Strong missions that reflect a noble purpose and guiding visions are both important, but they are not enough alone to make strong, powerful organizations. For organi- zations to succeed, leaders have to translate vision, values, and purpose into action, which is the role of leader as strategist-in-chief. Strategic managementrefers to the set of decisions and actions used to formulate and implement specific strategies that will achieve a competitively superior fit between the organization and its environ- ment so as to achieve organizational goals.65
When leaders link vision and strategic action, they can make a real difference for their organization’s future. Research has shown that strategic thinking and plan- ning for the future can positively affect a company’s performance and financial suc- cess.66One study found that as much as 44 percent of the variance in profitability of major firms can be attributed to strategic leadership.67
How to Achieve the Vision
To formulate a strategy, leaders ask questions such as “Where is the organization now? Where does the organization want to be? What changes and trends are occur- ring in the competitive environment? What courses of action can help us achieve our vision?” Strategy can be defined as the general plan of action that describes resource allocation and other activities for dealing with the environment and help- ing the organization attain its goals and achieve the vision. Leaders have to be clear on the organization’s purpose and vision before they can adopt an effective strat- egy. Strategy involves making decisions every day based on what the organization wants to do and be.68
Developing Effective Strategy To develop strategy, leaders actively listen to people both inside and outside the organization, as well as examine trends and discontinu- ities in the environment that can be used to gain an edge. Rather than reacting to environmental changes, strategic leaders study the events that have already taken place and act based on their anticipation of what the future might be like.69 When leaders rely solely on formal strategic planning, competitor analysis, or market research, they miss new opportunities. Consider that when Ted Turner first talked
CHAPTER 13CREATING VISION AND STRATEGIC DIRECTION 411
Strategic management the set of decisions and actions used to formulate and implement specific strategies that will achieve a competitively superior fit between the organization and its environment so as to achieve organizational goals Strategy
the general plan of action that describes resource allo- cation and other activities for dealing with the environ- ment and helping the orga- nization attain its goals
about launching a 24-hour news and information channel in the 1970s, many dis- missed him as delusional. Every source of conventional wisdom, from market research to broadcast professionals, said the idea was crazy and bound to fail. Yet Turner looked at emerging social and demographic trends, listened to his intuition, and launched a global network that generates 35 percent gross margins. Other media leaders had the same information, but they didn’t interpret it the same way or formulate the same strategy to tap into emerging trends.70 Good leaders antici- pate, look ahead, and prepare for the future based on trends they see in the envi- ronment today, which often requires radical thinking.
Of course, leaders should also use hard analysis to help set a course for the future. They strive to develop industry foresight based on trends in technology, demographics, government regulation, values, and lifestyles that will help them identify new competitive advantages. Situation analysis, for example, includes a search for SWOT—strengths, weaknesses, opportunities, and threats—that affect organizational performance. Leaders using situation analysis obtain external infor- mation from a variety of sources, such as customers, government reports, suppliers, consultants, or association meetings. They gather information about internal strengths and weaknesses from sources such as budgets, financial ratios, profit and loss statements, and employee surveys.
Sometimes leaders have to shift their strategy several times before they get it right.71 In addition, strategy necessarily changes over time to fit shifting environ- mental conditions. Consider Yahoo, which sank into decline because a succession of leaders stuck with an outdated vision and strategy. New CEO Marissa Mayer, who joined the company in mid-2012, hopes to make Yahoo relevant again by refocusing the company around the mission of making the world’s daily habits more inspiring and entertaining.
IN THE LEAD
Marissa Mayer, Yahoo
Yahoo still commands one of the largest audiences on the Web, but the company has been a “has been” for so long that no one would believe it. New CEO Marissa Mayer does, though, and she thinks her new vision and strategy can jolt the company back to relevance and profitability.
Mark Zuckerberg coined the term “social graph” for Facebook, and Marissa Mayer believes Yahoo can become just as successful by being the world’s “daily interest graph.”
To achieve the vision, Mayer’s strategy includes developing products that will help Yahoo
“create a complete profile of everything you love,” allowing for more personalized content for users and more lucrative advertising sales for Yahoo. She started by giving Flikr, Yahoo’s neglected photo-sharing service, a much-needed mobile upgrade. In addition, Flikr can now divide people’s uploaded photos into more than 1.6 million minutely specific interest groups. She redesigned the Web site to make it easier for people to connect with the news and information they care about most. The goal is to make the Yahoo experience so easy and appealing that people will return daily. So far, many people are doing just that.
Mayer’s strategy also involves the acquisition of startup companies that are focused on mapping users’ interests. Before Mayer arrived, Yahoo had already acquired IntoNow, which connects users based on the TV shows they watch and love. Mayer has since acquired sev- eral other mobile apps that fit the strategy. The first, On the Air, was started with a mission
NEW LEADER ACTION MEMO
As a leader, you can prepare for the future based on trends in the environment today. Don’t be afraid to think radically. You can shift your strategies to fit changing conditions.
412 PART 5THE LEADER AS SOCIAL ARCHITECT
Find more at http://www.downloadslide.com
to make a difference in the daily lives of people, which is a clear fit with Yahoo’s new strat- egy. Others include Stamped, which kept track of restaurants, books, movies, and anything else users liked; Snip.it, which clipped and shared news articles; and Alike, which made res- taurant recommendations based on previous preferences. These acquisitions are being remade into Yahoo products that “will help us build experiences that bring people with shared interests together,” said Mike Kerns, vice president of products.72
Mayer has a tough road ahead, but people both inside and outside of Yahoo believe she has a chance to pull off her ambitious strategy. By linking vision and action, Mayer has “given everybody a sense of hope,” said one Yahoo mobile engineer.73 Elements of Strategy To improve the chances for success, leaders develop strategies that focus on three qualities: core competence, developing synergy, and creating value for customers.
An organization’s core competence is something the organization does extremely well in comparison to competitors. Leaders identify the organization’s unique strengths—what makes their organization different from others in the indus- try. L.L. Bean succeeds with a core competence of excellent customer service and a quality guarantee. Leaders at Family Dollar focus on a core competence of opera- tional efficiency that enables them to keep costs low.
Synergyoccurs when organizational parts interact to produce a joint effect that is greater than the sum of the parts acting alone. As a result the organization may attain a special advantage with respect to cost, market power, technology, or employee skills. Synergy was the motivation for Yahoo to buy mobile app startups, for exam- ple, to obtain both the products and the engineering talent. Another way companies gain synergy is through alliances and partnerships. Leaders at Coinstar, the company behind Redbox movie rentals, take this approach. As rentals of physical videos declined the Redbox division partnered with Verizon Communications on a service that combines DVD rental and streaming video, benefiting both companies.74
Focusing on core competencies and attaining synergy help companies create value for their customers. Value can be defined as the combination of benefits received and costs paid by the customer.75 For example, Panera Bread doesn’t have the lowest costs for sandwiches and other food and drink products, but it works hard to create an environment where people want to spend time. “If you give people food they want, in an environment that they want, they will spend a dollar or two more, they will go out of their way for it,” says CEO Ron Shaich.76 Delivering value to the customer is at the heart of strategy.
Strategy formulation integrates knowledge of the environment, vision, and mis- sion with the company’s core competence in such a way as to attain synergy and create value for customers. When these elements are brought together, the company has an excellent chance to succeed in a competitive environment. But to do so, lea- ders have to ensure that strategies are executed—that actual behavior within the organization reflects the desired direction.
How to Execute
Strategy executionmeans that leaders use specific mechanisms, techniques, or tools for directing organizational resources to accomplish strategic goals. This is the basic architecture for how things get done in the organization. Strategy execution,
CHAPTER 13CREATING VISION AND STRATEGIC DIRECTION 413
Core competence something the organization does extremely well in comparison to competitors Synergy
the interaction of organiza- tional parts to produce a joint effect that is greater than the sum of the parts Value
the combination of benefits received and costs paid by the customer
Strategy formulation integrating knowledge of the environment, vision, and mission with the core com- petence in such a way as to attain synergy and create customer value Strategy execution putting strategy into action by adjusting various parts of the organization and direct- ing resources to accomplish strategic goals
sometimes called implementation, is the most important as well as the most difficult part of strategic management, and leaders must carefully and consistently manage the execution process to achieve results.77 One survey found that only 57 percent of responding firms reported that managers successfully implemented the new strat- egies they had devised over the past three years.78Other research has estimated that as much as 70 percent of all business strategies never get implemented, reflecting the complexity of strategy execution.79
Complete this assignment online with CengageNOW.
C a