Much of the focus on economic reform in Eastern Europe has been concerned with fixing its macroeconomic problems: plummeting industrial output, spiraling inflation and unemployment, and escalating shortages. Little attention has been paid to microeconomic issues such as the kinds of products firms make, the markets in which they compete, and the management of stakeholder relationships in making the transition to Western-style businesses. While the macroeconomic problems, though severe, can be tackled in a matter of years, dealing with the microeconomic challenge is likely to take several decades. Accelerating the resurrection of Eastern firms is a matter of decisive leadership from within, rather than hand-holding from without.

Bose: What will it take to bring about a turnaround in individual companies and institutions in Eastern Europe?

Kraljic: Kraljic: Turnarounds, even in the West, always involve a major change program. And, like any major change program, a turnaround needs a set of preconditions before it can really work.

A turnaround needs a strong—almost ruthless—and identifiable leader; a leadership team alone will not do

The first precondition is normally a crisis; for companies in the East, this is clearly a given. The second is a strong—almost ruthless—and identifiable leader; a leadership...