Competing For Advantage

1. Competing For Advantage Part I – Strategic Thinking Chapter 2 – Strategic Leadership

2. Individual Strategic Leaders and Influences on Their Decisions • Key Terms • Strategic Leadership – the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary

3. Qualities of Legendary CEOs • Visionary • have a clear view of what they want to accomplish • Transformational • act as agents of change • motivates others to do more • organizational needs above their own

4. Strategic Leadership • Multifunctional • Managerial & Influential • Change tolerant • Uncertainty tolerant • Motivational

5. Skill Hierarchy

6. Level 5 Leaders • Self-confident enough to set up their successors for success • Humble and modest • “Unwavering resolve“ • “Workmanlike diligence - more plow horse than show horse" • Give credit to others for their success and take full responsibility for poor results • “Attribute much of their success to 'good luck' rather than personal greatness"

7. Strategic Leadership Style • Directive approach • Collaborative approach • Delegation • Each has its own set of advantages & disadvantages

8. Managerial Discretion and Decision Biases • Discretion – latitude for action or decision making • Hubris – excessive pride, leading to a feeling of invincibility • Heuristics – rules of thumb used in decision making

9. Constraints on Decision Making

10. Decision-Making Biases • Reliance on previously formed beliefs • Focus on limited objectives • Exposure to limited decision alternatives • Insensitivity to outcome probabilities • Illusion of control • Reliance on a limited set of heuristics

11. Hubris • Excessive pride that leads to a feeling of invincibility • Magnifies the effects of decision-making biases

12. Implications for IBP • Be sure you don’t fall prey to decision making biases • Be sure you understand the effects of hubris • Play the role of Devil’s Advocate. • Question decisions constructively. • Other ideas?

13. Top Management Teams • Group composed of the CEO and key managers who are responsible for setting the direction of the firm and formulating and implementing its strategies

14. Factors that Influence the Effectiveness of Top Management Teams • Top management team heterogeneity • The CEO and top management team power • Executive succession processes

15. Heterogeneous Top Management Team • Introduces a variety of perspectives • Has a greater propensity for strong competitive action • Tends to "think outside of the box," leading to more creative decision making, innovation, and strategic change • Offers various areas of expertise to identify environmental opportunities, threats, or the need for change • Promotes debate

16. Heterogeneous Top Management Team Challenges • Cohesion • Communication • Comprehensive examination of threats and opportunities

17. The CEO and Top Management Team Power • CEO Duality - CEO also serves as chair of the board of directors to achieve power relative to the board • Independent Board Leadership Structure –the structure in which the board's ability to monitor top-level managers' decisions and actions (particularly in terms of financial performance) is enhanced by employing two different people to serve as CEO and board chair

18. CEO Duality • Is more common in the United States • Occurs most often in the largest firms • Receives scrutiny from increased shareholder activism • Is criticized for causing poor performance and slow response to change

19. Top Management Power • Members of top management can use their social and business ties with directors • Powerful CEOs can appoint members of the top management team or other sympathetic associates to serve on the board • CEO duality • CEO tenure

20. Executive Succession Processes • Process can be internal or external

21. Benefits of Internal Labor Market • Continuity • Continued commitment • Familiarity • Reduced turnover • Retention of "private knowledge"

22. Benefits of External Labor Market • Since tenure with the same firm is thought to reduce innovation, outsiders can bring • diverse knowledge bases • new social networks • which may offer new synergies and new competitive advantages

23. Effect of CEO Succession and Top Management Team on Strategy

24. Key Strategic Leadership Responsibilities and Actions

25. Acquire, Develop, and Manage Key Resources • Key Terms • Organizational Culture–complex set of ideologies, symbols, and core values that are shared throughout the firm and influence the way business is conducted

26. HR Practices Linked to Strategic Success • Managing intellectual capital • Investing in capital resources • Building effective commitments to organizational goals • Incorporating international experience into the skill sets of employees

27. HR Practices Linked to Strategic Success (cont.) • Employing effective training and development programs to promote strategic vision and cohesion • Establishing effective reward plans • Instituting continuous learning • Leveraging the firm's expanding knowledge base

28. Effective Cultural Qualities • Entrepreneurial opportunism • Employee autonomy • Innovativeness • Risk taking • Proactiveness • Competitive aggressiveness

29. Overcoming Cultural Difficulties • Effective communication • Effective problem solving • Effective staffing • Effective performance appraisals • Effective reward systems

30. Mintzberg’s Managerial Roles

31. Actions for an Ethical Culture • Employ ethical strategic leaders • Establish and communicate specific goals to describe the firm's ethical standards • Continuously revise and update the code of conduct based on stakeholder input • Disseminate the code of conduct to all stakeholders to inform them of ethical standards and practices • Develop and implement methods and procedures to use in achieving the firm's ethical standards • Create and use explicit reward systems to recognize bold acts that demonstrate ethical behavior and decision making • Create a work environment in which all people are treated with dignity

32. What is strategic effectiveness? Consistent, long-term goals and objectives Consistent, long-term goals and objectives Reflects and understanding of the environment Strategic Effectiveness (fit) Takes resources into consideration Effectively implemented

33. Strategic Vision vs. Mission • A strategic vision concerns “wherewe are going” or ”what do we want to be.” • Markets to be pursued • Future product/ market/customer/ technology focus • Kind of company management is trying to create • The mission statement focuses on its “who we are and what we do” • Current product and service offerings • Customer needs being served • Technologicaland businesscapabilities

34. Mission Statements • Boundaries of the currentbusiness • Fundamental purpose that sets it apart from other firms of its type • Conveys • Who we are, • What we do, and • Why we are here

35. Objectives • Turns mission into performance outcomes • Organizations produce what is measured • Long and Short term

36. Control Systems • Financial Controls • focus on short-term financial outcomes • produce risk-averse managerial decisions • Strategic Controls • focus on the content of strategic actions • encourage decisions that incorporate moderate and acceptable levels of risk

37. Leading versus Lagging Indicators • Current financial results are “lagging indicators” reflecting results of past decisions and actions—good profitability now does not translate into stronger capability for delivering better financial results later • However, meeting or beating strategic performance targets signals growing competitiveness & strength in the marketplace, thus developing the capability for better financial performance in the years ahead • Good strategic performance is thus a “leading indicator” of a company’s capability to deliver improved future financial performance

38. Controls in Balanced Scorecard Framework