luck; sport, and in particular a sport that has a certain degree of strategy and tactics offers an intriguing case study. Despite being depicted by Irish playwright and London school of economics founder, George Bernard Shaw as a game in which 11,000 fools watch another 11 fools play for 5 days and yet there is no result at the end, compared to the other sports, cricket has still enough strategy and planning going into it to test our case for ‘incredible turnarounds’. Who could forget the Ashes test of 1981 between England and Australia at Headingly, Leeds. In the most incredible turnaround game in the history of test cricket, England following on with a deficit of 227 runs, were 135 for 7, still 92 runs behind with Australia still to bat again. The home crowd had long disappeared out of the stadium with the inevitable writing very much on the wall. Yet the headlines at the end read, “England beat Australia at Leeds”!  From a hopelessly irrecoverable position, where defeat was a mere formality, the incredible turnaround had happened. Although two individuals, Ian Botham and Bob Willis, almost singlehandedly carried the heroics, the reasons for this incredible turnaround, lied somewhere else.

Consistently for over 2 years prior to this test match, England had been taking a beating in international cricket. Defeat after defeat had become the norm. Owing to his brilliant performances on the field with both bat and ball, Ian Botham had been put in charge of the team on the assumption that he would automatically inspire others and be the great leader. The tenure not only made England suffer, but also made Botham’s brilliance, a thing of the past. Just before the Headingly test, came the radical change, a ‘spark of brilliance’. Out of the blue, the selectors brought back a retired and an aging 39 year old Mike Brealey to lead the team. The ‘spark of brilliance’ was not in bringing back an old proven card, but in being wise enough to realize the need of the hour; despite his aging and his mediocrity as a player, the selectors had the wisdom to value the leadership asset that he offered, over and above all his shortcomings. They realized the need of the hour. The result was England winning the next three tests on a trot, along with the series, and Brealey inspiring Ian Botham to return to his previous brilliant best as a player. Brealey’s strong but sympathetic presence at the top had given the players the relaxed confidence to bring the best out of their abilities. The same group of players who were crumbling like nine pins, consistently for two long years, were now blowing away the best in the business. Not surprisingly though, despite Brealey being in charge, initially things went the same dismal way for England in the test match, the way they had been going during the previous two years. Poor show and staring defeat in the face. But then eventually something different happened; a halt, turnaround and then a sweet victory! Despite being a trivial matter compared to the corporate and the nation, and despite being largely driven by adrenalin, it seems that even a luck oriented business such as sport needs a radical change at the top if things have to be turned around from an abyss.

History is rife with case after case where an entity, close to gallows, is not only rescued, but given a zeal for life because of a change at the decision making top end. One man’s vision and resolve to convert that vision into reality has invariably been the principal driving factor behind incredible turnarounds from dire situations. What is evident however, is that like in all turnaround situations, when you are nose diving fast, even a radical change at the top will not change things overnight. The deep rooted and heavily built up inertia will take some time to disappear, provided that the new leader catapulted at the top has a proven track record that reeks of hope, honesty, achievement and the ability to take hard and strategically agile decisions. Any other change, even at the top, is just prolonging the demise.

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