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
Leader
Liaison
Informational roles
Monitor
Disseminator
Spokesperson
Formal authority and status
Decision roles
Entrepreneur
Disturbance handler
Resource allocator
Negotiator

5. LEVEL 5 LEADERS Capabilities
Build greatness through combination of will and humanity
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

6. 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

7. 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

8. 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
Tolerance for risk or ambiguity
Charisma and emotional intelligence
Personality characteristics may be important; defining and isolating leadership abilities is difficult
Background and demographic differences
Differences in competence and action
Background refers to factors such as:
Work experience
Education
Demographic refers to factors such as:
Gender
Nationality
Race
Religion
Network ties
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

9. 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 3

10. 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

11. 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

12. 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.”

13. GERSTNER’S 1993 VISION
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.

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. 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

16. STRATEGY 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

17. STRATEGY 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

18. 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

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. 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

21. 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

22. 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