0. Chapter 2 Leading Strategically

1. OBJECTIVES 1
Explain how strategic leadership is essential to strategy formulation and implementation 2
Understand the relationships among vision, mission, values and strategy 3
Understand the roles of vision and mission in deter-mining strategic purpose and strategic coherence 4
Identify a firm’s stakeholders and explain why such identification is critical to effective strategy formula-tion and implementation 5
Explain how ethics and biases may affect strategic decision-making

2. PULLING A USD 15 BILLION COW OUT OF A DITCH
Xerox reaches profitability
The fall from the nifty 50
Mulcahy takes
over
She lends a turnaround
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”.
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

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

4. Formal authority and status
EXECUTIVE ROLES
Interpersonal roles
Figure head
Ceremonial
Liaison
With external stakeholders
Leader
Of employees
Informational roles
Monitor opportunities and threats
Disseminator (internal)
Spokesperson (external)
Formal authority and status
Decision roles
Entrepreneur - designing the strategy
Disturbance handler - of internal/external conflicts
Resource allocator
Negotiator

5. Seven Surprises for new CEOs
CEO Surprises
Seven Surprises for new CEOs
You can't run the company (no time! Too many stakeholders to deal with)
Giving orders is costly (it demoralizes, creates resentment, stifles creativity/ adaptability/flexibility and speed)
It's hard to know what's really going on
You are always sending a message
You are not the boss (the board is)
Pleasing shareholders is not the goal (focus on long-term value creation)
You are still only human

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

7. TWO ATTRIBUTES OF LEVEL 5 LEADERS
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
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
Professional will
Professional modesty

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

9. LEADERSHIP CHARACTERISTICS
Personality differences
A large amount of research has been done on personality or the psychological determinants of strategic leadership focusing specifically on:
Locus of control
Need for achievement
(In)tolerance for risk or ambiguity (my score 35/112)
CEO MBA 55-60
Charisma and emotional intelligence
Personality characteristics may be important; defining and isolating leadership abilities is difficult
(similar argument in entrepreneurship)
Background and demographic differences
Differences in competence and action
Background refers to factors such as:
Work experience
Education (law, acct, fin)
Demographic refers to factors such as:
Gender
Nationality
Race
Religion
Network ties
Traditional: WASP male Ivy leaguer
The profile of leaders is changing (e.g., more diversity among top management teams)
Companies are increasingly placing value on substantive work experience; looking beyond skin color, gender, and even the items on a resume.
Evidence of being a strategic leader–someone who works not only to develop a plan, but also empower the organization to realize the vision behind it, are important indicators of leadership potential
TAKE THE “ARE YOU A STRATEGIST QUIZ” Exhibit 2.4

10. CRITERIA OF AN EFFECTIVE TOP-MANAGEMENT TEAM
The team responds to a complex and changing environment 1
The team can manage the needs of interdependent but often diverse units, arenas, or functional areas 2
The team is able to develop a coherent plan for executive succession
How would you go about hiring a new president for UNLV? How about a provost? Would you look for different things? 3

11. VISION AND MISSION
Vision
A simple statement or under- standing of what the firm will be in the future. A statement of vision is forward looking and identifies the firm’s desired long-term status
A declaration of what a firm is and stands for – of its fundamental values and purpose
Mission
Because it’s hard to execute a strategy if it can’t be described or understand, firms with clearly and widely understood vision and mission find it easier to make strategic decisions entailing difficult trade offs

12. VISION, MISSION AND 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
Vision and Mission
Strategic Goals and objectives
Fundamental purpose
Values
View of future
Specific targets
Measurable outcomes

13. 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.”
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
CitiBank’s vision in 1915:
“the most powerful, the most serviceable, the most far reaching world financial institution the world has ever seen.”

14. VISION ANCHORED IN GOALS AND OBJECTIVES
Examples
Wal-Mart
Grow sales and profits by 70% per year
Goals and objectives
Ryanair
Be Europe’s largest airline in 7 years
Matsushita
To become a “super manufacturing company”

15. GERSTNER’S 1993 VISION (the last thing IBM needs right now is a vision)
IMPLICIT VISION : Get IBM back on top (ambitious and ambiguous)
But further anchored in specific goals and objectives
IBM will not be split up and its many parts will be even more closely coordinated.
IBM will reassert its identity as customers’ primary computing resource.
The company will be the dominant supplier of technology in the industry.
PowerPC, a new microprocessor design will be IBM’s centerpiece. Built into many future computers, it will run a wide range of standard industry software. It will steeply cut manufacturing costs.
Mainframes are no longer central to the strategy, but IBM will still make them, now with microprocessors.
IBM is its own worst enemy. Employees must waste fewer opportunities, minimize bureaucracy, and put the good of the company before their division’s.

16. REASONS TO CRAFT CLEAR VISIONS AND MISSIONS
To crystallize and disseminate the firm’s strategy among employees
To provide a shared logic for the firm’s view of its internal and external environments and of its treatment of stakeholders
To galvanize concerted strategic action
To link strategy formulation to implementation by tying vision and mission to specific and measurable goals and objectives
THEY ALSO PROVIDE
STRATEGIC PURPOSE
&
STRATEGIC COHERENCE
BUT
THEY ARE NOT A SUBSTITUTE FOR STRATEGY!

17. STRATEGIC PURPOSE AT MATSUSHITA/PANASONIC
Goal:
To become a 21st century “Super manufacturing company“
Today
Tomorrow
A conventional manufacturing company
A 21st century “Super manufacturing company“
Role
Provide goods
Provide solutions
Principally capital
Investment
Expansion of R& D, marketing and IT
STRATEGIC PURPOSE guide tradeoffs in decision making

18. STRATEGIC COHERENCE Strategic coherence is
Staging
Differentiators
Economic logic
Vehicles
Arenas
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
Congruence

19. STAKEHOLDER ANALYSIS 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?
Steps in identifying stakeholders
Determine influences on strategy formulation decisions
Determine stake-holders power and influence over strategy execution decisions
Determine the effects of strategic decisions
Stakeholders: Individuals or groups who have an interest in an organization’s ability to deliver intended results and maintain the viability of its products and services

20. PERFORMANCE METRICS
Some financial and non-financial performance metrics
Financial performance metrics
Non-financial performance metrics
Return on sales
Return on assets
Return on equity
Sales per employee
Sales growth
Inventory turn
Accounts receivable turn
Debt ratio
Current ratio
Cost reduction
Customer retention
Customer satisfaction
Customer complaints
Employee turnover
Product returns
Product quality
Patents
New products released
Product development speed
Reputation
Web traffic

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

22. ETHICS AND BIASES
Have any potential biases clouded our decision-making process?
Is the decision ethical?
New strategy – A new means to accomplish goals
Implementation – Executing new strategy to realize goals
Authority structures
Incentive systems
Role of corporate governance
Common illusions about ourselves (e.g., favorability optimism , control)
Escalating commitments
Self-serving fairness bias
Overconfidence bias
Ethnocentrism and stereotyping
Risk assessment

23. BIASES
Illusion of favorability people give themselves more credit for success and take less
(aka fundamental attribution error) responsibility for failures
Illusion of optimism we tend to overestimate the probability of favorable outcomes
Illusion of control we tend to think we are more in control than we actually are (happens a lot in craps games)
Escalation of commitment we tend to throw good money after bad
Self-serving fairness bias we expect more credit and reward and expect others to accept less (e.g. administrative merit – 50% of faculty get merit increase, but 100% of administrators, no administrators get minimum merit)
Overconfidence bias we place erroneously high levels of confidence in our own knowledge or abilities
Confirmatory bias we seek confirmatory evidence of our beliefs while discounting contradictory evidence
Add ethnocentrism and stereotyping and imperfect theories about the world

24. SUMMARY
Explain how strategic leadership is essential to strategy formulation and implementation 1
Understand the relationships among vision, mission, values and strategy 2
Understand the roles of vision and mission in deter-mining strategic purpose and strategic coherence 3
Identify a firm’s stakeholders and explain why such identification is critical to effective strategy formulation and implementation 4
Explain how ethics and biases may affect strategic decision-making 5

25. GROUP ACTIVITY
As a group, craft a vision and mission statement for the College of Business and then for the university as a whole. How are they similar? How do they differ? How are they similar or different from those that you might draw up for a for-profit organization?
Using the vision/mission you crafted, develop a list of stakeholders for the university and their relative power and stake in the university. Which stakeholders are accounted for in your mission/vision and which are left out? Did you identify any groups that could negatively affect your realization of the vision/mission?
What roles should strategic leadership play in the realization of the vision/mission statements that you articulated in the first question? Who can you identify as strategic leaders?