Spring 2017 InSights

InSights

A publication from the Albers School of Business and Economics the Center for Leadership Formation s pr i n g 2017

By Marilyn Gist and Alan Mulally

Our fall issue provided an overview of Alan Mulally’s Working Together Management System. The key elements of that involved: setting a compelling vision, comprehensive strategy, and relentless implementation. This article focuses first on the front-end of the process by taking a deeper dive into what leaders need to do to develop the best vision and strategy possible. At the most fundamental level, the leader’s most important contribution is to hold him- or herself and the leadership team collectively responsible and accountable for defining a compelling vision, comprehensive strategy, and relentless implementation plan. Relatedly, we discuss an area that is under-recognized when considering strategy: that the type of person the leader is, not merely the analytical

process used, will have a significant influence on the vision and strategy development. This article concludes by addressing important aspects of the leader’s temperament that merit attention.

Mission, Vision, and Strategy Let us first differentiate terms that are often confused: mission, vision, and strategy. An organization’s mission draws on its primary line of business or service. In simplest form, our university’s “business” is higher education. In contrast, Ford Motor Company makes motor vehicles to deliver safe and efficient transportation, while a hospital treats those who need serious medical care. These lines of business are rather Continued on page 4

Letter from the Dean in this issue Charting the Course / 1 Determinants of a Business Strategy Formulation Process / 3 Visioning and Strategy: A Pragmatic Approach / 6 Strategy and Organizational Behavior / 7 The Alchemy of Passion / 8 The Idea and the Change / 12 Upcoming Events / 13

TrendWatch / 14

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everal shout outs are in order for the Center for Leadership Formation (CLF).

First, the Leadership EMBA program was once again ranked 12th in the nation in the US News and World Report 2018 graduate program rankings. This recognition was received because of the program’s distinctive focus on leadership.

Second, Associate Dean for Executive Programs Dr. Marilyn Gist was recognized as the SU Alumni Professor of the Year at the SU Alumni Awards Dinner on May 5th. This is an extraordinary accomplishment for Marilyn and a well-deserved acknowledgement of her leadership of the Center for Leadership Formation.

Finally, the Executive Leadership Program launches its 20th class this year! The sustained success of this program is definitely something to celebrate, and we will do so September 29 and 30 with the 2017 Stoking the Common Fire alumni event. CLF Senior Fellow Alan Mulally and poet and consultant David Whyte will headline the program.

We are so proud of the great work our faculty and staff members do with our executive students. Students continue to marvel at their transformation as skilled practitioners, savvy business leaders, and contributors to the Common Good.

Please enjoy reading about the theme of “Visioning and Strategy Formation.” Alumni, we look forward to you joining us on September 29 and 30 for the 2017 Stoking the Common Fire event!

Joseph M. Phillips Dean, Albers School of Business and Economics

Center for Leadership Formation Staff Dr. Marilyn E. Gist Associate Dean, Executive Programs Professor, Department of Management Executive Director, Center for Leadership Formation Ariel Rosemond Associate Director Kathleen McGill Manager, Executive Programs Outreach Lorri Sheffer Programs Manager

Center for Leadership Formation Fellows Alan Mulally Senior Fellow, Former President & CEO Ford Motor Company Phyllis Campbell Chairman, Pacific Northwest, JP Morgan Chase Jim Dwyer President & CEO, Delta Dental of Washington Allan Golston President, US Program, Bill and Melinda Gates Foundation Jim Sinegal Co-Founder & Retired CEO, Costco Wholesale Brian Webster President & CEO, Physio-Control, Inc.

Center for Leadership Formation Advisory Board Lindsay Anderson Vice President Quality Boeing Commercial Airplanes Lorrie Baldevia Senior Vice President MCM Sallie Bondy Director, Business Operations for Boeing Fabrication The Boeing Company Mike Butler President, Operations Services Providence Health & Services

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Determinants of a Business Strategy Formulation Process Rubiná mahsud

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trategy formulation is a natural outgrowth of a firm’s viewpoint on their mission and vision. Every firm exists to make profit—thus, making profit is not a choice but a given. Existence beyond profit motives helps firms with soul remain alive in the minds and hearts of customers for centuries—way beyond the lives of their founders, such as that of the Ford Motor Company. A firm’s purpose beyond profit should inform the strategy formulation process leading to the strategy’s successful implementation.

Strategy formulation entails which perspective of strategic thinking is involved in the formulation process—is it considered a plan, a perspective, a pattern in the stream of decision making, positioning, or a ploy to deter competitors? Strategy formulation is also contextual on industry type, age, saturation (such as the auto or airline industries), or a novice industry (gaming, online shopping, and social media), environmental stability or dynamism. For example, during a stable environment a methodical

Mike Ehl Director, Aviation Operations Port of Seattle Brad Harlow CEO & President PhysioSonics Aaron Howes Vice President, Risk Management & Insurance Expeditors International of Washington O. David Jackson Founder & Chief Strategist Jaxx Strategic Partners Kate Joncas Deputy Mayor, Operations City of Seattle

stepwise formulation with detailed plans of execution is desirable to achieve efficiency and effectiveness— this idea comes from a planned school of strategy. However, in an unstable high-velocity or hypercompetitive environment, strategy formulation may take an emergent (emergent school of strategy) path that adjusts itself with the environment. Choosing between a planned versus an emergent strategy formulation process would need a systematic analysis of a multitude of factors to reach a strategic choice.

Harvey Kanter Chairman of the Board, CEO & President Blue Nile Jim Klauer Senior Vice President, Non-Foods Merchandising Costco Wholesale John Milne Founder & CEO Avnew Health Doug Moore President McKinstry Company

Sometimes, managers need to be ambidextrous to formulate their firm strategy in both modes simultaneously.

The strategy formulation process also depends on the mental model and makeup of the firm. For example, foundational work in the strategy discipline by Raymond Miles and Charles Snow (1978), famously referred to as “the Miles and Snow Typology,” categorizes firms in four quadrants depending on how they address issues, including entrepreneurial, logistical, and technological areas.

For example, a firm can be categorized into one of four categories: (1) Prospector—a firm is considered an innovator, risk taker and pioneer in opening up new industries and markets; (2) Defender—rather than being too innovative a firm protects and defends its current market share, maintains stable growth, and serves its current customers; (3) Analyzer—a firm Continued on page 10

Sarah Patterson Executive Vice President & COO Virginia Mason Medical Center Chris Rivera Chairman, President & CEO Nativis, Inc. Dan Wall President, Global Products Expeditors International of Washington

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Charting the Course

Continued from page 1

distinct. Yet mission statements go beyond simply distinguishing the line of business. In most organizations, leaders define a mission that helps differentiate their organization from others in the same industry. For example, Seattle University’s mission is “to educate the whole person, to professional formation, and to empowering leaders for a just and humane world.” Note that this mission reflects our Jesuit nature. It is valuesbased (leaders “…for a just and humane world”), holistic (intellectual, emotional, and spiritual growth), and formative (development through curricular experiences that foster reflection and discernment).

Next we move to creating a vision.

An organization’s vision embraces its mission and is aspirational. Ford Motor Company’s vision is: “People working together as a lean, global enterprise to make people’s lives better through automotive and mobility leadership.” In order for a vision to be compelling, it should reflect both past and future. Note that Ford’s vision reflects its automotive history, but extends that vision to integrate advances in technology for mobility into Ford’s future. This may include driverless cars, as well as other technology that aids driving and safety.

Other themes that help make this particular vision statement compelling are efficiency (“lean”), broad markets and production (“global”), collaboration (“people working together”), and a focus on helping others (“to make people’s lives better”). So this vision statement embraces Ford’s past while illustrating its aspirations.

Strategy should follow the vision’s aspiration by articulating “how” it is to be achieved. Good strategy will guide an organization’s direction and actions so it accomplishes its vision and has a positive impact on its stakeholders. A number of factors go into determining impact, including unforeseen external factors and competitors’ actions. However, our focus in this article is on the factors under an organization’s reasonable control that are involved in developing a compelling vision and comprehensive strategy. These factors are the process of inclusion, analyses of organizational capabilities and the context of its environment, and an orientation toward innovation.

Strategy Development There is an extensive literature in the field of strategic management. Two important summaries are provided in this issue by Professor Rubina Mahsud who emphasizes strategy formation, and Professor Greg Prussia who discusses elements of strategy implementation. Here, we briefly highlight three common approaches to developing organizational strategy.

In the first approach, organizational capabilities drive strategy.

Obviously, capabilities must be considered by all organizations, but they tend to dominate in two situations. They commonly drive strategy in entrepreneurial firms where few competitors have presented challenges to success.

And they may limit strategy for firms in declining industries. An example of the former would be Space-X. High barriers to entry and few competitors enable Space-X to establish its goals

with few constraints beyond its own capabilities. By contrast, some brickand-mortar retailers are struggling financially because internet competition has eroded market share. Strategy formation for stores like Sears and JC Penney is constrained by limited resources.

In businesses with greater flexibility, organizational capabilities can be increased through resource allocation (e.g., additional hires or capital investment). Competitive analysis or orientation to innovation are then favored to form business strategy, which, in turn, drives resource allocation.

Competitive analysis involves rigorous consideration of the industry, including customer demand, the supply chain, competitive firms, and the economic environment. If a firm determines its competitive position is favorable, its strategies should reflect that (e.g., expansion into new markets).

If unfavorable, more defensive strategies should be appropriate (e.g., strengthening customer ties within a business segment to prevent erosion of market share).

Finally, design thinking emphasizes innovation. Its focus is on creating prototypes of products or services and testing them before full roll out.

Design thinking embraces the concept of “rapid failure” — that many ideas can often be tried quickly to find the strongest one. Hallmarks of this approach are getting into the field and talking with customers to discover needs, then drafting alternative approaches. These are then tested to drop the weaker ones and refine the best.

In large organizations, strategy may include multiple elements.

Businesses may channel resources toward innovation in one area and expansion in another. They may seek to optimize capabilities such as excess production capacity by expanding into new markets or creating new products.

Whatever the strategy, it typically

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For the Leader: Who Am I? Few discussions of organization vision and strategy emphasize personal qualities of the leader. Yet these are critically important because “who I am” has a lot to do with “what I do.” We offer several examples below of how this plays out, then tie it back to the development of good vision and strategy.

Decades ago, David McClelland identified three motives that are important in characterizing individuals, and a body of research supported these elements as being distinct and relevant for leadership. The motives are Need for Achievement (orientation toward promotion and status), Need for Power (interest in control and influence), and Need for Affiliation (desire for relationships and socializing). McClelland’s research showed that need for achievement predicted the rise into leadership.

Those with high need for achievement tended to become managers significantly more often than those with low need for achievement.

However, need for power predicted who remained in management after several years – those with low need for power more frequently self-selected out. Finally, need for affection was less

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has a multi year horizon (3-5 years) for enough commitment of resources to ensure progress. In this way, the organization’s vision is best achieved.

strongly associated with leadership than the other two. Many leaders had low-to-moderate need for affection scores.

The nature of organizational leadership has changed over time, and the roles are both less hierarchical and more complex. Yet in a contemporary context, McClelland’s il yn Gi three motives might st lend themselves to broader interpretation. Need for Achievement may explain not only the rise to leadership, but the pursuit of strategies that drive organizational success (profit) and personal gain.

Both goals are appropriate — unless taken to an extreme. Need for Power can initiate creative strategies that position a firm in the lead for its industry, or to strategies that are destructive to others in pursuit of personal dominance. This may be particularly true if Need for Affiliation does not temper Need for Power.

Need for Affiliation can be interpreted not only as desire for connection and socializing, but as related to one’s values and beliefs about people. Leaders’ beliefs influence their actions. Do they believe people are basically trustworthy and hardworking, or that people generally can’t be trusted and are lazy? This influences a leader’s openness to others’ ideas as well as the ultimate vision and strategy developed. And a leader’s values matter. Does the leader value people as much or more than making a profit? In what way does this translate into action? We suggest it shows up in a desire to serve others (e.g., “servant leadership”). Because it involves connecting to others, Need for Affiliation should relate to honesty and integrity. A leader’s honesty and integrity guide ethical behavior.

This is not limited to breaking the law, but to how leaders make tradeM

The leader’s most important contribution is to hold him- or herself and the leadership team collectively responsible and accountable for defining a compelling vision, comprehensive strategy, and relentless implementation plan.

Alan Mulally served as President and Chief Executive Officer of The Ford Motor Company and as a member of Ford’s board of directors from September 2006 – June 2014.

Mulally joined Google’s board of directors in July 2014, and the board of directors of Carbon 3D in May 2015. Prior to joining Ford, Mulally served as Executive Vice President of The Boeing Company, president and CEO of Boeing Commercial Airplanes, and President of Boeing Information, Space and Defense Systems. Mulally served on President Obama‘s United States Export Council, as Co-Chairman of the Washington Competitiveness Council, and has served on the advisory boards of the National Aeronautics and Space Administration, the University of Washington, the University of Kansas, the Massachusetts Institute of Technology, and the United States Air Force Scientific Advisory Board. He is a member of the United States National Academy of Engineering and a fellow of England’s Royal Academy of Engineering.

Mulally is Senior Fellow of the Center for Leadership Formation at Seattle University.

Dr . Marilyn E . Gist is associate dean for executive programs and professor of Management, Albers School of Business and Economics, Seattle University. In addition, she serves as executive director of the Center for Leadership Formation providing academic direction for the executive degree and certificate programs. Prior to this, Marilyn held the Boeing Endowed Professorship of Business Management at the University of Washington, where she was also the Faculty Director for Executive MBA programs. In addition to her academic roles, she has served in management positions in the public and private sectors, and has extensive consulting experience.

Marilyn has over 25 publications in leading scholarly outlets. Her publications include “ Developing Dual-Agenda Leaders” (coauthored with Professor Sharon Lobel) in the 2012 Journal of Corporate Citizenship, and ”SelfEfficacy” (co-authored with Angela Gist) in the 2013 Oxford Bibliographies in Management.

Continued on page 9

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Visioning and Strategy:

A Pragmatic Approach Neven Stojanovic

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s leaders, one of our core responsibilities is to articulate a compelling vision and strategy in order to move people to action. The best leaders articulate a vision and strategy that is aligned with the mission and purpose of the organization, is clear and achievable, and resonates with all stakeholders.

While these fundamentals are simple, the process of articulating a vision and strategy is more of an art than a science. One way to make the process easier is to think of it using a familiar pattern of people-processtools.

People It is not possible to create a compelling vision or alignment without a complete understanding of the needs and desires of all stakeholders.

Typically, there are three distinct categories of stakeholders that have to be considered: customers, your team, and everyone else that will be affected with the changes.

Customers are the most important stakeholders and you need to understand who your true customer is. I work in an IT department and we sometimes incorrectly identify the customer as one of our business units while the real customer is actually the customer purchasing our services.

Similar patterns exist in almost all organizations.

While you are responsible for creating a vision, your team and other stakeholders must be directly engaged and must participate during the process of strategy formation, or you risk having a strategy that belongs only to you instead of to the team and organization. You can expect that

“Strategy and vision require making choices and deciding on trade-offs.” initially, not everyone will buy into your vision and strategy. You need to understand where the resistance is coming from and why.

Remember that your success with people depends on your influence and leadership skills. The people will follow you only if you’re worth following.

Process Strategy and vision require making choices and deciding on tradeoffs.

Be prepared to make difficult decisions, but do not make decisions in a vacuum. Create opportunities to engage with all of your stakeholders in order to understand their needs and perspectives. Do not rush to conclusions or procrastinate tackling difficult issues; both scenarios are equally detrimental to success. Take time to develop relationships, and in the process, explain the decisionmaking process and criteria. Step back to reflect and understand how your stakeholders perceive your vision and strategy. Is your vision and strategy clear and compelling? Is it realistic?

Can you measure success? Does it create alignment? Can everyone see themselves in it? Continue with refinements until you are ready to communicate it to a wider audience.

tools The two most important tools for creating a compelling vision and strategy are communication and a clear and transparent decision-making process.

You need to capture and communicate the essence of your vision and strategy in a way that can be easily remembered and shared. Remember that communication goes two-ways; great leaders are also great observers and listeners, so remain tuned in at all times. A transparent decision-making process will help you create and lead change because everyone respects and appreciates process fairness.

Building and explaining your decisionmaking process in collaboration with the key stakeholders will help you build trust you need to succeed.

It is human nature to strive to simplify complex problems in order to avoid failure. Creating a compelling vision and strategy requires us to use both our hearts and minds. Both vision and strategy are uniquely and deeply connected to the people, the purpose, and the culture within an organization. There is no universal checklist for creating one. While this short summary does not introduce any new ideas, it offers an approach for organizing the basic leadership concepts around a familiar pattern of people-process-tools, and may help us increase our chances of success.

Neven Stojanovic served as Senior Development Manager for Technology and is the Technical Principal for Information Services at Expeditors International of Washington. Neven is an alumnus of Seattle University’s Leadership Executive MBA (LEMBA ‘14).

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Strategy and Organizational Behavior Greg Prussia

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n my doctoral program we learned about all elements of business practice, but we chose to focus on either strategic management or organizational behavior (OB). While I chose OB for my emphasis, one of the things I remember most from my strategy classes was the need to better understand strategy implementation.

That is, the vast majority of time spent both in study and in practice seemed to focus on strategy formation almost to the exclusion of its implementation!

There are many activities that relate to the successful implementation of a strategy (e.g. organizational restructuring, technology systems modifications), but success hinges largely upon the degree to which the organization’s workforce executes, or implements, the plan.

Organizational strategy and implementation is not unlike the pursuit and realization of a dream house. For such a house the first things to develop are the blueprints and specifications — the vision/ strategy for what the house will ultimately be. The strategy may be somewhat adaptable but should be appropriate to achieve the goal of constructing a sound, livable, desirable house. Following development of the blueprints, construction implementation ensues.

Effective construction depends on a sound foundation followed by quality framing, drywalling, roofing, etc.

In a business, a similar sequence ideally occurs. A high-level vision and strategy may be formulated by top management, but the successful implementation of the strategy will largely depend on the organization’s foundation (culture) and workforce characteristics. While

the dream house construction hinges on the quality of the foundation, framing, etc., effective business strategy implementation depends on the existence and quality of the following workforce-related elements: 1. Leadership character and organizational culture; 2. Strategy clarity and communication; 3.

Sense of ownership and autonomy; 4. Accountability and tracking; 5.

Feedback and recognition.

Character and Culture Regardless of the formulated strategy, it’s important to be transparent and honest with the workforce. Importantly, Kouzes and Posner found that honesty is one of the top leadership traits valued by employees (2006). Thus, even if the chosen strategy is not a positive one (e.g., retrenchment), being honest with the workforce about it is critical. Such transparency regarding strategic aims may even enhance the quality of implementation avenues derived via workforce input.

Leadership that is perceived as having integrity and that treats employees with respect is likely to impact the manner in which the workforce implements any strategy.

Aside from leader character, the broader organizational culture can also facilitate strategic success. ideally the culture is one where employees feel valued, believe their input is appreciated and possibly utilized, sense that they are respected as evidenced by organizational practices (e.g., fair annual review procedures), and work in an environment characterized by positive interpersonal treatment (i.e., interactions with management). An organizational culture distinguished

“Specific goals are more motivating to employees, and their ultimate achievement can be relatively easily identified and therefore celebrated!” by these elements is an apt foundation upon which to effectively deploy the other elements of successful strategy implementation below.

Strategy Clarity and Communication While a high-level strategy may be general by design, its successful implementation by the workforce will necessarily be translated into clearly stated and objective goals.

Specific goals are more motivating to employees, and their ultimate achievement can be relatively easily identified and therefore celebrated!

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Continued on page 15

The Alchemy of Passion O. David Jackson, SPHR, PMP, MBA

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few years ago, I found myself leading a nonprofit’s efforts to identify its next executive director. As our search committee conducted its work to narrow the national candidate pool down to a finalist, we found ourselves in a classic dilemma. We had identified two candidates—one with the head skills of a proven executive leader, and one with the passionate heart of a proven warrior for our cause. If we could have melded them together, we would have found the perfect candidate. However, as the limitations of technology (and ethics) made it abundantly clear, we had to make a choice. After multiple weeks and rounds of deliberation, I finally asserted that what we needed was a leader with heart. Specifically, I said, “I can teach executive skills; however, I can’t teach passion.”

At some point during his legendary career, Peter Drucker famously quipped, “culture eats strategy for breakfast.” If Drucker was right that culture feeds on strategy, then it is passion that fuels the soul of culture. Organizational cultures evolve from the alignment of sound business practices, principles, and functions, that when optimized, produce tremendous value and results. Yet, it is passion— that strong and barely controllable emotion—that guides culture to inform strategy in the development of an organizational vision. The effort to define the undefinable toward the mass production of success has

resulted in numerous management and operational frameworks such as Lean and Six Sigma; resulted in hundreds of books, most notably Jim Collins’ Good to Great; and fostered an industry of coaches and motivational speakers whose livelihoods are rooted in trying to improve business and organizational leaders—yet all of these efforts can be distilled to the intimate work of discovering and connecting to one’s innate passion.

Today’s business and organizational landscapes are currently enamored with the trends of data-driven decision making and seeking to inspire a growth culture— as if neither data nor growth had ever been considered prior to now.

In the age of big data, however, an organization’s ability to collect and synthesize data to create predictable models for success has come to be viewed as a competitive advantage.

Moreover, when such practices are institutionalized within a culture to guide how decisions are made, an organization is said to have a sustainable competitive advantage. But alas, such frameworks and language are being elevated over the importance of passion. Rather than teaching practitioners and leaders to be data driven toward predictability and growth, we must encourage leaders to frame and ask better questions to ignite passion.

So, why are we afraid of passion?

Passion is messy, ill-defined, and does not fit neatly onto an evaluation form. Passion that refuses to be managed can fly in the face of culture and strategy. Passion is the most personal, most deeply held, and the most irrational aspect of our personhood—and yet it is passion that unlocks discretionary effort in our employees; it is passion that drives one to the edge of creativity resulting in innovation; and it is passion in its most innate form that Jim Collins attempts to describe as the secret to “Level Five” leadership. When

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Charting the Course Continued from page 5

we fear passion, we fear ourselves—for passion can only be controlled by passion. Culture is the sandbox derived from the alignment of strategy; passion is the beach from which the sand originates.

As 21st century business and organizational leaders, let’s save ourselves the time and money invested in creating frameworks and structures to manage and motivate employees.

Instead, let’s affirmatively declare that our business and organizational lives are dedicated to the embrace of passion through whichever endeavors we may pursue. During my tenure at Microsoft, I gained a reputation for effectively retaining employees in the competitive business of online search, where the skills of machine learning, data analytics, and software engineering were in high demand. While having the discretion to construct financially compelling packages helped, my success was forged through the personal connections made with employees to understand the passion behind their decisions to leave. I came to understand Greg’s need to provide for his family because he felt that his decision to complete his doctorate had left him lagging the earnings of his peers; I came to understand Juan’s desire to take on greater responsibility for his family and their farm in Argentina; and I fully understood Qi’s demand for premium pay as a rare woman in the technology field dominated by men. My approach was not fully appreciated because instead of conveying a corporate perspective to financially control said passions, I chose to help my employees fulfill them—and they stayed with us.

As I advocate for passion, I do so fully cognizant of the need for structure and normative language. However, as business and organizational leaders, we get to decide how we will use our position and power to create the environments in which we spend a third of our lives. Moreover, we need to acknowledge that all the systems and processes that facilitate our daily work are really designed to harness passion toward organizational outcomes. After all, marathons are started with training and skill, but the race is completed with passion.

Looking back, the members of that nonprofit’s board chose to hire the passionate candidate. Today, with a strategy and culture fueled with passion, the organization that once teetered on the brink of collapse has reclaimed its leadership role within our community and will soon host the grand opening of a $1.5M community servicing center. The lesson here is quite simple—when in doubt, let passion lead you forward.

O. David Jackson served as Human Resources Director, Application and Services Group at Microsoft and is the Interim Executive Director of the American Association of Cosmetology Schools, and Founder and Chief Strategist of Jaxx Strategic Partners. David is an alumnus of Seattle University’s Leadership Executive MBA (LEMBA ‘09).

offs when forced to choose. Do they keep commitments made publicly? Can their word be trusted?

Finally, several personality traits of the leader also will influence strategy development. Three common personality characteristics are considered self-defeating behaviors. Unchecked, they will hinder the development of compelling vision and strategy. These are arrogance, defensiveness, and excessive control tendencies. m Leaders who are arrogant may not solicit much input from others. Fresh ideas will be limited. In addition, arrogant leaders tend to be highly focused on personal gain.

They may bias an organization’s direction toward their own benefit because they see themselves (and people who are like them) as more important than others. m Leaders who are highly defensive may be open to others’ ideas initially, but tend to end discussion, or withdraw emotionally, if there is a hint at criticism or disapproval of the leader’s current approach. Others recognize this and are often careful not to offer valid suggestions for fear the leader will react negatively. m Leaders with excessive control tendencies are often highly critical of others’ work.

When the leader does seek input, people are reluctant to respond for fear their partially developed ideas will be harshly received.

By contrast, positive traits lead to the development of stronger teams and effective strategies. These traits include humility and love. They also include a willingness to openly engage others by facilitating discussions and mobilizing the group through shared goals and transparent communication.

Developing a compelling vision and comprehensive strategy are central to the Working Together Management System.

Equally important, the temperament of the leader affects the process for strategy development and implementation — for better or worse. In our next issue, we will explore the implementation process in depth.

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Determinants of a Business Strategy Formulation Process Continued from page 3

that maintains market share and tries to be somewhat innovative but avoids being too risky and, finally, (4) Reactor—a firm that avoids having any clear strategic approach but rather moves with environmental events, but does not anticipate or influence the events.

In today’s volatile environment executives need ongoing strategy formulation, implementation, and evaluation processes. The days of linear thinking and consideration of few factors are gone; instead, executives need to look for idiosyncratic factors that are difficult for competitors to understand, let alone imitate. In the management discipline, these idiosyncrasies are called intangible assets, while in the strategy discipline, they are known as dynamic capabilities.

To choose between a planned and an emergent strategy formulation process, management needs openmindedness along with shared ideas and ideals among themselves to reach comprehensive decisions. Whether one chooses planned or emergent strategy, formulation involves scanning the general, specific, and crossindustry environments to anticipate threats and opportunities, challenges, and promises. General environmental factors, including technological, demographic, sociocultural, political, and economic factors, can bring or block possibilities and potentials. The industry environmental analysis would require scanning buyers, suppliers, new entrants, substitutes, rivalry firms and competition. The new force is a non-threatening, complementing force called “complementors.” For example, Sony Play Station and Nintendo require a constant flow of new games that comes from an entirely different industry—that of the video gaming industry. Content-producing video game firms are not competing with

If a firm possesses resources that are valuable and rare, it can gain temporary advantage.

the two above-mentioned firms for market share; rather, the video game industry players are complementing Sony and Nintendo, thus creating a win-win outcome for all. The wave of complementarities sweeping markets and industries involves knowledge sharing, co-option, alliances, and partnerships that facilitate businesses to minimize risks while maximizing opportunities for either party.

For a firm to have sustained competitive advantage, scanning needs to be a regular process built into the firm’s DNA. For example, how do the shifts in demographics (populations and ethnicities) inform companies and industries to align their products and services accordingly? Take the case of historical retailers such as Macy’s, Sears, JC Penney, and Kmart—all run by smart executives—that are today grappling for existence and threatened by novice entrants to the market. Are they grappling because they did not cater to the burgeoning new populations with different needs for style, cuts and colors, price points, or all of the above? Were these retailers too long caring and catering to the suburban white members of a population, that was not only shrinking, but also contained a new generation that did not want to associate with their parents’ choices and selections?

Wasn’t there also an ethnic population

growing in numbers and affluence which was ignored and forced to acquire dominant tastes? In the meantime, new firms like Zara, H&M, and many more online companies have mastered flexible, agile firm strategies and structures that the larger giants are now grappling with.

Perhaps the historical companies and their executives, while formulating their grand strategies in their boardrooms, were isolated from their operating core personnel responsible for implementing their designed strategies, or not involved in conceiving those strategies at all.

That is exactly what Gallup’s 2017 survey on the State of the American Workplace suggested when it stated that 70 percent of U.S. workers are not engaged in their work. This disengagement is costing the U.S. economy around $500 billion each year (Gallup, 2013). Similarly, the three big American auto companies not long ago controlled some 90% of the U.S. market share. Today, their market share is reduced to less than 40%. The onetime prospectors who invented the retail and auto industries are struggling in this new global market paradigm.

Companies that were onetime great innovators and efficient operators are facing difficulty on both fronts—and one wonders why. Why did these once-upon-a-time inspiring companies become less uninspiring?

A major indication may be that executives not only failed to involve their operating core personnel in the strategy formulation processes but were focused on downsizing, rightsizing, and re-engineering—in other words, firing employees—not realizing that they were losing the soul of their firms, which we call the human and social capital.

This brings us to the strategy formulation process that looks inside

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a firm’s resources and capabilities to reap sustained success. The Resource Based View (RBV) is a dominant approach in the strategy formulation process that highlights the link between resources and a firm’s competitive advantage. If a firm possesses resources that are valuable and rare, it can gain temporary advantage. But if it possesses valuable, rare, difficult-to-imitate, and non-substitutable resources, it can gain long-term competitive advantage. Resources involve financial assets, physical assets, organizational structure, and human capital, including hiring, training and development, compensation, etc. Human capital represents the knowledge, skills, and capabilities of individuals which are reflected in a person’s education and life experiences. Whereas social capital involves the relationships between individuals and organizations that facilitate action and create value— the bond that cannot be purchased or acquired as it is specific to the company and individuals working there. The bottom line is that in order to create organizations that are truly fit for the future, successful strategy formulation processes need to involve employees working at the operating core who are inspired and excited about their input right from the formulation process.

Finally, it is important for management to identify the correct unit of analysis for formalizing their firm strategies. For example, sometimes external environmental factors or industry-specific forces can provide the dominant logic for pursuing a particular strategy formulation process. Or a firm’s internal resources and capabilities may provide a better explanation for strategy formulation. Other times,

Linear STrategy formation – past

Formation

Implementation

Evaluation Iterative Strategy Formation – the Current & the future

management needs to formulate strategies in unconventional ways, suggested by the Blue Ocean Strategy concept. The Blue Ocean Strategy concept asks executives to focus on demand creation rather than competition. By creating a demand that never existed before, management can make the competition irrelevant. Demand can be created by making value innovation the right strategic move.

Most firms choose to focus either on value or innovation, as it is difficult to do both simultaneously. For example, focusing on value creation alone will allow firms to gain only incremental improvements in their performance, but will not make them stand out in the market. Similarly, focusing only on innovation may result in products and services that are too futuristic, overshooting the customer’s threshold. Focusing on both can make the company stand out in a crowded market for a long time and be remembered for its soul. This success is possible by having management focus on socially significant and noble goals, considering companies as communities and employees as family, constantly cherishing and nurturing both.

DR . Rubiná Mahsud is an Associate Professor in the Albers School of Business and Economics, teaching executives at the Center for Leadership Formation, Seattle University.

She teaches in the areas of competitive and collaborative strategy, Blue Ocean Strategy, global business strategy, and international management. Her previous experience includes working as a medical doctor, medical director, consultancies with the United Nations and private organizations. Her work is published in the Journal of Managerial Psychology, Journal of Leadership and Organizational Studies, Consulting Psychology Journal, Business & Society Review, and The Independent Review.

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The Idea and the Change

by Robert spencer

I

t’s spring and the business plan competition season is upon us. As a long-time mentor to the budding entrepreneurs that enter these contests, I believe we can learn an interesting lesson from them in creativity and managing organizational change.

Every year, students come into business competitions with plans they intend to execute. Over the course of the competition, plans are modified and altered as students adapt an idea, product or service for a market. As it turns out, these entrepreneurs (and those who toil within organizations to introduce innovations, sometimes referred to as intrapreneurs), make natural change leaders.

Over a 35-year career in advising organizations on major change initiatives, I have observed that the most successful projects were not necessarily the product of an extraordinary plan, flawlessly executed.

The common thread is that successful change initiatives are orchestrated by leaders who take a simple yet powerful approach to solving problems.

First, they engage with major stakeholders to uncover and understand others’ perspectives on the need for change. The most successful leaders are active listeners and relentless communicators.

Second, good leaders focus their efforts in a way that resonates with stakeholders. After taking the time to understand the context and needs of those that must be influenced, leaders develop a “change vision” that is both

appealing and empowering to those who must implement it.

Finally, successful change leaders enlist their stakeholders in the work of building and implementing the change vision. The investment of time in sharing points of view and establishing group norms and expectations pays off when teams work more efficiently and collaboratively.

When leaders take this straightforward approach, they help to create environments in which ideas are nurtured, stakeholders are encouraged to create and where decisive action can produce dramatic results.

I see this same phenomenon play out in business plan competitions I support every year. Many times, the winners are those entrepreneurs or teams who have had to adapt or realign their vision as a result of real stakeholder engagement.

The way this tends to unfold is instructive. The participants I see and coach usually start by focusing intensely on their idea for the competition. They often invest a great deal of time in the design of their strategy, business model, and operations approach. They may also enlist the aid of others — collaborators who share in the entrepreneurial vision for the business plan undertaking. This all takes place over about a four-month period as a precursor to developing the business plan for the competition.

But then, at least among those who seem to place highest in the

competitions, something unexpected happens that changes everything: they talk to potential customers. And this stakeholder engagement usually leads to a significant material change in their business model and approach.

In the same way that engaging and listening to stakeholders is vital to leading change programs, it is equally important to entrepreneurs. There is a critical question that must be answered before a successful business plan can be created, and many entrepreneurs forget to ask it.

Like any successful change leader, an entrepreneur must find out what a stakeholder’s interest is in their product or service itself.

I once worked with an entrepreneur as the vision for her product evolved over time. Her product, indoor gardens in assisted living facilities, was initially intended to enhance the aesthetic quality of the environment.

What she learned after intense engagement with the intended end “consumers,” assisted living facility residents, was that residents didn’t just want to look at their environment, they wanted to be engaged and involved with it.

With that, the direction of her plan significantly changed. Instead of offering a product—a garden—she developed a service that helped seniors create the product themselves.

In addition to meeting the “consumer’s” stated needs of being involved, the revised offering provided a host of vital therapeutic benefits that were not even considered in the original plan.

Her success in using the simple change process to find out what stakeholders wanted and needed won her a great deal of recognition in the competition and has catapulted

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“ Like any successful change leader, an entrepreneur must find out what a stakeholder’s interest is in their product or service itself.” her efforts into a thriving business, Eldergrow.

Entrants to business plan competitions are routinely encouraged to engage with stakeholders to develop financial projections. However, the most successful among them take engagement to a higher level to improve their business model, round out their ideas and set the stage for marketing.

To be successful, entrepreneurs should follow the example of good change managers and employ their simple three-step “change” approach: ask questions to uncover emergent needs, create strategies to respond to them, and finally, involve customers in the solution. Applying this approach as their businesses and markets evolve will ensure that entrepreneurs continue to bring products and services to market that meet the actual, not the perceived, needs of consumers.

CENTER FOR LEADERSHIP FORMATION Stoking the Common Fire: 20 years of Executive Leadership Excellence Friday/Saturday, September 29-30, 2017

ALBERS SCHOOL OF BUSINESS AND ECONOMICS EXECUTIVE SPEAKER SERIES Free and open to the public.

5:30 to 6:30 p.m / Pigott Auditorium

Scott & Ally Svensen Wednesday, October 11, 2017 Co-founders, Mod Pizza Nick Hanauer Tuesday, November 7, 2017 Entrepreneur, Venture Capitalist, Civic Activist, Philanthropist, Author

connect with us!

For more information about these events and/or our programs connect with us on Facebook and LinkedIn or via: https://www.seattleu.edu/albers/executive/connect-with-us/#form

Robert Spencer is currently an Albers Adjunct Professor where he teaches courses in management of change, organization behavior and strategy. Over the course of his career, Robert has worked as a partner in Accenture’s Change Management Practice, which included global responsibilities for leadership consulting projects. Prior to his consulting work, Robert held a variety of planning and research positions with Puget Sound Energy, Seattle City Light, King County Metro Water Quality Planning, and other organizations. Robert co-teaches the capstone course in the Leadership Executive MBA program.

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In light of this issue’s focus on Vision and Strategy, we asked: IN WHAT WAYS HAS YOUR ORGANIZATION’S VISION GUIDED STRATEGY?

S

ome may think that with a mission to “revolutionize travel through the power of technology,” Expedia is facilitating change in the travel industry through a limited number of big, bold bets. However, revolutionary change is often more successful through a series of small, precision adjustments facilitated by Expedia’s abundant “test and learn” culture.

Focused on the scientific method, in one year, Expedia may execute over 1,500 A/B tests on both our consumer- and supplier-facing technology. Analysis of data from these A/B tests is then used to guide—and not make—decisions as to which changes should be permanently implemented. When all of these focused changes are combined, Expedia is successful at truly revolutionizing travel.

Jacki Fischer, LEMBA ’16 Vice President, Finance, Expedia, Inc.

R

egardless of regulation or policy, maximizing the use of natural light makes sense whether we are illuminating the interiors of buildings, growing plants within the built environment, or balancing legacy energy sources through photovoltaics or the displacement of solar heat gain.

Having a vision that is propelled by maximizing natural light has created limitless strategic revenue opportunities and a space where people are excited about what’s next. That vision was the foundation of lumenomics and is coupled with strategic initiatives to promote the products and services that facilitate implementation of natural light to increase shareholder value by driving up revenue and reducing operating costs.

T

he industry of architecture is facing an existential problem: the devaluation of design intelligence and creative problem solving. In response, CallisonRTKL has created a new service model built around our clients’ end users, providing our clients with actionable insights into their customers’ wants, patterns and perceptions. This requires an expanded team model beyond architects and designers, one that includes experts in psychology, business analysis, operational excellence, change management and digital engagement.

This focus has given us license to operate as a true design consultancy solving more of our client’s problems, and not solely as an architecture firm. Architects will continue to be called upon to create iconic expressions that shock and awe. However, when algorithms begin to not only optimize buildings but to actually design autonomously, our industry will be transformed into one of system operators. By focusing on the experience, we are creating something that is uniquely human, something that an algorithm can’t create.

Mike Riggs, LEMBA ’16 Senior Vice President, CallistonRTKL

Marti Hoffer, LC, LEMBA ’12 Founder, CEO, President, lumenomics, Inc.

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Strategy and Organizational Behavior Continued from page 7

Though some strategies may be less objective than others, an attempt to clarify them such that their measurement is demonstrable and verifiable enables their actionable pursuit by employees.

The effective communication of such clear strategies and goals certainly impacts execution. During the course of implementation, management will obviously need to make relevant aims and targets known to the workforce. However, structural mechanisms supporting upward communication should also be designed such that any needed tactical modifications may be considered and pursued.

More generally, employee input to management regarding implementation progress should not only be solicited and encouraged (i.e., through established meetings or processes) but also believed to have real, potential impact on decision making. Communication needs to be both formally structured as well as informally encouraged through cultural norms in order to enhance implementation effectiveness.

Ownership and Autonomy Management can enhance employees’ interest in the strategy and their commitment towards its successful implementation by building a sense of ownership in the endeavor. Such commitment can best be built by first soliciting employees’ input in the development of the implementation plan.

This involvement together with establishing a sense of purpose (i.e., a specific role with impact) has the effect of creating a sense of responsibility in employees regarding task execution. Other characteristics that can enhance sense of ownership and commitment include decision-making involvement

and structured interdependence or working with others as opposed to independently (Katzenbach & Smith, 2005).

While the implementation plans may have been codeveloped between management and employees, much of the determination for how those plans will be achieved should be left to the employees. That is, though general guidance and continued oversight of strategic implementation is appropriate, much of plan execution should be ceded to employees. In other words, employees should have autonomy and managers should avoid micro-management of plan execution.

Accountability and Tracking As is often said, “what gets measured gets done,” and employee activity related to implementation activity should be assessed. Each particular element of the plan should have an “owner” that will be accountable for implementation achievements. Furthermore, established management and technology systems can track and provide needed data upon which to judge workforce achievements. A scorecard of related worker accomplishments may be used to demonstrate progress, emphasize momentum, provide visibility and foster cooperative activity.

related to the project. It’s critical to reward particular milestone achievements in order to reinforce the importance of the strategy and its implementation. Such rewards not only stress the importance of a plan to employees but also provide a sense of organizational fairness.

Katzenbach, J.R., & Smith, D.K. (2005). The Discipline of Teams. Harvard Business Review, July-August, pp. 1-10.

Kouzes, J, & Posner, B. (2006). The Leadership Challenge. Jossey-Bass: San Francisco.

Dr. Greg Prussia teaches undergraduate and graduate level Teambuilding and Leadership cl a s s e s , a s we ll a s H u m a n Re s o u rce Management and Principles of Management in the Albers School of Business and Economics.

His research interests center around issues of ethical leadership, leadership justice, and organizational safety. His publications have appeared in Academy of Management Journal, Academy of Management Review, Journal of Applied Psychology, Journal of Management, and Personnel Psychology. He also loves to hike the Cascades.

Feedback and Recognition Feedback regarding implementation progress can help determine any needed strategic course changes. Mechanisms including faceto-face meetings allow a review of progress and provide an opportunity to send/receive suggestions for possible modifications. Feedback can also come in the form of rewards

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