Relying on Sector Experts Is Flawed

Phil Bulman, Senior Consultant, Vendigital

In our current climate like never before, businesses cannot afford to stand still but must constantly adapt to the changing environment. Change however, involves risk, and the tendency is for business owners and investors to rely on leadership and experience from within the industry. The general perception is that a ‘safe pair of hands’ is needed to minimise risk, usually seeking expertise that is proven within the industry. The mantra is ‘sector is best’, based on the flawed belief that sector knowledge will lead to optimum performance.

A fresh mind
There is a however a strong case that fresh non-sector input, to drive change and create business growth, is much lower risk than is perceived. Expertise from outside the industry can be much more alert to external threats and opportunities.

Examples of this fresh approach and the success it brings litter corporate history, but before we look at this, let us examine some of the causes.

Spectacular failures
Whether it is the failure of high street businesses like HMV and Jessops, seemingly failing to adapt to new buying methods (downloading & streaming)or Nokia struggling to adapt to the smart phone phenomenon, new disruptive technologies have led to some of the biggest changes in how businesses operate.

Globalisation has also caused challenges for many businesses, with recent examples in Renault and Peugeot Citroen both reporting big losses, largely attributed to their reliance on a stagnant and highly competitive European market and falling behind in the critical new growth markets of China, Brazil and the US.

It is challenges like these and the ability to identify and adapt or even lead the inevitable change that is critical to a business’ success.

Tough decisions
Outside expertise has the advantage of not being wedded to the culture of the industry and ‘the way we do things’. They can review operations objectively, without being blinkered or emotionally attached to anything.
This enables them to take tough decisions that are often needed in business. For instance, Lou Gerstner was recruited to turn around IBM, after senior roles in very different companies, (McKinsey & Co, American Express and RJR Nabisco). Gerstner took the tough decision to kill the OS/2 operating system, which IBM had been developing for ten years.

Similarly, Finnish mobile device hardware manufacturer Nokia had become complacent because of its market dominance. It had a corporate culture that lavished funds on research, but squandered opportunities to bring the innovations it produced to market. It appointed Canadian Steve Elop, from Microsoft, a software company, as its first non-Finnish chief executive. Elop quickly stopped development of its aged Symbian operating system, as well as MeGo, a replacement. He had a new range of handsets in the market to compete with the iPhone, using Microsoft Windows operating system within a year. This was faster than either of the competing axed software platforms could have achieved.

Fresh perspective
There are many examples where non-sector leadership has led to a fresh perspective on the sector and development of new direction and opportunities.

Sergio Marchionne, the current CEO of Chrysler and FIAT, who is credited with both companies turnaround was a lawyer, working at Deloitte and 18 years running laboratory testing and inspection companies before being given the top job at FIAT.

His fresh approach removed bureaucracy and focussed the ailing FIAT business on developing markets and profitability. His global approach, led to alliances with Chery Motors in China, TATA motors in India and turned FIAT from 17 quarters of reported losses to sustained profit.

The Power of success
A common theme that links the high performing individuals is success. Concerned about the risk that is inherent in making big change, investors and owners have been looking to proven sector experts to lead the business forward. Rather than focussing on sector knowledge to reduce risk when considering changes in a business, an emphasis on successful people whose perspectives and insights have been proven in other sectors, should give confidence.

Outside expertise are well placed to introduce new ways of working that are required to deliver competitive advantage and seize opportunities for new ways of growing the business.

High performing businesses will increasingly have high performing resources at all levels in a business, making use of non-sector experience and external insights to make the big changes.

Phil Bulman, Senior Consultant, Vendigital
Phil is responsible for the leadership of major client engagements. With 10 years’ experience in diverse roles within operations, design and development, supply chain and procurement, Phil is well placed to advise and lead major supply chain transformations, new product development programmes and cost reduction activities.

Phil’s background in design and manufacture means that he is often included in product development and value engineering programmes, as well as new supplier assessment and implementation programmes. Phil heads up Vendigital’s activities in private equity, and has experience in client engagements across the UK, Europe, USA and Asia.
www.vendigital.com