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Chapt er 2 - Strategic Leaders hi p

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C HAP TER S UMMARY T hi s chapt er begi ns wi t h a focus on i ndi vi dual st r at egi c l ea ders a s a key r es ource for t he f i r m. It di sc usse s t he i mpor t ance of st rat egi c l eader ship, ski l ls a nd personal charact er i sti cs t hat ma ke l ea der s ef fec ti ve, a nd f act ors which i nf luence thei r abil it y t o make e f f ect i ve st rat egi c dec isi ons. St r at egi c l eadership t hr ough t op mana gement t ea ms i s al so exa mi ned , wi t h a r evi ew of t op mana gement t ea m dyna mi cs whi ch i mpac t or gani zat ions and exec ut i ve s ucce ssi on i ssues r elevant to or gani zat i onal per f or manc e . T he six key component s of ef fec ti ve s tr at egi c l ea der ship ar e t hen expl ored, al ong wi t h how t hey i nf l uenc e t he amount of val ue a fi r m cr eat es and i ts e conomi c outcomes .

C HAP TER OUT LINE Str at egi c Lea der s as a K ey Res ource t hr ough T hei r Infl uences on Str ategi c Deci sions St rat egi c Leadership Style M anager ial Di scre ti on and Dec i si on Bi ases T op M anagement T eams Top Management Team Het er ogenei ty The CEO and Top M anagement Team Power Execut i ve Succe ssi on Process es K ey Strategi c Leader shi p Res ponsi bi li ti es and Act ions Ensure That t he Fi rm i s Wel l Posit i oned Economicall y Acqui re, Devel op, and M anage Key Res ourc es Dev el op and M anage Rel ati onshi ps wi th Exter nal St akehol der s Det er mi ne and Communicat e St rat egi c Dire ct ion Ove rs ee Formul ati on and Impl ement ati on of Spec ifi c St rat egi es

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Chapt er 2 - Strategic Leaders hi p

Est abl ish Bal anced Controls Summar y Ethics Questi ons

KNOW LED GE O BJ ECT IVES 1. Def i ne st r at egi c l eadership and desc ri be t he i mpor t ance of t op -l evel mana ger s a s r es our ce s . 2. Di sc uss the c harac teri st i cs of eff ecti ve s tr ategi c lea ders a nd t he f act ors that i nf l uence t hei r abil it y t o make e f f ect ive s t r at egi c dec isi ons, i ncl udi ng mana ger i al di scr et i on and dec isi on bias es. 3. Def i ne t op mana ge ment t eams a nd expl ai n t hei r ef fect s on f ir m per f or manc e. 4. Des cri b e t he f act or s t hat i nfl uence the a bi lit y of t op mana ger s to be ef fect i ve st r at egi c l ea der s. 5. Des cri be t he pr oces ses ass oci at ed wi t h ens ur i ng t hat a fi r m i s well posi ti oned ec onomi ca ll y and i dent if y t he c har act er isti cs of a well def ined str ategy. 6. Explai n how st rategi c lea der s a cquir e, devel op, and mana ge f ir m r es our ces t o cr eate one or mor e compet i ti ve a dvant ages .

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Chapt er 2 - Strategic Leaders hi p

7. Des cri be how str at egi c l ea der s mana ge r el ati onshi ps wit h ext er nal st akehol der s i n or der t o r educe uncer tai nt y and e nhanc e val ue cr eati on. 8. Di sc uss the rol es of str at egic l eade rshi p i n det er mi ni ng and c ommuni ca t i ng t he fi rm's st rat egi c dir ect ion. 9. Di sc uss the i mpor tance a nd use of or gani zat i onal cont rol s.

LECTURE NO TES Str ategic Leaders as a K ey Res ource Through Their Inf l uences on St rat egi c Dec i si on s – T hi s sect i on i nt r oduces st r at egi c lea der shi p and t he conce pt of skil ls hier ar chy, which det ail s t he ac cumul ati ve s ki l l set s att ained by ef fect i ve s tr at egi c l eade rs. See sl i de 1.

Com pet i ng fo r Ad vant

Int r oduct

ag e PART I: ST RAT EGIC T

ion See sl i de

HINK ING Chapt er 2: Str at egi c Leader The Strship at egi c Managem ent P roces s – O ver vi ew

2. Figur e 1.6

Str ategic Thi nki ng – dr i ven by st r at egi c l eaders who est abl ish a nd use t he st rategi c mana ge ment pr ocess i n t heir fi r ms. Str ategi c di rec ti on i s r efl ect ed i n t he f ir m’ s vi si on, mi ss i on, pur pose , and long -t er m goal s.

2 ––1 3

Chapt er 2 - Strategic Leaders hi p See sl i de 3. K ey Ter ms

Chapt er 2 - Strategic Leaders hi p

K ey Terms Str at egi c l eadership - t he a bi li t y t o anti ci pat e, e nvi si on, mai nt ai n f l exi bi li t y, and empower other s t o cr eat e str at egi c c hange a s nec essar y Di sc ussi on poi nts:

- Str at egi c l eaders c an pr of oundl y i nfl uence f ir m per f ormanc e.

- Leader s can be eff ect i ve a nd suc ces sf ul wi th ver y di f fer ent appr oac hes.

- Eff ecti ve s tr ategi c lea der ship i s a r equir ement f or succ ess f ul st rat egi c mana ge ment .

- Str at egi c l eaders ar e a key or gani zat iona l res our ce becaus e of t he i nfl uence t hey have on st rat egi c deci si ons.

1. Name s o me e xampl es of l egenda r y l ea der s. Di scuss thei r di spar at e appr oac hes . a. Ja ck Wel ch – General El ectr i c CEO b. Sam Wa l t on – Wal mar t Founder and CEO c. Aki o Mor it a – Sony CEO d. Ste ve J obs – Apple Founder and CEO

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Chapt er 2 - Strategic Leaders hi p

2. Wha t r ol e do str at egi c l ea der s pl ay i n t he str ategi c mana gement pr ocess ? ( From Chapt er 1) a. T hey gui de t he str ategi c mana gement pr oce ss. b. T hey hel p the or gani zati on ac quir e and devel op neede d r es our ces . c. T hey mana ge r el at ionshi ps wi t h key or gani zat i onal st akeholders.

See sl i de 4. Di sc

d. T hey devel op adequat e or gani zati onal contr ols t o ens ur e des ir ed outcomes ar e ac hi eved. Des pit e di ff erent l eader shi p st yl es , l egendar y CEOs do have s ome quali ti es i n common.

ussi on

Havi ng t he a bil it y t o es t ablish a st rat egi c vi si on and cr eat e pas si on and ene r gy amon g a f i r m’ s e mpl oyee s to r eali ze t he vi si on and a chi eve out st andi ng perf or manc e i s es se nt ial .

See sl i de

Str ategic Leaders hi p – t he abil it y t o ant ici pat e, envi sion, mai nt ai n f l exi bi li t y, and empower other s t o cr eat e str at egi c c hange a s ne cess ar y

5. Di sc ussi on

3. Wha t does s tr at egi c l ea dershi p invol ve ( i n additi on to the def init i on above)? a. It i s mul t i f uncti onal – and of t en gl obal – i n nat ur e and sc ope. b. It ent ai ls mana gi ng an e nti re e nter pr ise r ather t han a f unct i onal subuni t. c. It i nvol ves mana gi ng t hr ough ot her s and i nfl uencing human be havi or . d. It r equi res the a bil it y t o mea ni ngf ull y i nfl uence t he beha vi ors, t hought s, and feel ings of those wi t h whom t hey wor k. e. It r equi res acc ept ing and c opi ng wi t h an i ncrea si ngl y gr ea t er amount of cha nge in an uncert ai n envi ronment .

See sl i de 6. Di sc ussi on

f. It mea ns mot i vat i ng ot hers t o do mor e than i s expect ed, t o cont inuousl y enri ch t hei r ca pabi li ti Ski ll Hi erar chy i ve seti nter of st ests rat egi l eader shizat p ski es,–aaccumul nd t o pl at ace t he of tche or gani i onll s whi ch se r ve aabove s a fr tamework f or anal yzi ng mana ger s’ ca pac it y heir own. t o bec ome ef s tr at egi l ea der g. fec It i stiavechieved t hrcough bot sh communi ca t ion and Incl udes p ersonal ch aracexa terimpl sti e. cs which enabl e str at egic l eade rs personal to make ef fec ti ve s tr at egi c dec isi ons.

2 –3

Chapt er 2 - Strategic Leaders hi p

Lower -l evel ski l ls must be mas t er ed bef or e hi gher -l eve l ski ll s ca n be f ull y devel oped. Ref erence: Good t o be Great , by J i m Col li ns Di sc ussi on poi nts:

- Level 1: Most basi c t o becomi ng a c apa bl e i ndi vi dual is devel opi ng tas k-r el at ed ski ll s a nd a st rong wor k et hi c.

- Level 2: Next , a per son must be able to wor k eff ect i vely wi t hi n a t eam st r uct ure a nd make us ef ul contr i buti on s t o t he ac hievement of t eam goal s.

- Level 3: Af t er mas t er i ng l evel s 1 a nd 2, compet ent mana ge ment comes f r om t he a bil it y t o or gani ze pe opl e and r es our ces to ac hi eve or ganizat i onal obj ect i ves .

- Level 4: Not al l compet ent mana ger s c an become e f f ect i ve l ea der s, whi ch ent ail s t he abi li t y t o art i cul at e a cl ear str ategi c i ntent and t o mot i vat e f oll ower s t o hi gh level s of per f or manc e.

- Level 5: Al so known as Transf ormati onal Leader s . Achi evi ng exe cut i ve -l evel ski l ls r equires lea der s t o poss ess an unwaver i ng r es ol ve t o l ea d t heir company t o gr ea t ness . Fr equentl y, t hese l ea der s are humbl e a nd are comf or t abl e att ri buti ng succe ss t o t hei r t ea m, r ather t han f ocusi ng on t heir own per sonal ac hievement s.

- **In addi t i on t o t hese skil ls, i ndi cat ors of f ut ure s ucce ss a lso i ncl ude: o An underst andi ng of t he fi rm’ s s t r at egi c si t uat i on t

o make appr opr iate de ci si ons o Avai l abil it y of h uman a nd soci al capit al

Str ategic Leaders hi p St yle – T his s ecti on des cr i bes di f ferent st yl es of str ategi c leade rshi p and t hei r ef fec ti vene ss i n dif f erent si tuati ons . See sl i de 7. Di sc ussi on

Str ategic Leaders hi p St yle – Leaders e ngage i n di ff er ent st yl es of st rat egi c l eader shi p for ef fect i veness i n di f ferent sit uat ions. T hey set the t one f or t he amount of manager i al par ti ci pat i on i n str ategi c de ci si ons and f or how dec isi ons ar e to be i mpl ement ed. 2– 4

Chapt er 2 - Strategic Leaders hi p Di sc ussi on poi nts:

- Di re ct ive – Me et wit ht op ma na ge me nt t ea m me mb er st o col l ect i nf or ma ti on, but i ndi vi du al ly de ci de on str at egi es

Chapt er 2 - Strategic Leaders hi p

and di r ect subor di nat es t o car r y t hem out .

- Col l aborat i ve – Joi nt l y arr ive at str at egi es and i mpl ement pl ans wi t h member s of the top mana gement t ea m.

2– 5

Chapt er 2 - Strategic Leaders hi p

- Del egat i on – Gi ve st rat egy -ma ki ng r es ponsi bil it ies t o subor di nat es, al l oca te res our ce s t o t hem, and gi ve t hem r es ponsibil it y f or ef fect i vely ut i li zi ng t he res our ces t o ac hieve st rat egi c goal s.

- Appr opri at e use of each t ype of l ea dershi p st yl e depends on the compet i ti ve s it uat i on.

- T he cul t ur al /f unct i onal backgr ounds of t op mana ger s ma y al so i nfl uence t he way str at egi c dec isi ons ar e made .

- An ongoi ng deba t e exi sts regar di ng whet her it i s a ppr opr i at e t o t r y t o mat ch bac kgr o unds of mana ger s wit h t he competi ti ve si tuati on i n whi ch t hey wi ll l ea d.

4. Whe n i s i t appropri at e to empl oy ea ch s t rat egi c l eadershi p st yl e? a. Di re ct ive approach – A tr adi ti onal " commande r " st yl e mi ght be most appr opri at e when r api d deci sions nee d to be made , suc h as dur i ng emer genc ies or unexpect ed shi ft s i n t he business e nvi r onment . b. Col l aborat i ve approac h – In gene r al , t hi s part ici pati ve st yl e usuall y yi el ds bett er res ult s when mana ger s s har e and e val uat e a gr eat er amount of r el evant i nf or mat ion i n t hei r de cisi on maki ng. T his s t yl e also e nhanc es i mpl ement at i on of str at egi es , as mana ger s t ake gr ea ter owner shi p of decis i ons i n whi ch t hey ar e i nvol ved . c. Del egat i on – T hi s i s a n eff ect i ve st yl e when i mpl ement at i on of str at egy ca n be i mpr oved t hr ough i nde pende nt dec isi on maki ng by mana ger s.

5. Provi de e xampl es of when it i s appr opri at e or inappr opr i at e t o mat ch mana ger bac kgr ounds t o compet i ti ve s it uat ions. a. Product ion/ operati on bac kgr ounds are s ui ted f orlowcoststrategies due t o t heir int ernal f ocusonefficiency and engi neeri ng. b. Ma r keti ng/ R&D bac kgr ounds a re s ui ted f or di ff erenti at i on st r at egi es due t o t he ir nee d f or i nnovati on and mar ket awar eness .

Chapt er 2 - Strategic Leaders hi p

Chapt er 2 - Strategic Leaders hi p c. Ma r keti ng bac kgr ounds ar e suit ed f or gr owth st r at egi es. d. Ma nagers who demonstr ate a will ingnes s to take r i sks and a hi gh t oleranc e f or ambi gui t y ar e sui t ed f or gr owth st rat egi es, but not par ti cul arl y f or a t ur naround si tuati on. e. Younger , well -educ at ed mana ger s wit h les s ti me a t an or gani zat ion ar e suit ed f or a c hangi ng str at egi c di r ection and i nnovat i on st r at egi es.

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Chapt er 2 - Strategic Leaders hi p

Manageri al Disc ret ion and Dec i si on Bi ases – T hi s sec ti on pr esents a det ail ed disc ussi on ofthe influencethatmanagerialdiscreti on and dec isi on -ma ki ng bi as es ca n have on t he effectivenessof strategicdecisions,hi ghli ght i ng how st r at egi c l eade rshi p can be enhanced,factorsthatconstrain manageri al decisi on maki ng, and how biase s and hubris a ff ect the quali t y of dec isions . See sl i de K ey Terms 8. K ey Ter

Ma nageri al d isc reti on - l ati tude f or acti on

Hubr i s - exc es si ve pr i de, leadi ng t o a f eeli ng of invi ncibi l ity Manageri al Disc ret ion and Dec i si on Bi ases – Mana ger ial di scr et ion and deci si on -maki ng bi as es ca n have a str ong i nfl uence on t he ef fec ti vene ss of str ategi c deci si ons, whi ch are i nt ended t o est abl ish compet i ti ve a dvant age a nd or gani zat ional succ ess. Di sc ussi on poi nts:

- Hubr i s ca n magni f y t he ef fec t s of t he potenti al bias es in mana ger i al decisi on maki ng.

- Leader s must cauti on agai nst posit i ve medi a at tenti on and publi c rec ognit i on whi ch can l ead t o over conf i denc e and negat i vel y aff ect st r at egi c dec i si on maki ng. See sl i de 9. Fact or s

- Leader s must guar d against se lf -conf i dence gr owi ng t o t he F act ors Im pact i ng Manager i al Disc reti on – Ma nageri al di poi nt of hubr is. screti on i s al so use d f or t he i mpl ementat ion of chosen st rat egi - ecti Some of tssoday’ eatcest l eadeshi rs pe can xhi bi an unusual es. Eff vene of st sratgregi l eader be tenha nced bydegr ee of addres si ng t he f act ors which i mpac t mana ger i al disc reti on. humi l i t y. Di sc ussi on poi nts:

- Ma nager char act eri st ics: o Degr ee of or ientati on t oward ac ti on whi ch spur s

the company t o t ake a cti on o Level of commi t ment t o t he f ir m and i t s str at egi c out

comes o A mount of t ol eranc e f or ambi gui t y o Pre sence of skil l s i n wor ki ng wi t h dif f er ent per sonali ti

es o Level of aspir at i on

- Exte rnal envi r onment : o Indust r y st r uct ure o Rat e of mar ket gr ow th

–6 ch pr oducts can be di ff er ent i at ed o Degr ee t o2whi

Chapt er 2 - Strategic Leaders hi p

- Or gani zat i on char act er isti cs: o Size o Age o Res ource s o Cul t ur e

See sl i de 10. Figur e 2.1

Ref er t o Fi gur e 2.1 or Sl i de 10. F act ors Af f ect i ng Manageri al Di scr et i on – T hree maj or t ypes of f act ors c onstr ain mana ge r i al deci si on maki ng. Exte rnal envi r onment f act or s (suc h as i ndust r y st r uct ure, r at e of mar ket gr owt h, degr ee of pr oduct di ff erenti at i on) . Or gani zat i onal f act or s ( such as company si ze, a ge, r esour ces, cult ur e) .

See sl i de 11. Di sc

Indi vi dual mana ger fac tor s ( suc h as commi t men t t o t ir m, tng olerB ance gui t y, i nter Dec i si he on f-Maki i ase fsor – iambi nfl uence t he qualiper t ysonal of ski l ls, ambi ons.)dec i si ons strat egi ac nd mana getiment

ussi on Di sc ussi on poi nts:

- Str at egi c mana ger s t end t o r el y on a l i mi t ed set o f heuri sti cs,or “rulesofthumb”,tosi mpl i fy over whel mi ngl y compl icatedand uncertaindecisi on envi r onment s.

- From t hei r past experi ence s and i nf or mat i on pi cked up f r om varioussources, executi ves br i ng a number of preconceived ideasinto any dec isi on p r oces s. o beli efs a bout causali t y o t endency t o overl ook i nformat i on l eadi ng t o dif f

er ent conc lusions o st er eot ypes – not i ons about abil it ies or potenti al

behavior s bas ed on gende r , nat i onali ty, r el i gi on, or r ac e

- A f ocus on li mi t ed t ar gets can prec lude br oader ( non -f inanc ial) obj ecti ves of st rategi c i mpor t ance or mor e f avorable s takehol der r elati onshi ps.

- Limi t i ng t he number of deci sion al t er nat i ves ai med a t achi evi ng a pa rt icular goal si mpl if ies and s pee ds up deci si on pr oce sses , but supplement s r ati onal it y wi t h i nt uit i on and t ends t o over l ook pot ent iall y mor e vi abl e al t er nati ves .

- Dec i si on maker s may not under st and, tr ust , or use common probabi li ti es t o gui de de ci si on pr ocess es. T hey ca n be mor e i nfl uence 2 –7d by t he magni t ude of pot ent ial deci si on out comes r at her t h an t he pr obabi li t y that t hey wi ll occur

Chapt er 2 - Strategic Leaders hi p

t he pr obabil it y of succe ss bec ause they consi der t he si tuati on to be unique. T hi s i s danger ous a s l eaders may be a t t racted t o hi gh -pot enti al ret ur ns wi t hout consi deri ng t he unli kel i nes s of suc cess .

- Bel ief of gr eat er cont r ol over out comes t han rea ll y exist s

See sl i de 12 . Di sc ussi on

mani f es ts it sel f i n l ower asses sment s of t he probabi li t y of f ail ure or i n t he bel i ef t hat t he lea der poss esse s t he s ki ll s t o fi x pr o blems t hat surf ace . Over conf i denc e or over opti mi sm ca n l ea d t o poor deci sions earl y i n the decisi on pr Mi ni mioce zi ng -Maki ng i ase s â&#x20AC;&#x201C; Tathe ef pl fect i venes ss aDeci nd t si o ion nadequat e iB mpl ement i on anni ng. s of st r at egi c l ea der shi p ca n be e nhanced by mi ni mi zi ng t he e f fec ts of deci si on - ma ki ng bi as es . Di sc ussi on poi nts:

- Awar ene ss of bias es c an hel p lea der s overcome t hem. - An open decisi on -ma ki ng e nvi r onment i nvi tes new perspe ct i ves and c hall enges exi st i ng assumpt i ons/str ategi es .

- Use o f r eal opt i ons anal ysis ens ur es t he consi der at i on of pr oper pr obabi lit i es ( di scus sed mor e f ull y i n Chapt er 13) .

- A t op mana ge ment t eam compose d of i ndi vi dual s wi t h di ver gent vi ews and a vari et y of bac kgr ounds r educe s pr oblems as soci at ed wi t h deci si on bias es .

- It i s i mpor t ant t o eval uat e the de ci si on pr oces ses which ar e use d t o est abl ish st rategi es .

- A r ec ent McK i nse y st udy of over 1,000 busi ness inves tment s showed t hat compani es worki ng t o r educe de ci si on bi ases t heii rdenti r eturfi ns Top Managem ent Teams â&#x20AC;&#x201C; T hir saisesed ct ion es by t he7% t op. mana gement t ea m of an or gani zati on as a cr it ical r esour ce f or fi rms s ee ki ng t o suc cess full y use the st rat egi c mana ge me nt process . It i s br oken i nt o t hr ee fac tor s t hat infl uence the abil it y of t op mana ge ment t ea ms t o ex er cise ef fec ti ve st rat egi c l eader shi p. See sl i de 13. K ey Ter ms

K ey Terms T op mana gement t ea m - gr oup compose d of t he CEO and other key mana ger s who ar e res ponsi bl e f or set ti ng t he di rect i on of t he f ir m and f or f or mul at i ng and i mpl ement i ng i t s str at egi es Het erogene ous t op mana gement t ea m - mana ger i al gr oup compose d of i ndi vi duals wit h dif ferent f unct ional bac kgr ounds, expe ri ence s, and educati ons

Chapt er 2 - Strategic Leaders hi p

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Chapt er 2 - Strategic Leaders hi p

Top Managem ent Team s – a ss or t ment of hi gh -r anki ng mana ger s t ypi cal l y r epr esents maj or busi ness es or f unc ti onal ar eas of t he f ir m Di sc ussi on poi nts:

- T he t op mana gement t ea m of an or gani zati on i s a cri tica l r es our ce f or fi r ms s ee ki ng to suc ces sf ull y use t he str ategi c mana ge ment pr oce ss.

- Addr essi ng compl ex or ganizat i onal chall enges r equi res subst ant i al inf or mat i on, knowl edge, a nd ski l ls.

- T he qual it y of st r at egi c t hi nki ng and de ci si ons made by t he t op mana ge ment t ea m i mpac t the a bi li t y of t he f ir m t o i nnovat e and ef fec t strategic c hange .

- Dec i si ons made by t op mana ger s i nf luence t he desi gn of t he or gani zat ion, t he nat ur e of it s st rat egy, and t he a chi evement of i t s goal s.

- Superi or mana ger ial and deci si on -maki ng s ki l l s l ea d t o or gani zat ional succ ess. Top Managem ent Team H eter ogenei t y – T he f or mat ion of a di ver se t op mana gement t ea m wi t h a var i et y and brea dt h of strengt hs, ca pabi li ti es, a nd oper ati onal knowl edge will pr ovi de eff i ve st r atent egiTeam c l ea der t o addres compl ex or e nvi r See sl i de Topect Managem Ef fshi ectpiveness – Tshr ee f act s infl onment al abil f orce andt op t o mana mana gement ge mul ttea i plms e (t per haps i ctii ng) uence the it ys of o exer ci cseonfl eff ect 14. Fact or s st akehol der r el ati onshi ps. T he mor e var i ed t he exper ti se and ve st r at egi c l ea der shi p and achieve or gani zat i onal succe ss. knowl edge wit hi n a tea m, t he gr ea t er it s ca paci t y t o eff ect i vel y f or mul at e st rat egy. Top Managem ent Team H eter ogenei t y – T his s ection di scusse s t he f or mati on of a di ver se t op mana ge ment t ea m wi t h a var iet y of st rengt hs, ca pabil iti es , and knowl edge to pr ovide e ff ect i ve st rat egi c l eader shi p whil e fac i ng compl ex e nvir onmental for ces and mana gi ng mul t i pl e st akeholder r el at i onshi ps. See sl i de 15. Bene fi t s

B enef it s of Top Management Team H eter ogenei t y – Het er ogene ous t op mana gement t ea ms c ont ri bute t o bet t er st rat egi c gui dance a nd bet t er or gani zat ional per f or manc e. Di sc ussi on poi nts:

- A var i et y of di ff er ent per spec ti ves is i nt r oduce d and i ncr ease s t he quali t y of deci sion maki ng ( es peci al l y when s ynt hesi s occ urs) . 2– 9

Chapt er 2 - Strategic Leaders hi p

- Het erogene ous t ea ms ha ve demonst r at ed a gr ea ter pr opens it y t o t ake s tr onger compet i ti ve act ions and rea ct i ons t han homo gene ous tea ms.

- Het erogene ous t ea ms a re mor e l i kel y t o engage i n t hi nki ng “out si de of t he box“ ( or beyond common ment al model s whi ch sha pe vi ewpoi nt s), lea di ng t o mor e c rea ti ve de ci si on maki ng and yi el di ng i nnovati on and str ategi c c hange wit hi n t hei r or gani zat ions.

- V ar i ous ar eas of subst ant i ve f uncti onal and busi ness expertise improvethei denti fi cati on of envi r onment al opport uni ties and t hr eats or t he nee d f or a new st rat egi c dir ect i on.

- V i gor ous de bate yi el ds bet ter decisi on maki ng and hi gher fir m per for manc e. See sl i de 16. Chal lenges

Chall enges of Top Managem ent H eter ogeneit y – Once a dec isi on Exampl e: Steve Ball mer ’ s t op mana gement t ea m at Mi cr osoft is made , cha l lenges of het erogene i t y ca n i nterf ere wit h the i mpl ement ati on of st r at egi c cha nge. In ge n er al , t he mor e het erogene ous a nd l ar ger t he t op mana gement t ea m, t he mor e di f fi cul t it i s t o eff ect ivel y i mpl ement st rat egi es. Di sc ussi on poi nts:

- Cr ea ti ng a level of cohesi on among t ea m me mber s i s impor t ant t o fac il it at e ef fect i ve i mpl ement at i on of cha ng e. T hi s i nvol ves i ntegr ati ng di ver se opi ni ons and be havi or i nto a c ommon way of t hi nki ng and ac ti ng.

- Compr ehe nsi ve a nd l ong-t er m st r ategi c pl ans ca n be i nhi bit ed by communi ca ti on di ff iculti es among t op exe cut i ves wi t h di ff erent bac kgr ounds and cogni t i ve s ki ll s, unles s t he dec isi on ma ki ng pr oce ss i s pr oper l y over se en.

- Di ver se t op mana gement t ea ms may f ai l t o compr ehe nsi vel y exa mi ne t hr eat s and opportuni ti es i n t he exter nal envi ronment and can pr oduce subopt i mal str at egi c dec isions unl ess ef fec ti vel y mana ged .

- Gi ven t he nee d f or di ver se mana ger i al per spec ti ves in an i ncrea si ngl y compet i ti ve mar ket plac e, it is unfort unat e t hat some f i r ms r emai n r el uct ant t o f il l t op j obs wit h indi vidual s wi t h di ff er ent vi ews.

- Mi nor it y gr oups a nd women a r e under r epr ese nt ed i n t op posit i ons, whi ch i ndicat es that t he f ull set of avail abl e r es our ces i s bei ng under uti li zed a nd that opport uni ti es t o f ost er r elati onshi ps with di verse segment s of soci et y are bei ng mi ss ed. 2– 10 Exampl e: V ir gi ni a Rometty’ s c hall enges at IBM

Chapt er 2 - Strategic Leaders hi p

6. Name s o me e xampl es of progr es s that is being made i n t he advanc ement of women t o upper -l evel posi ti ons. a. X er ox CEO Ur sulaBurns b. Pepsico CEO Indr a Nooyi c. HP CEO Me g Whi t man a. 17% of boar d member s a r e now f emal e

The CEO and Top Managem ent Team P ow er – T his s ect ion f ocuses on t he char act eri st ics t hat gi ve t he CEO and t op mana ge ment t ea m power r elati ve t o the boar d and t he i nfl uence these cha rac teri st i cs c an have on t he a mount of st rat egi c l eader shi p t he boar d pr ovi des. See sl i de K ey Terms 17 . K ey Ter ms

CEO dual it y - pr ac t i ce of CEO al so hol di ng t he posi ti on as chair of t he boar d of di r ect or s Indepe ndent b oar d l eadershi p st r uct ur e - pr ac ti ce of as si gni ng t he CEO and chai r of t he boar d posit ions t o t wo dif f erent people St ewardshi p theor y - conc ept sugges t i ng t hat t op manager s intend to behave i n t he r i ght i nt er est s of the fi r m’ s sharehol der s

See sl i de 18. Di sc ussi on

See sl i de

The and Managem ent power Team P es dt of di rec CEOCEO Dualit y –Top a s our ce of CEO relow at ierve–tinfluenc o the boar he amount of st r at egi c l eade rshi p that t he boar d ul ti mat ely tor s pr ovi des Exampl e: Pfi zer ’s Ian Read T he cri ti ci sm of CEO duality ca usi ng poor perf or mance a nd sl ow r es ponse t o change i s not clea rl y bac ked up by r esea Independent B oard Leader ship St ruct ure rch.

19. Di sc ussi on See sl i de 2 0. Di sc ussi

Stew ardshi p Theory – If the s tr at egi c l ea der i s t he best poss ibl e st ewar d of t he fi r m’ s a sset s, t hese ass umpt i ons s houl d st and.

2– 11

Chapt er 2 - Strategic Leaders hi p

See sl i de 21. Di sc ussi on

Chapt er 2 - Strategic Leaders hi p

Sourc es of Top Management P ow er â&#x20AC;&#x201C; T he board of di r ect or s i s a go ver nance mec hani sm f or moni t or i ng st r at egi c di rect ion and r epres enti ng sha reholder i nter est s. Des pi t e t he premi se t hat hi gher fi r m per for manc e can be ac hi eved by boar ds of dir ect ors t hat ar e acti vel y i nvol ved wit h sha pi ng t he fi r m's s t r at egi c di rec ti on, some pr ac t ice s ca n i ncrea se the power of t op mana gement t ea ms r el ati ve to i ts boar d of di r ect or s and can make i t dif f icult f or di rect ors t o gui de t he st rategi c ac ti ons of powerf ul CEOs and t op mana ger s.

7. Ar e boar ds an ef f ecti ve ma nagement cont rol mec hani sm or ar e they a mana ge ment t ool to f aci li tat e mana gement i nit iat i ves ? Exampl e: Pfi zer Answer s wi ll var y. Des pit e hi ghl y vi si bl e exa mpl es of poor go ver nance i n l ow -per f or mi ng f i r ms, c lose t ies bet ween t he boar d and CEO do not al ways l ea d to les s board i nvol vement i n str at egi c deci si ons. It i s i mpor t ant f or boar d me mber s t o rec ogni ze a nd saf eguar d agai nst the ri sks.

8. How mi ght l ong t enur e i mpac t t he eff ect i veness of executi ves i n t hei r r ole a s str at egi c lea ders? a. Long t enure i s known t o rest ri ct t he brea dt h of an exe c ut i veâ&#x20AC;&#x2122;s knowl edge ba se, whic h li mi t s t he st r at egi c al ter nati ves t hey devel op. b. Executi ves wit h l ong t enure may be a bl e t o exer cise mor e e f f ecti ve s tr ategi c c ont r ol and ac hi eve hi gher per for manc e.

9. Wha t steps ca n boar ds take t o st r engt hen t he f ir m? a. Devel o p an ef fec ti ve r el at i onshi p wi t h t he t op mana ge ment t ea m. b. Exami ne t he r el ati ve de gr ee of power hel d by t he board and t op mana ge ment t eam me mber s. c. Rec ogni ze t he nee d f or enhanc ed CEO power and les s mana ge ment di ver sit y when a vol ati le or uncer tai n ext er nal envir onment exi sts.

2â&#x20AC;&#x201C; 12

Chapt er 2 - Strategic Leaders hi p

Exec uti ve Succ ession P roce sses â&#x20AC;&#x201C; T hi s se ct ion anal yzes t he wisdom of sel ect ing t op exec ut i ves , par ti cul ar l y CEOs, fr om ei ther i nter nal or ext er nal labor mar ket s a nd t he i mpac t thi s decisi on has on company per f or manc e and t he abili t y t o embr ace c hange i n t oday's c o mpet i ti ve l andsc ape . See sl i de K ey Terms 22. K ey Ter ms

Int er nal mana ger i al labor mar ket - se eki ng t o f il l manager i al posit i ons fr om a pool of candi dat es f ound wit hi n t he fir m

2â&#x20AC;&#x201C; 13

Chapt er 2 - Strategic Leaders hi p

Exte rnal mana ger i al l abor mar ket - se eki ng t o f i ll mana ger i al posit i ons fr om a pool of candi dat es f ound out side of the fi r m Exec uti ve Succ ession P roce sses – T he c hoi ce of t op exe cut i ves , par ti cul ar l y CEOs, is a cr it ica l or gani zati onal decisi on wi t h i mpor t ant i mpl i cat i ons f or f ir m per f ormanc e. Di sc ussi on poi nts:

- Ma ny compani es use l ea dershi p sc ree ni ng syst ems t o identi fy individualswithmanager i al and st r at egi c l eade rship skil l s and pot ent ial .

- Eff ecti ve s cree ni ng syst ems ca n be use d t o as ses s f ir m empl oyee s t o gai n val uable i nf or mat i on on i nt er nal mana gement ca pabi li ti es posse sse d by t he f ir m.

- Wit h t hi s i nput , t r ai ni ng and devel opment progr ams c an be cr eat ed t o pr ese lect and shape f ut ure lea der s f or t he or gani zat ion. See sl i de 23. Di sc ussi on

B enef it s of Int ernal Hi ri ng Pract i ces – In t he pas t, compani e: GE’s 10 -Ste pr ogrgeamment posit i ons eshave Exampl stronglypreferredto fi llp Tal t opentmana fromtheinternal labormarket f or t hese t ypes of rea sons. Di sc ussi on poi nts:

- Des i re f or conti nui t y - Ongoi ng co mmi t ment t o t he f ir m’ s c urr ent vi sion, mi ssi on, and chos en str at egi es

- Fami l i ari t y wit h company pr oduct s, mar ket s, t echnologi es , and oper at ing pr oce dur es fr om f i r m and indust r y experi ence

- Incr ea se d retenti on of exi st ing per sonnel - Ret e nt i on of valuabl e knowl edge ( such as uni que r out ines , pr oces ses, document ati on, or tr ade s ecr et s) nece ssar y to sust ain hi gh perf or manc e

- Int er nal succ essi on i s favored when t he f ir m i s pe rf ormi ng wel l .

- Res ear ch shows t hat i nsi der CEOs a r e mor e ef fec ti ve and are mor e s ucc essf ul i mpl ement i ng cha nge pr ogr ams a ft er thr ee yea r s.

- An ef fec ti ve s ucce ssi on mana gement pr ogr am t o i nter nal l y devel op and prepa re mana ger s f or advanc ement is necess ar y f or t he i nter nal l abor mar ket t o oper at e suc ces sf ul l y. 2– 13

Chapt er 2 - Strategic Leaders hi p

See sl i de 24 . Di sc ussi on

Chapt er 2 - Strategic Leaders hi p

Ext er nal Labor Mar ket – Bec ause of cha ngi ng compet it i ve l andsca pes and var yi ng l evel s of per f ormanc e, a n i ncr eas ing numb er of boar ds ar e t ur ni ng t o out si der s t o succee d CEOs. Despit e vali d reas ons f or t ur ning t o t he out si de l abor mar ket t o fi ll top mana gement posit i on s, it i s of t en done beca use boar ds have not est abl ishe d well -devel oped, i nt er nal suc cessi on pl ans. If st r ategi c c hange i s nee ded, an out si der i s oft en se lected t o l ead t he cha nge.

See sl i de 25. Figur e 2.2

Int eracti on betw ee n CEO Succ essi on and Top Management Team Com posi ti on – Fi gur e 2.2 shows how t he composi ti on of t he top mana ge ment t ea m and CEO suc cess ion ( mana ger ial labor mar ket ) may i nter act t o af fec t str at egy.

For e xampl e, when the t op mana ge ment t ea m i s homogene ous (i ts me mber s ha ve s i mi l a r f uncti onal experi ence s and e ducat ional bac kgr ounds) and a new CEO i s s el ect ed fr om i nsi de the fi r m, t he fi r m’ s cu r rent str at egy i s unli kel y t o change. On the ot her hand, when a new CEO i s s el ect ed f rom out side t he fi r m and t he t op mana ge ment t eam i s het er ogene ous, t her e i s a high pr obabil it y t hat st r at egy wi l l cha nge. Whe n t he new CEO i s f r om i nsi de t he f ir m and a het erogene ous top mana ge ment t ea m i s i n pl ace, t he str at egy may not cha nge, but i nnovati on is li kel y t o continue. An ext er nal CEO succes sion wit h a homo gene ous tea m cr e at es a mor a mbi guous s i bil t uati K ey St rat egi c Leader eshi p Res ponsi it ion. es and Act i ons – T his s ecti on outl i nes the var i ed r es ponsibil it ies and tas ks a ssoc iat ed wit h st r at egi c l eader shi p as t hey r elat e t o t he thr ee str at egi c ma nage ment per specti ves pr es ent ed i n Chapter 1. See sl i de 26 Figur e 2 . 3

K ey St rat egi c Leader shi p Res ponsi bil it i es and Act i ons – T he pr i mar y r es ponsibil it y f or st rategi c thi nki ng and e ff ecti ve s t rategi c l ea dershi p r est s wit h t he t op mana gement t ea m, i n par ti cul ar , the CEO. T hese r es ponsibil it ies cannot be del egat ed. Here, the var ied res ponsi bi li ti es and tas ks a ssociated wit h str ategi c lea der shi p ar e r el ated t o t he t hree st rat egi c mana ge ment perspe cti ves ( pr esented in Chapter 1) . Di sc ussi on poi nts:

- T hr ee maj or r esponsi bi li ti es of st rategi c lea der s and the s tr at egi c mana ge ment per specti ve wit h which they r elate:

o Ensuri ng t hat t he fi r m i s wel l posit ioned ec onomi cal l y – moni t or i ng t he e xt er nal envi r onment

o Acqui ri ng, devel opi ng, and mana gi ng ke y r es ource s – ut il i zi ng i nt er nal r esour ce s 2– 14

Chapt er 2 - Strategic Leaders hi p

o Devel opi ng and mana gi ng r el at i onshi ps wit h key cons tit uent s t o cr eat e val ue â&#x20AC;&#x201C; coll abor at i ng wit h st akeholders

- Specif ic tas ks a re a ssoci ated wi t h t hese maj or r esponsibi li ti es:

o Det er mi ni ng and communi ca ti ng st rategi c dir ect ion o Fac il it at i ng and overse ei ng t he f or mul ati on and i mpl ement at i on of specif i c st rat egi es

o Est abl ishing bal ance d control s - Out comes t hat can be expect ed f rom ef f ect i ve st r at egic l ea der shi p: o T he est abl ishment of compet it i ve a dvant age o T he crea ti on of gr eat er val ue f or t he fi r m and it s st akeholders o Above -aver age f i nanci al per f or manc e

- T he per specti ves and t he r ol es pl ayed by str at egi c lea dersare linkedandover lap. Responsi bi li ti es associ ated wit h al l t hree per spect i ves i nfl uence st rategy f or mul at i on, di rec ti on, and i mpl ement at i on.

Ensure That t he Firm is Well P osi ti oned Econom icall y â&#x20AC;&#x201C; T hi s sect i on disc usses t he posit i oni ng r esponsi bi li ti es of st r at egi c l eaders a nd hi ghl i ght s t he fi ve i mpor t ant element s t hat det er mi ne a fi r m's s t r at egy. See sl i de 2 7. K ey Ter ms

K ey Terms Scope - br ea dt h of a fi r m's ac ti vi t ies acr oss pr oduct s, mar ket s, geogr aphi c regi ons, cor e t echnol ogi es , and val ue cr eation stages Ensure That t he Firm is Well P osi ti oned Econom icall y â&#x20AC;&#x201C; St r at egi c l ea der shi p i nvol ves sel ecti ng i ndustr i es a nd i ndus tr y segment s i n whi ch t o compet e and r es ponding t o changes t hat occ ur i n t hose envi ronment s. Cont i nuous ali gnment bet wee n the fi r m and it s envi r onment and j udgment i n anal yzi ng t he ext ernal envi r onment ar e es senti al .

Chapt er 2 - Strategic Leaders hi p See sl i de 28. Figur e 2. 4

Chapt er 2 - Strategic Leaders hi p

Fiv e Elements t hat Ident ify a Firm ’s Strategy – A f irm’ s s t r at egy i s t he centr al , int egr at ed, ext er nall y-or i ent ed concept of how t he or gani zat ion pl ans t o ac hi eve i t s obj ecti ves . It i s a mani f estati on of the company’ s st r at egi c i nt ent . Di sc ussi on poi nts:

- De f i ni ng t he business arenas ( scope defi ned on Sl i de 27) – cr it ical start i ng poi nt f or strat egi c pl anni ng and mana gement

- Commonl y use d growt h vehi cl es – i nt er nal devel opment , j oi nt vent ur es, li ce nsi ng, fr anchisi ng, and acqui sit ions 2– 15

Chapt er 2 - Strategic Leaders hi p

- Di f fer enti at ors – help a firm det er mi ne how it is e xpect ed t o win cus t omer s i n t he mar ket place

- St agi ng – t he t i mi ng of st r at egy and t he seque nce of moves t he firmwilltaketocarryit out ( i ncr easi ngl y i mpor t ant becauseof thespeedof change i n t he compet i t i ve e nvir onment )

- Economi c l ogi c – pull s t oget her all of t he a bove el ement s a nd f ocuses on ac hi evi ng above -a ver age f i nanci al ret ur ns

Acquir e, Devel op, and Manage K ey Resources – Thi s sec ti on hi ghl i ghts t wo crit i cal r esource s, human c api tal and or gani zat i onal cult ure , which ar e close l y ti ed t o st rat egi c l eader ship and ca n es t abli sh a c or e c ompet ency f or a fi r m i n it s quest for compet i ti ve a dvant age. ( Other or gani zat ional res our ces t hat of f er the pot ent ial f or compet i t i ve a dvantage a r e cover ed i n Chapter 4.) T hi s mat eri al supp ort s the i dea that fi r ms c an de velop core c ompet encies based on bot h t he ca pabi li ti es it posse sse s and t he way t he c apabil iti es ar e use d t o pr oduce st r See de ions. Acquir e, Devel op, and Manage K ey Resources – Str ategi c lea der at egisl ci act shi p al so i nvol ves rea li zi ng t he val ue of or gani zati onal res our 29. Di sc ces. ussi on T wo cr it ical r esour ce s, human c api tal and or gani zati onal cul tur e, are st r ongl y r el at ed t o st rategi c l ea der shi p and pl ay a si gni fi ca nt rol e i n es t abli shi ng cor e compet enci es t o ai d i n t he f ir m’ s quest to ac hi eve a compet i ti ve a dvant age. ( Other or gani zati onal res our ces t hat of f er t he pot ent ial f or compet it i ve a dvant age a r e cover ed i n Chapt er 4.)

2– 16

Chapt er 2 - Strategic Leaders hi p See sl i de 30. Di sc ussi on

Chapt er 2 - Strategic Leaders hi p

Managi ng Hum an Capi tal – T he abil it y t o mana ge human c api tal may be t he most cri ti cal of t he str ategi c lea der ’s s ki ll s. Bui ldi ng human ca pit al is a chall enge which i s vi tal t o st rat egi c l eader shi p. Di sc ussi on poi nts:

- In vol ves har nes si ng t he knowl edge a nd ski l ls of t he fir m’ s enti r e wor kf or ce

- Incl udes t he a bi li t y t o cr eate a nd commer ci ali ze i nnovat ion wit h i ntell ect ual capit al

- Est abl ishes c ont ext thr ough whi ch st akehol der s (suc h as empl oyee s, c ustomer , and suppli ers) ca n per for m at peak ef fi ci enc y

- Depe nds on t he a bi li t y t o mana ge t he f ir m’ s oper ati ons and empl oyee s e f fec ti vel y t o sust ai n hi gh per for manc e over ti me

- Requi res mor e than usi ng tempor ar y empl oyee s, i mpr ovi ng r ecr uit ment and se lect i on t echni ques , and see ki ng st ar pl ayer s i n t he sear ch f or ade quate human c api t al t o r un an or gani zat i on

- Di ct at es bui l di ng ef fect i ve commi t ment s t o or gani zat ional goals

- Ma ndat es bui l di ng an ef f ect i ve or gani zat i onal t ea m commi t t ed t o achi evi ng t he c ompany’ s s t rategi c i nt ent

- Requi res str ategi c lea der s wi t h coll abor at i ve a bi li ti es

2– 17

Chapt er 2 - Strategic Leaders hi p

See sl i de 31. Di sc ussi on

Chapt er 2 - Strategic Leaders hi p

Deve l opi ng Gl obal Com pet enci es – Incr ea si ngl y, i nter nat i onal expe ri ence has become e ssenti al t o t he devel opment nec essa r y f or st rat egi c l eader s. Nearl y eve r y i ndust r y i s t ar get ing f ast -gr owi ng f or ei gn mar ket s, whic h r equi r es gl obal compet ency amon gst t op mana ger s.

10. Wha t i s “i npat ri ati on”? a. I npatriati on i s the pr ocess of tr ansf er ri ng host countr y or t hi rd count r y nat i onal mana ger s i nto t he domes t ic mar ket of mul t i nat i onal fi rms.

See sl i de 32. Di sc ussi on

b. It has bec ome a n i mpor t ant mea ns of buil di ng gl obal cor e compet enci es. Invest i ng i n Em p l oyee s as a Capit al Resource – Much of t he devel opment of U.S. i ndustr y ca n be att ri buted to pr oducti ve i nves t ment i n t he ef f ecti vene ss of human c api tal . “…a s t he dynami cs of competi ti on acc el er ate, people ar e per haps the onl y sus tai nable s our ce of compet i t i ve a dvant age.” T his s ugges t s t hat human r es ource mana geme nt act i vit ies ar e i ncr easi ngly i mpor t ant to t he suc cess of busi nes ses ar ound t he wor l d. Human r es our ce mana ge ment is a suppor t acti vi t y ( discuss ed mor e f ull y i n Chapt er 4) whi ch f acil it at es ef f ort s t o succ ess full y se l ect and use t he f i r m’ s st rategi es .

11. How do ef fect i ve tr ai ni ng and devel opment pr ogr ams i ncr eas e t he pr obabil it y of str at egi c lea der succe ss? a. T hey cont ri but e t o the de vel opment of core compet enc ies . b. T hey bui l d t he knowledge and ski l ls int egr al t o gai ning and s ust ai ni ng a c ompet it i ve a dvant age. c. T hey i nculcat e a common se t of cor e val ues. d. T hey est abl ish a syst emat i c vi ew of t he or gani zat i on whi ch pr omot es st rat egi c vi si on and or gani zat ional cohe si on. e. T hey devel op ski ll s cr it ical t o per f or mi ng st r at egi c l ea der shi p t asks, s uch as det er mi ni ng str at egi c di rect i on, expl oi ti ng and mai ntai ni ng cor e compet enci es, and devel opi ng an or gani zati onal cul tur e whi ch support s et hi cal pract i ces . Exampl e: GE 2– 17

Chapt er 2 - Strategic Leaders hi p

Di sc ussi on poi nts:

- Fir ms t hat val ue huma n r esour ces a nd have i nsti t ut ed ef f ecti ve r eward plans have obt ai ned hi gher ret ur ns on their i nit ial publ ic of f er ings.

- Whe n human c apit al i nvestment s a r e suc ces sf ul , a workf or ce ca pabl e of conti nuous l ear ni ng i s est abli shed.

- Lever agi ng t he fi r m's e xpandi ng knowl edge ba se i s also li See sl i de 33. K ey Ter ms

nked wi t h st rategi c s ucce ss. K ey Terms Or gani zat i onal c ult ur e - a compl ex s et of i deol ogi es , symbol s, and c or e val ues that i s shared t hr oughout t he f ir m and i nfl uences t he way busi ness is c onducted Ensuri ng an Ef f ec ti ve Organizat ional Cul t ure – Fi rms c an de vel op cor e compet enci es based on bot h t he ca pabil it ies i t poss esse s and t he way t he c apabil it ies ar e used t o pr oduce st r at egi c act i ons. Di sc ussi on poi nts:

- Bec ause or gani zat i onal cultur e i nfl uence s ho w t he fi r m conduct s i ts busi ness and hel ps r egul at e and c ontr ol empl oyee beha vi or , i t ca n be a sour ce of compet iti ve a dvant age.

- Shapi ng t he c ont ext wit hin whi ch t he f ir m f or mul at es See sl i de 34. Di sc ussi on

and i mpl ement s i ts st r at egi es is a c ent r al t as k of str ategi c leade rs. Entr epreneuri al O pport unism – T he pursuit of ent r epr eneuri al - uni Changi m’ s tant or gani onal is imor e difi fi opport ti esng i s aanf ii rmpor sourzatcei of gr cult owthure and nnovat on.culFi tthan maintainingit,but eff ect i ve l ea ders r ecogni ze when r ms of al l si zes r el y on devel opi ng i nnovati on as a f oundati on f or ear ni ngchange i s nec essar y. above -a ver age r et ur ns, but it i s es pec iall y i mpor t ant i n lar ge f ir ms, wher e t he or gani zati onal cul t ur e can eas il y sti fl e e nt repr ene ur ial ac ti vi t y. Cha pt er 12 des cr ibes how lar ge f ir ms us e e nt reprene urshi p t o pur sue opport uni ti es and gai n f ir st -mo ver advant ages . Chapt er 13 des cr ibes i nves ti ng i n oppor tunit ies as r eal opt ions. Five di mens i ons char act er ize a f ir m’ s e ntr epr eneuri al or i ent ati on. Combi ned, t hey i nf l uenc e a f ir m’ s a cti ons and eff ort s to i nnovate a nd l aunch new vent ur es.

2– 18

Chapt er 2 - Strategic Leaders hi p

Di sc ussi on poi nts:

- Empl oyee aut onomy – all ows a cti ons which are fr ee of or gani zat ional constr ai nt – per mi t s self -di r ect i on

- I nnovat ive nes s – t endency t o engage i n and suppor t new i deas, novel t y, exper i ment at i on, and crea ti ve pr oce sses t hat ma y pr oduce ne w pr oduct s, ser vi ce s, or t echnol ogi cal pr ocess es – enc our ages t hi nki ng beyond existi ng knowl edge, t ec hnol ogy, and par amet ers t o add val ue

- Ris k t aki ng – r ef lec ts a willi ngnes s t o acce pt ri sk when pur sui ng new opport uni ti es, s uch a s as sumi ng si gni f ica nt level s of debt or al locat i ng subst anti al r esour ce s f or i ncompl et e or unproven pr oj ec ts

- Proacti vene ss – des cr i bes the a bi li t y t o l ea d r at her than f

See sl i de 35. Di sc ussi on

oll ow i n t he fi r m’ s indust r y or ma r ket s – use s pr oces ses t o ant i ci pat e f ut ur e mar ket needs and to sa ti sf y t hem bef or e compet it or s l ear n t o do so Shaping and Rei nf orci ng aive New t ure – Incr al cha - Compet it ive aggress nesCul s – pr opensi t yement t o t ake a ct nges i ons t o a f i r m’ s cult use dsttentl o i mpl whic h alure lowa trehec fommonl ir m t o yconsi y outement per f st orrategy. m r i val Radi ca ls cha nges to cul t ur e suppor t the s el ect ion of ent ir el y new st rategi es for t he or gani zat ion. Di sc ussi on poi nts:

- A new cult ure requir es e ff ect i ve c ommuni ca t i on and pr oblem sol vi ng.

- It r equi res the sel ecti on of the e mpl oyee s with t he val ues desir ed by t he or gani zati on.

- Est abl ishing goal s t hat fit in wi t h new cor e val ues and mea sur i ng i ndi vi dual perf ormanc e t owar d t hose goal s ar e nec essar y.

- Appr opri at e r ewar d syst ems must be de vel oped t o reward des ir ed beha vi or s t hat r ef lect new core val ues .

- Cul t ur al changes are li kel y t o succ eed onl y wi t h the acti ve support of t he fi r m’ s CEO, t op -l evel mana ger s, a nd key mi ddl e - l evel mana ger s. Exampl e : J .C. Penney

2– 19

Chapt er 2 - Strategic Leaders hi p

Deve l op and Manage Relat i onshi ps w i t h Ext er nal Stakehol ders – T hi s sect i on emphas i zes t he r es ponsibil it ies t hat t op mana ger s ha ve, in addi ti on t o mot i vat i ng and dir ect ing t he i nt ernal or gani zat ion, t o cr eat e and mana ge r el ati onshi ps wi th ext er nal st akeholders . See sl i de 36. Bene fi t s

B enef it s of Ef f ecti ve St akehol der M anagem ent – depend onthe actionsandattitudes of str at egi c lea der s who devel opandmanage relationships with key st akehol der gr oups As c ompl exit y and i nt er depende ncy i ncr eas e i n t he busi ness worl d, t he l ea der shi p r ol e of mai nt ai ning ext er nal st akehol der rel at i onships i ncrea ses i n st rat egi c i mpor t ance.

Det erm i ne and Com m unicat e St rat egi c Dire ct ion – T hi s sect i on uses t he e xampl e of Novar ti s' mi ss i on st at ement t o i ll ust rat e t hat st r at egi c dir ect i on is e mbedde d i n a fi r m's mi ss i on, vi si on, pur pose, long -t er m goal s, a nd val ues . A f ull di scussi on of est abli shi ng val ues and et hi cal pr act ice s wi t hi n t he f r amework of t he st r at egi c mana gement pr ocess then f oll ows . See sl i de 37 . K ey Ter ms

K ey Terms Str at egi c di rect i on - def i n it ion of a fi r m's i ma ge a nd char act er over t i me, f ramed wit hin t he c ont ext of t he condi ti ons in whi ch t he company oper at es Sust ai nabl e d evel opment - conc ept t hat a f ir m ca n and should oper at e wi t hout a dver sel y inf l uenci ng i t s envi r onment Di sc ussi on poi nts:

- Str at egi c Di r ecti on o A f unct i on of t he f ir m’ s s trat egi c i ntent, r esour ce s and ca pabi li ti es, a nd stakehol der expec tati ons o CEO i s t he c hi ef archit ect o Gui des deci si ons and acti ons of i nt er nal stakehol de rs o Posit i vel y aff ect s perf or manc e, mea sured by gr owt h i n sa l es, pr ofi ts, e mpl oyment , and net wort h o Is of i nt er est to ext ernal stakehol ders, par ti cul ar l y i n t he wake of r ecent cor porat e scanda ls o Is r ef l ect ed i n t he f ir m’ s i nter connect ed vi si on, pur pose, 2– 20

Chapt er 2 - Strategic Leaders hi p l o n g -t e r m g o a l s, a n d v a l u e s

Chapt er 2 - Strategic Leaders hi p o bot h int er nal and exter nal st akeholders

- Sust ai nabl e Devel opment o Conce pt has bee n gaini ng st r at egi c i mpor t ance in rec ent yea r s Exampl e: Novar ti sâ&#x20AC;&#x2122; mi ss i on st at ement

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Chapt er 2 - Strategic Leaders hi p

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