Chapter 2 Leading Strategically

1
Chapter 2Leading Strategically
2
OBJECTIVES
Explain how strategic leadership is essential to
strategy formulation and implementation
1
Understand the relationships among vision,
mission, values and strategy
2
3
Understand the roles of vision and mission in
deter-mining strategic purpose and strategic
coherence
4
Identify a firms stakeholders and explain why
such identification is critical to effective
strategy formula-tion and implementation
Explain how ethics and biases may affect
strategic decision-making
5
3
PULLING A USD 15 BILLION COW OUT OF A DITCH
Xerox reaches profitability
Mulcahy takes over
The fall from the nifty 50
She lends a turnaround

• Xerox introduces the Xerox 914 copier in 1959.
  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 Xeroxs 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

4
STRATEGIC LEADERSHIP
Leadership
Strategic leadership
The task of exerting influence on other peoples
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
5
EXECUTIVE ROLES
Formal authority and status
6
LEVEL 5 LEADERS
Capabilities
Build greatness through combination of will and
humanity
Level 5leaders
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 companys behalf rather
  than ones 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 modesty
Professional will
8
WHAT DOES IT TAKE TO BE A CEO?
An Ivy league MBA?
Charisma?
There is little consensuson whether personality
or background matters more
International management experience?
Integrity
9
LEADERSHIP CHARACTERISTICS
Differences in competence and action
Background and demographic differences
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 leadersomeone 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

• 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)

10
CRITERIA OF AN EFFECTIVE TOP-MANAGEMENT TEAM
11
VISION AND MISSION
Because its hard to execute a strategy if it
cant 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
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
Sonys vision in early 1950s 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

CitiBanks vision in 1915 the most powerful,
the most serviceable, the most far reaching
world financial institution the world has ever
seen.
14
GERSTNERS 1993 VISION
15
VISION ANCHORED IN GOALS AND OBJECTIVES
Vision
Examples
Goalsand objectives
16
REASONS TO CRAFT CLEAR VISIONS AND MISSIONS
17
STRATEGY PURPOSE AT MATSUSHITA/PANASONIC
Goal
To become a 21st century Super manufacturing
company
Today
Tomorrow
18
STRATEGY COHERENCE
Congruence
19
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

20
STAKEHOLDER ANALYSIS
Stakeholders Individuals or groups who have an
interest in an organizations ability to deliver
intended results and maintain the viability of
its products and services
21
MAPPING STAKEHOLDER INFLUENCE AND IMPORTANCE
Importance of Stakeholder
Little/Noimportance
Moderateimportance
Significant importance
Influence ofstakeholder
Unknown
Unknown
Little/Noimportance
Moderateimportance
Significant importance
22
ETHICS AND BIASES
Have any potential biases clouded our
decision-making process?
Is the decisionethical?

• Common illusions about ourselves (e.g.,
  favorability optimism , control)
• Escalating commitments
• Self-serving fairness bias
• Overconfidence bias
• Ethnocentrism and stereotyping
• Risk assessment

• Authority structures
• Incentive systems
• Role of corporate governance

23
SUMMARY