Leadership and CoachingExecutive Education Seminar

End of Competitive Advantage: How Strategic Leadership is ChangingHugh Sherman, PhDSeptember 2015

Seminar Objectives

1. Review the concept of strategy and strategic leadership

2. Using the General Electric experience, examine how context impacted the strategic leaders’ approach to managing the corporation.

3. Conclude with how today’s context is shaping the approach of strategic leaders.

Top Performing CEO’s

Embraer – Maurício Novis Botelho• The world's third-largest maker of commercial

aircraft. The company has dominated recent orders for regional jets seating 70 to 120 passengers, especially in fast-growing Asian markets.

• Total Shareholder Return - Industry Adjusted 2,895%

Worst Performing CEO

Eike Batista, Chairman and CEO, EBX Group• Destroyed tens of billions of dollars in shareholder

value. Blamed the CEOs of each of his companies for the problems he created

• Oil company OGX filed for bankruptcy and a week later shipbuilder OSX, whose fortunes depended on OGX, also went bankrupt. Stock prices dropped 95%

• Batista lost most of his personal wealth, once worth $30 billion and now less than $400 million

Definition: Means by which obtain objectives– Strategy is about doing things differently –

making choices– Requires allocation of resources

Two Basic Questions–Where to compete– How to compete

What is Strategy?

Performance of Firm Determined by:

Corporate Strategy(where to compete)

Choice of Industries in which we will compete

Issues include types of diversification, acquisitions, allocation of resources between industries

Business Level Strategy(how to compete)

How to establish a competitive advantage in a specific market

Examples include low cost, differentiated, niche strategies

What is Strategy?

• http://www.youtube.com/watch?v=ibrxIP0H84M

Berlitz Example

• Positioning worldwide was as a Language Company –Proven business model (in person classes)

• Marcos Justus Brazil GM – became CEO• In U.S. language training is “nice to do” not a

necessity• New positioning a global cultural training

organization – can help your company develop a global team

STRATEGIC LEADERSHIP

Definition: Ability to anticipate, envision, maintain flexibility and empower others to create strategic change

Long term competitiveness -Need to respond quickly & appropriately to environmental change

Requires continually changing set of assumptions and accepted wisdom as to how industry operates

Ireland & Hitt (1999) AME

Leadership is Contextual

Environment• Market Demand, growth• Quasi-legal constraints• Powerful outside forces (suppliers, customers,

competitors)Organization • Skills, knowledge of employees• Inertial forces – culture• Resources available

Discussion of GE Case

1. What are Jack Welch’s the key strategic initiatives?

2. What are Jeff Immelt’s the key strategic initiatives?

Who had the Right Strategy?

1980-2001: Welch focused on developing a cost advantage as his strategy. Welch was focused on high performance culture, by using benchmarking, best practices, and Six Sigma.

2001-Present: Immelt focus on creating a high growth technology, innovative strategy.

Strategy Change Requires Change in all Organizational Dimensions

Welch’s ApproachFocus on Performance and Efficiency- Culture -Competitive, confrontational- Managers were financially oriented, generalists- Focused on efficiency, process improvement, - Promoted from within

Immelt’s Approach

Focus on Technology Growth - Culture – team, collaborative- In depth industry, specialized managers- Focused on innovation, increasing organic growth- Investment in R&D- Recruited industry experts- Marketing focus

Jeff Immelt

• http://www.youtube.com/watch?v=oN_iSHcbyYI

• (Listen to minute 3- 15)

• http://www.youtube.com/watch?v=PHZ9i5Z8RQs

• (Listen to 15 minutes – third point on leadership 4th is simplify. 5th systems thinker)

Today’s Environment: Accelerating Technological Change

• Unprecedented amounts of information in hands of consumers/buyers

• Increasing pace of technological adoption & innovation shortening the life cycle of products and firms

The New Strategy Playbook

Competitive Advantage is Transient• One of purposes of strategy is to achieve a

sustainable competitive advantage• However, today change is the norm not stability• Key is to build temporary advantages ,

innovation becomes continuous and become core to how the business operates

• Prediction and being right less important than reacting quickly and taking corrective action

The New Strategy Playbook

Organizational learning Approach: • Set off in a direction and adjust in real time.

Listen/learn -find response from competitors, customers and learn and adapt.

• Strategic Leaders need to focus on not just on core business but equally building options –continuous renewal and innovation

New Strategic MindsetFrom• Assumption existing

advantages will persist• Few & homogeneous

people involved in strategy

• Internally focused on optimization

• Talent directed at solving problems

To• Assumption existing

advantages will be eroded

• Broader involvement with diverse inputs

• Aggressively focused on external world

• Talent directed at identifying & seizing opportunities

Rita McGrath, The End of Competitive Advantage (2013)

New Strategic MindsetFrom• Resources devoted

primarily to exploitation

• People work on innovation in addition to their day jobs

• Failure to test assumptions, little learning

• Planning orientation

To• Balanced portfolio of

initiatives, core, new platforms and options

• Resources dedicated to innovation

• Assumptions continually tested

• Experimental orientation

Rita McGrath, The End of Competitive Advantage (2013)

Conclusion – Strategy TodayCompetitive Advantage is Transient:• Competitive advantage embedded in people and

the relationships between people• People are the key to innovation and innovation is

the requisite for future success.Requires a Leadership Style which:• Leads with purpose and meaning • Build enduring relationships with people• People to feel empowered to be innovative and

entrepreneurial, to share their learning

The Rules for Personal Success Have ChangedFrom• Hired for Existing

Skills & knowledge• Stable career path• Hierarchies and

teams• Infrequent job

changes• Careers managed by

organization

To• Hiring for ability to

acquire new skills (learnability)

• A series of engagements

• Teams & Superstars• Permanent career

campaigns• Careers managed by

Individual

Rita McGrath, The End of Competitive Advantage (2013)