Q1: “Success breeds active inertia, and active inertia breeds failure.” Is this statement true?

Explain how successful companies can overcome active inertia.

Ans: “Success breeds active inertia, and active inertia breeds failure.” The statement given here is
correct. Active inertia can be avoided, or at the very least be overcome, by successful businesses
using the following steps:

a) They have to break free from the assumption that their worst enemy is paralysis.
b) They need to realize that action alone solves nothing. In fact, it often makes matters worse.
Instead of rushing to ask, “What should we do?” managers should pause to ask, “What
hinders us?” That question focuses attention on the proper things: the strategic frames,
processes, relationships, and values that can subvert action by channeling it in the wrong
direction.
c) Even after a company has come to understand the obstacles it faces; it should resist the
impulse to rush forward.
d) One can exhort managers to change every aspect of their companies simultaneously, to
foment revolution within their organizations.
e) Trying to change everything all at once, managers often destroy crucial competencies, tear
the fabric of social relationships that took years to weave, and disorient customers and
employees alike. A revolution provides a shock to the system, but the shock sometimes
proves fatal.
f) Guiding a company through big changes requires a difficult balancing act. The company’s
heritage has to be respected even as it’s being resisted. It’s often assumed that outside
managers are best suited to lead such an effort, since they’re not bound by the company’s
historical formula.
g) It is recommended is to look for new leaders from within the company but from outside the
core business. These managers, whom I call inside-outsiders, can be drawn from the
company’s smaller divisions, from international operations, or from staff functions.
h) Another alternative is to assemble management teams that leverage the strengths of both
insiders and outsiders.
i) Finally, inside managers can break free of their old formulas by imagining themselves as
outsiders.
j) Managers should respect the company’s heritage. They should build on the foundations of
the past even as they teach employees that old strategic frames, processes, relationships,
and values need to be recast to meet new challenges.
Q2: Briefly explain the turnaround approach of firestone and IBM in view or insider-outsider and
outsider turnaround leader perspective.

Ans: In the case of Firestone, it was the new chief executive who they brought in after finally
recognizing the obstacles that were preventing the company from succeeding ahead. As soon as he
joined, he wasted no time and closed five of the company’s 14 domestic plants, replaced the
bottom-up capital-budgeting process with a strict top-down approach, and filled key management
posts with a crew of outsiders. Since, outside crew/managers are best suited to lead such an effort
since they are not bound by the company’s historical formula. Typically, outsiders are so quick to
throw out all the old ways of working that they end up doing more harm than good. The approach
one would recommend is to look for new leaders from within the company but from outside the
core business.

These managers, whom one calls inside outsiders, can be drawn from the company’s smaller
divisions, from international operations, or from staff functions. Charles Pilliod, for example, the CEO
who led Goodyear into the radial age, was born and raised in Akron and worked his entire career
with Goodyear. But he had spent 29 of his 31 years prior to taking the helm at Goodyear in the
company’s international division, where he had watched the rapid spread of radials in Europe. He
understood the company’s heritage, but he could see it from the objective viewpoint of an outsider.

Firestone was spared from bankruptcy by the new CEO's revolution, but it left the firm badly
positioned for future development. Despite warnings from seasoned insiders that the company's tire
stores had never been successful, the team of outside management sold many of Firestone's most
promising companies and invested significantly in tire retailing. The days of Firestone as a stand-
alone firm were numbered. Any successful business experiencing major changes may learn a lot
from IBM's comeback. Lou Gerstner’s success in turning IBM around is frequently held up as
evidence of the need for an outsider.

When Gerstner took over at IBM, he didn't fire everyone from the previous administration. The
majority of operations jobs remained manned by IBM veterans with decades of expertise, while
important staff positions and marketing responsibilities were filled by foreigners. Gerstner shook up
the hidebound IBM culture and slashed costs, but he also preserved and nurtured many of IBM’s
traditional strengths. IBM has been able to harness previous strengths to propel itself along an
altogether new path because to the mix of views. Because the pull of the past is so powerful, active
inertia occurs.

Attempting to break this attraction via a bold act of organizational revolution leaves individuals
befuddled and alienated, cut off from the past yet unprepared for the future. Managers should pay
more attention to the company's history. They should build on previous foundations while also
teaching people how to recast existing strategic frameworks, procedures, connections, and values to
meet new problems.