Chrysler Vice Chairman Robert A. Lutz talks with Peter Lawrence, Chairman of Corporate Design Foundation, about the role that design has played in changing Chrysler from the "perpetual problem child of the auto industry" to Forbes magazine's 1996 Company of the Year.

A 1994 New York Times piece, "The Designers Who Saved Chrysler," claims "design alchemy" transformed Chrysler from "the basket case of the auto world to leading the resurgence of the American auto industry." Was it just vehicle design that made the difference?

That's only half the story. Also going on inside Chrysler at the time was a different sort of design alchemy and, in fact, it's the thing that made our new product designs and a whole lot else possible. I'm talking about how we totally redesigned our organization at Chrysler.

What was Chrysler like before the reorganization?

It was organized around a very traditional, sequential, component-based process characterized by vertically oriented functions or "chimneys," as we liked to call them. Most departments were in separate buildings, literally insulated by bricks and mortar. Our designers worked pretty much in a vacuum, conceiving a product and "throwing it over the wall" to engineering in the next building, which would do the same to procurement and supply, and down the line.

This caused the product development process to function in a sequential manner with lots of miscommunications, false starts and waste. There was no simultaneous contact, no exchange of ideas, no trade-offs occurring early in the program.

Did you topple the chimneys at Chrysler?

Yes, we have replaced them with completely horizontal, cross-functional "platform teams." Our entire company is now organized around information flows, not traditional notions of function. Decision trade-offs are concurrent, not sequential, and made at the lowest possible level in the organization. Our senior managers also have two distinct job titles one functional, one cross-functional. For instance, the head of our Jeep/truck platform team is vice president of engineering technologies. This natural check-and-balance system keeps the focus on the whole, rather than on pieces of the whole. It is one reason why we're able to achieve not just "process-driven design" in our organization, but, equally important in our view, "design-driven processes."

How has the new Chrysler Technology Center supported your reorganization?

Now designers, aesthetic designers, technical designers in the form of engineers, procurement and supply people, key suppliers, finance, marketing and so forth, all work on a vehicle program simultaneously from inception to prototype, through prototype hardware and ready-for-volume production, all in our virtually "wall-less" Technology Center. Employees are in constant contact. They can go down an escalator and into the shops where the vehicles are physically taking shape. They can go from computer screen to conference room, down to view the "physicals" without moving more than 30 yards or so. That has proven to be of enormous value. As Winston Churchill once observed, "We shape our buildings; thereafter, they shape us."

Does the Chrysler Technology Center allow more interaction among employees?

The Chrysler Technology Center is laid out in an open way, with large atriums and various levels connected by escalators. It has fast food places and cafeterias to encourage intermingling of employees from various functions and disciplines. Chance encounters and semi-relevant conversations often lead to some of the most creative breakthroughs. A building can greatly facilitate that, or hinder it.

How does Chrysler integrate the use of design with its corporate strategy and objectives?

We keep reminding ourselves that almost every vehicle out there -- old, new, big, small, passenger cars, sports utility, roadster, minivan -- fulfills the basic transportation function, and they all fulfill it roughly equally well. Yet people go for the new. They go for the good-looking vehicle. That's why advance product design is the core of our business strategy.

Often we adopt designs that other companies may compromise. For example, the engineers may say the design is too difficult to execute; it's going to add weight or cost. They ask if they can move something an inch. We say, "No, the whole vehicle concept depends on the integrity of the design. Try to work with it, without watering it down."

We also expect the design process to come up with completely new directions for us to go in, such as finding new ways to interpret transportation or psychological needs. We expect the design ethic, and not necessarily the designers, to drive everything.

Wasn't the Dodge Viper an example of Chrysler's design ethics and team approach?

Yes, probably no other car company on earth would have or could have put this design into production. The original Viper concept car was first shown at the 1989 Detroit Auto Show. Response on the auto-show circuit that winter was so overwhelming for this V-10, 400-horsepower throwback to the original Shelby Cobra that we decided, what the hell, let's build it! Since we were going broke at the time, we figured we might as well go out with a bang. The Viper street car went from show car to showroom in just three years flat. Team Viper, made up of just 85 people, proved to us there was magic in small, empowered, co-located teams. It was the forerunner of our platform team approach.

In a speech, I heard you say, "The customer is not always right." Could you explain that comment?

At Chrysler, we love our customers and listen to them, but we don't expect them to do our critical creative thinking for us. Customers have a rear-view mirror perspective. They can tell us what they like among designs that are already out there. But when it comes to the future, why should we expect them to be clairvoyant.

For the Dodge Viper, we did absolutely no market research. That's not to say we hate research; we consider it a valuable tool, but only for confirmation. To come up with great creative ideas, you simply have to have an unfettered, free-flowing environment. You can't find those kinds of ideas simply by sifting through market-research data.

At Chrysler, we like to zig just about the time everybody else is zagging. For instance, just about when everyone else was trying to catch up to modern looks like cab-forward, we decided to go in a completely different direction with a concept car called the Chrysler Atlantic, first shown at Detroit Auto Show in 1996.

Could you talk about this most recent concept car, the Atlantic?

The Atlantic was Chrysler's desire to think along new avenues. Historically, automotive design has been linear. In the teens, cars looked like horseless carriages. In the late '20s and '30s, they became very boxy, and in the mid-'30s, they became boxes with rounded corners. Toward the end of the '30s, streamlining came in. In the '50s, we got into the "pontoon" shape where the fenders disappeared. Then we moved more and more toward pure aerodynamic shapes. Some people predicted, "That's a road to nowhere, because if you go for the pure aerodynamic shape, all cars are going to look the same." That's as silly as saying, since fish are all formed hydro-dynamically, all fish are going to look the same.

However, on the other hand, I asked the designers, "What are we going to do when we've run the full course of more and more modern?" If you look at other industries, whether watches, fountain pens or furniture, many have successfully gone back and picked up great themes out of history and brought them up-to-date using modern proportions, materials and surfaces to avoid some of the convoluted detail that we had back then. There is a way to bring the essence and character of those designs into the present day. It is a treasure trove, a mother lode of design ideas that you can reach into and grab. Needless to say, we are going to exploit it. The new Atlantic pays homage to the heroic look of the custom coachwork era of the '20s and '30s.

At Chrysler, does design excellence extend beyond the look of the vehicle?

Design is important to everything you communicate about your product and your business. It includes design ethics such as the appearance of your annual report, product catalogs and dealerships. Very good companies will have the same design ethic not only in their products, but in every way that they face the public, whether it's a web site or the tonality of their advertising. Even the quality of paper used in the catalog is part of conveying a sense of design excellence. The same is true in the physical workplace facilities. It can be both a manifestation of a company's design ethic and an outward communication of a company's design ethic and drive for excellence.

Do you think the understanding and use of design is changing in business?

It certainly has changed in our company and, I think, it's changing in general. Everything has gotten so competitive. For example, oil companies spend considerable amounts of money and energy on gas station design. They're making sure that they look accessible and friendly and not in any way claustrophobic. Nearly all businesses have realized the importance of product design. But when it comes to the importance of adopting a design orientation, the way you design your processes and corporation and how it looks to the outside world, I don't think that understanding is very deep yet.

It seems that many corporate senior executives don't feel that design is important to business success. Why do you think this is the case?

Most senior executives today are the products of the way our business schools worked 20 or 30 years ago. Anything judgmental, artistic or non-quantifiable was felt to be irrelevant and non-existent. If you can't prove it in numbers, then go away and don't bother me. This left-brain-focused ethic is still very much with many senior executives. Chrysler and many other companies are being run by a combination of right-brained and left-brained people. Best yet are people who are both right-brained and left-brained, and have that balance of appreciating the artistic non-quantifiable side of the business while respecting the numbers. I think that's the combination that clicks. But it is not yet a prevalent combination in American business.