Chapter 2 Leading Strategically Through Effective Vision and Mission

1 OBJECTIVES Explain how ethics and biases may affect strategic decision-making Identify a firm’s stakeholders and explain why such identification is critical to effective strategy formula- tion and implementation Understand the roles of vision and mission in deter- mining strategic purpose and strategic coherence Understand the relationships among vision, mission, values and strategy Explain how strategic leadership is essential to strategy formulation and implementation

2 PULLING A USD 15 BILLION COW OUT OF A DITCH Xerox introduces the Xerox 914 copier in This copier transformed the work place Xerox was charter member of the “nifty 50”-50 stocks most favored by institutional investors Since 1970s, however, Xerox has been crippled by competition (mostly Japanese) October 2001, Xerox reports first quarterly loss in16 years. Mulcahy is not obvious choice for top position She lacks product development and financial expertise She gets it because the board has confidence in her “strategic mind”. Roles of 2 people – Former CEOs Paul Allaire & Richard Thoman Refines Xerox vision and reminds people of core values Aligns operation with the refined mission and values Sells Xerox’s China and Hong Kong operations and half of a stake in a joint venture with Fuji Closes down inkjet business Annual expenses cut by USD 1.7 billion Sold USD 2.3 billion worth of non-core assets Reduced long-term debt to USD 9.2 billion from USD 15.6 billion Xerox returns to profitability in 2002, generating USD 1.9 billion in operating cash flow and USD 91 million in net income on USD 15.8 billion in sales The fall from the nifty 50 Mulcahy takes over She leads a turnaround Xerox reaches profitability

3 STRATEGIC LEADERSHIP The task of exerting influence on other people’s pursuit of goals in an organizational context Leadership: Managing an overall enterprise and influencing key organizational out- comes, such as company wide performance, competitive superiority, innovation, strategic change, and survival Strategic leadership:

4 EXECUTIVE ROLES Formal authority and status Interpersonal roles Figure head Leader Liaison Informational roles Monitor Disseminator Spokesperson Decision roles Entrepreneur Disturbance handler Resource allocator Negotiator

5 LEVEL 5 LEADERS Level 5 leaders Build greatness through combination of will and humility Level 4 leaders Can lead a group to superior levels of performance Level 3 leaders Organize people resources to accomplish predetermined objectives Level 2 leaders Work effectively with others as a member of a team to achieve group objectives Level 1 leaders Make individual contributions through talent and work ethic Capabilities

6 Professional modesty TWO ATTRIBUTES OF LEVEL 5 LEADERS Professional will The ability to translate strategic intent into the resolve needed to pursue a strategy and usually to make hard choices over a period of time Being someone who prefers to share credit rather than hog it who tends to shun public attention, act with calm determination, and exercise ambitions on the company’s behalf rather than one’s own

7 WHAT DOES IT TAKE TO BE A CEO? Charisma? There is little consensus on whether personality or background matters more An Ivy league MBA? Integrity International management experience?

8 CRITERIA OF AN EFFECTIVE TOP-MANAGEMENT TEAM 1. The team responds to a complex and changing environment. 2. The team can manage the needs of interdependent but often diverse units, arenas, or functional areas. 3. The team has a valuable and effective social network. 4. The team is able to develop a coherent plan for executive succession.

9 VISION, MISSION AND STRATEGY Vision and Mission Fundamental purpose Values View of future Strategic Goals and objectives Specific targets Measurable outcomes Strategy The central, integrated, externally-oriented concept of how the firm will achieve its objectives. Consists of 5 elements: arenas, vehicles, differentiators, staging, and economic logic

10 VISION – USES OF AMBITION AND AMBIGUITY Sony’s vision in early 1950’s: “becoming the company that most changes the worldwide image of Japanese products as being of poor quality.” CitiBank’s vision in 1915: “the most powerful, the most serviceable, the most far reaching world financial institution the world has ever seen.” Vision statements generally express long-term action horizons, are ambitious and force the firm to stretch. their ambiguity allows flexibility for changing strategy or implementation tactics

11 VISION ANCHORED IN GOALS AND OBJECTIVES Vision Goals and objectives Examples Wal-MartGrow sales and profits by 70% per year RyanairBe Europe’s largest airline in 7 years MatsushitaTo become a “super manufacturing company”

12 STRATEGY COHERENCE The symmetrical co-alignment of the five elements of a firm’s strategy The congruence of policies in functions (e.g., finance, production, marketing) with these elements The overarching fit of various businesses under the corporate umbrella Strategic coherence is Staging Differentiators Economic logic Vehicles Arenas Congruence

13 STAKEHOLDER ANALYSIS Stakeholders: Individuals or groups who have a vested interest in an organization’s ability to deliver intended results and maintain the viability of its products and services Steps in identifying stakeholders 1.Determine influences on strategy formulation decisions 2.Determine stake- holders power and influence over strategy execution decisions 3.Determine the effects of strategic decisions After identifying stakeholders ask Have I identified any vulnerable points in either the strategy or its potential implementation? Which groups are mobilized and active in promoting their interests? Have I identified supporters and opponents of the strategy? Which groups will benefit from successful execution of the strategy and which may be adversely affected? Where are various groups located? Who belong to them, and who represents them?

14 MAPPING STAKEHOLDER INFLUENCE AND IMPORTANCE Unknown Little/No importance Moderate importance Significant importance Influence of stakeholder Unknown Little/No importance Moderate importance Significant importance Importance of Stakeholder

15 BENEFITS OF USING STAKEHOLDER ANALYSIS 1. Can use the opinions of the most powerful stakeholders to shape your strategy and tactics at an early stage. 2. Gain support from powerful stakeholders to help win more resources. 3. Can ensure that stakeholders fully understand what you are doing and understand the benefits of your project. 4. Can anticipate what people’s reactions to your project may be and build actions into the plan that will win people’s support.

16 Corporate Social Responsibility Broader responsibility: Private corporation has responsibilities to society that extend beyond making a profit.

17 Corporate Social Responsibility (CSR) Milton Friedman’s Traditional View of CSR “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits…” Consistent with Agency Theory Views

18 CSR of Business