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October 30, 2007

Who do you trust? Or more precisely what can you trust? Or (last question, promise) can you trust a gut feeling or do we need market studies, stats and figures before making desicions? A hunch or a feeling are things which are difficult to take to the board members or to the bank but…

The intuitive insight that would save Chrysler in the 1990s came to Bob Lutz, then the company’s president, during a weekend drive. On a warm day in 1988, Lutz took his Cobra roadster for a spin. As he raced along the roads in southeastern Michigan, he tried to relax, pushing aside what critics had been saying about Chrysler—that the company was brain-dead, technologically dated, and uninspired and that it lagged dangerously behind not only the Japanese auto-makers but also General Motors and Ford.

Ironically, Lutz found it difficult to enjoy himself precisely because he was finding the drive so pleasurable. “I felt guilty: there I was, the president of Chrysler, driving this great car that had such a strong Ford association, ”he says, referring to the original Cobra’s Ford V-8 engine. In fact, Lutz’s strong sense of corporate loyalty had earlier led him to remove the “Powered by Ford” plaques from his car. Still, the guilt needled him, and on this drive he began wondering about replacing the Cobra’s engine with one from Chrysler. Perhaps then he could enjoy his beloved sports car in peace. But he quickly realized that Chrysler did not have a V-8 engine that was up to snuff. If he made the switch, the car would lose considerable performance. “Chrysler was way, way, way behind,” he remembers admitting to himself.

Soon Lutz’s mind was racing. Didn’t Chrysler have a powerful ten-cylinder engine in development for its new pickup truck? Could that be the answer? And, wait, wasn’t Chrysler also building a five-speed, heavy-duty manual transmission for that truck? Why not co-opt those monster parts for a sexy, expensive, two-seat concept sports car that would be as revolutionary as the Cobra had been in the 1960s? Wouldn’t that silence everyone who had written off Chrysler?

That Monday, Lutz leapt into action, enlisting important allies at Chrysler to develop a muscular, outrageous sports car that would turn heads and stop traffic. After seeing a full-size clay model of the car—later to become the Dodge Viper—Lutz was all the more determined. But the naysayers were many. Chrysler’s bean counters were arguing that the $80 million investment would be better spent elsewhere, perhaps to pay down the company’s debt or refurbish plants. The sales force warned that no U.S. automaker had ever succeeded in selling a $50,000 car. At the time, Dodge cars were priced under $20,000, and customers were mainly blue-collar workers. But Lutz persevered, pushing the project forward with unwavering commitment. Amazingly, he had no market research to support him, just his gut instincts.

The Dodge Viper became a smashing success. It single-handedly changed the public’s perception of Chrysler, dramatically boosting company morale and providing the momentum that the company desperately lacked, ultimately spurring its dramatic turnaround in the 1990s. In hindsight, the Viper was exactly what Chrysler (now Daimler-Chrysler) needed; it was the right car at the right time. But how could Lutz have been so certain about that?

Lutz, now CEO of Exide Technologies, the $3 billion manufacturer of car batteries, has trouble describing exactly how he made one of the most critical decisions of his career. “It was this Subconscious visceral feeling. And it just felt right,” he says. Lutz is not alone. In my interviews with top executives known for their shrewd business instincts, none could articulate precisely how they routinely made important decisions that defied any logical analysis. To describe that vague feeling of knowing something without knowing exactly how or why, they used words like “professional judgment,” “intuition,” “gut instinct,” “inner voice,” and “hunch,” but they couldn’t describe the process much beyond that.

Article from the Harvard Business Review.

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