We now arrive at the strategic leader. As the central focus of this book, strategic leadership integrates strategic thinking and leadership. The rest of this book will establish and detail our observations regarding how leaders are most effective when seeking insight and driving strategic change. We will examine the key choices they face, the options they should consider, and the way in which they conduct themselves and work with others. We will also highlight where some leaders go wrong when they fail to integrate both strategic thinking and leadership effectively. Strategic thinking without leadership risks becoming an intellectual exercise, as demonstrated by the many strategic plans that gather dust on the shelves of executive offices. Leadership without strategic thinking risks not creating meaningful value, as evident when otherwise effective leaders race down the wrong path or execute a good plan the wrong way. The strategic leader recognizes these risks, and focuses on formulating strategy in a credible way and executing strategy in a planned and purposeful manner.
Strategic leaders have a multi-faceted focus. They must establish and communicate a compelling mission (the “what”) and vision (the “where”), and then work with colleagues and allies to formulate a path to success (the “how”). These form the basis of what has become widely recognized as the core components of strategic management:
- Strategy Formation — the determination of strategic intent, including such aspects as an organization’s mission, vision, and goals.
- Strategy Execution — the application of actions, controls, incentives and communication intended to achieve the strategy. (Simerson, 2011)
Each component is critical in its own right, and we should look at them both in greater detail.
Strategy Formation and Strategy Execution.
The available literature on both strategy formation and strategy execution is extensive. We will touch on some of it in the context of this book, with a bias towards concepts and tools directly relevant to the intersection of strategic thinking and leadership. We will not be providing an exhaustive inventory of the tools of strategic management. For those interested in delving deeper, you will find a list of recommended resources, including our own writing on the topic, in Chapter 8.
Effective strategy formation involves solving problems in a way that adds value, is unique when compared to other options, and is sustainable over time. The solution to a given problem is often itself referred to as “the strategy.” Strategy is the topic of much discussion and debate. Strategies are seen as good or bad, clear or unclear. Some discussion focuses on what even constitutes a strategy. Well-known professor of strategic management Richard Rumelt wrote an entire book on the subject, arguing that this confusion has resulted in a deluge of unclear thinking passed off as strategy. Rumelt proposes a basic structure of good strategy that he labels “the kernel.” A kernel has three components: (1) a diagnosis of the problem, (2) a guiding policy that helps set direction in solving the problem, and (3) a set of cohesive actions that carry out the guiding policy (Rumelt, 2011). For example, once could describe the kernel of Apple’s business as (1) helping higher end consumers who aren’t technology experts (2) access leading-edge technology through easy-to-use ‘all-in-one’ products by (3) controlling all hardware, software and services to deliver a seamless experience.
Strategy execution involves delivering on the proposed solution. While it is related to the third component of Rumelt’s kernel, effective strategy execution raises a broad range of additional issues. A competitor who decided to mimic Apple’s approach would face a number of challenges in copying all of their actions. It would need to acquire it’s own design talent, establish supply chain sources and manufacturing relationships, build appropriate retail locations and establish a comparable brand reputation. Any one of these tasks would be a feat in its own right, but in combination it reflects a very challenging task. As evidence of this, while many of Apple’s competitors have produced hardware, software or services of similar quality none have been able to match its business results. In the third quarter of 2013, while Apple’s iPhone made up only 12.9% of all smartphone devices shipped it made more profits than all of its competitors combined.
This example raises the very real challenges involved in being effective at both strategy formation and strategy execution. This is what makes strategic leadership so challenging, and likewise what makes it so important. Strategic leaders create tremendous value and impact if they can effectively solve the riddles of strategy formation and strategy execution.
Strategic Thinking and Leadership in Action
After taking steps to recognize and understand strategic thinking and leadership, we turn our attention to the activities of the strategic leader. As previously stated, strategic leadership applies to both strategy formation and strategy execution. We will be analyzing each of these components separately in chapter three, but to get started we will first ground the conversation with a simpler approach — four stories of strategic leadership in action.
We have chosen these examples to illustrate the ways we see both strategic thinking and leadership applied. They feature organizations, leaders and situations that are relatively well known, as we have found that their familiarity makes them easy to grasp and discuss. Each story builds on that popular understanding, but as is often the case a closer look reveals lesser-known or misunderstood aspects of what made these organizations and leaders successful. It is in these details that we find some of the most interesting examples of the many ways that strategic leadership shows up in real life.
To many, Walt Disney serves as the very definition of a visionary. His work and the company he founded continue to influence entertainment, business, and society over a century after his death. Unquestionably strategic, his life and legacy are an excellent example of both the impact and limitations of visionary leadership.
Disney was born in 1901, a year that marked a new century and the end of the Victorian era. In the next century technology would revolutionize entertainment, both culturally and as an industry. In that regard, Disney fits one characteristic of the most recognized visionaries — being in the right place at the right time. Capitalizing on that opportunity, Disney demonstrated a second key characteristic of visionaries with impact — insight into an opportunity to harness change and define a future that had yet to unfold.
Disney’s achievements in pioneering animation are well known due largely to the lasting impact of his most famous character — Mickey Mouse. Steamboat Willie, the first Mickey animated short that featured sound, was a breakout success when it debuted in 1928. It was followed by a string of successful shorts. A decade later Disney’s first animated feature film, Snow White and the Seven Dwarves, became the most financially successful motion picture of 1938. That financial success ensured the viability of Walt Disney Studios, and marked the beginning of what is commonly referred to as the Golden Age of Animation, from 1937 to 1942. That period saw the introduction of some of the most famous and innovative animated films of all time including Fantasia, Bambi and Dumbo. Each praised in its own right, in total these films pushed the boundaries of animation and motion picture storytelling.
Looking backward now at their success belies the creative risk and innovation they represented at the time, and it overshadows the tenuous nature of the Walt Disney Studio in those early days. Steamboat Willie was actually the third Mickey Mouse cartoon, not the first, after two silent film versions failed to attract significant attention. Snow White was only partially complete when the studio ran out of money, and Disney had to screen it with creditors in order to secure loans to see it through to completion. It was Disney’s passion and personal vision that fueled his continued experimentation. His emerging vision was informed by each failure and success. While this drive led to his ultimate triumph, it also strained relations between Disney and his artists — a tension that would persist even after financial success was beyond question.
Behind these creative victories lies an equally important vision that proved strategically important to the lasting success of Disney’s creations. Walt Disney pioneered a business model based on the ownership of entertainment properties, forging the earliest marketing synergies that now dominate mainstream entertainment. Merchandising and product tie-ins associated with entertainment today are so common that it’s difficult to comprehend that this practice is barely a half-century old. Through investments in the Walt Disney World theme park, launched in 1955, Disney gained first hand insights and early experience in to the myriad of business opportunities that lie beyond the distribution of those early films and the characters they made famous. In a 2013 article published in Harvard Business Review, Washington University Professor Todd Zenger highlighted a map drawn by Disney in 1957 that depicted his emerging vision just two years after his experience with the theme park. In the map, a dense web of theme park rides, music, TV and entertainment opportunities are depicted as flowing from the creative studio that drove the Disney machine. Zenger notes that Disney’s drawing both predicted the evolution of the entertainment industry and served as a roadmap for Disney and his successors, guiding them to explore additional opportunities and create business value for decades to come (Zenger, 2013).
While Disney’s vision leadership is evident in both his creative works and his business success, it also serves to illustrate a critical risk often associated with visionary leaders. In the subsequent years following Disney’s death the company and its executives often struggled to navigate the future without falling victim to its past. Much has been written about the rise of a question that often guided decisions within the company: “What would Walt do?” First coined to harness the creative vision that drove the company, it came to haunt decisions that were at times criticized as lacking creativity or holding back necessary change. Indeed, every CEO of the Walt Disney Company since its founder has had to frame their own agenda and leadership style in relation to Disney the founder (Gregersen, 2011). In that context it’s not difficult to imagine the challenges that lie in defining strategy for the company in a world that had changed radically since Disney passed away in 1966. This risk has become so well recognized that Steve Jobs, Apple’s equally visionary chief executive, famously advised his successor Tim Cook to never ask what Jobs would do. “Just do what’s right,” he implored.
Visionary leadership continues to maintain a particular hold on the public’s imagination. Talk of the need for vision and the power of visionary leaders pervades both the popular and business press. Fueled by the rapid progress of technology and its disruptive influence in both industry and society, the opportunity to create change and define something truly new often seems within reach to today’s entrepreneurs, entertainers, executives and social activists. And yet for all this popular attention, considerable mystery remains: Where does vision actually come from? Indeed, in the bestselling book Strategy Safari, the authors noted that the majority of writing on entrepreneurship and visionary leadership has been “in the spirit of the great leader view of management” (Mintzberg, Ahlstrand and Lampel, 1998). This view of the heroic leader is well documented by the popular press or biographies, often focuses on the individual’s personality, does much to eulogize that person’s accomplishments, but does little to help others understand where the person’s insight came from or the real actions they took to drive change. The modern emphasis on a compelling “founder’s story” for start-up companies illustrates this problem, showing preference for a compelling (and often times false) story that conveys a sense of purpose at the expense of accurate and specific detail that can help individuals see how to craft a vision and use it to drive change strategically.
While this tendency toward mythologizing visionary leaders, we shouldn’t be altogether dismissive. When we get past the superficial characterizations of visionaries, it’s still clear that leaders like Disney are no doubt strategic. As such, he provides us an excellent example for us to consider as we analyze strategic leaders.
GE is widely viewed as one of the most well managed companies in the world. The nine executives who have held the titles of CEO or Chairman include some of the most well regarded business leaders in history, from GE’s first President Charles Coffin — named the greatest CEO of all time in a Fortune magazine cover story (Collins, 2003) — to CEO Jack Welch, one of the most celebrated CEOs and leadership pundits alive today. The company’s current CEO, Jeff Immelt, was handpicked by Welch in 2001 and has been listed as one of the world’s best CEOs by Barron’s magazine three times.
Beyond the job at the top, GE is also widely recognized for developing future executives. In a 2006 article, The Economist deemed GE “America’s CEO Factory,” a label still widely used today to describe the company’s ability to produce strong general managers who have gone on to lead businesses within GE and other companies across a diverse range of industries (Economist, 2006). This reputation is backed up by research, as GE consistently appears near the top of Aon Hewitt’s semi-annual “Top Companies for Leaders” research study which assesses organizations effectiveness at developing their leaders and evaluates the link between leadership practices and financial results.
GE is therefore a useful company to examine, serving as a standard bearer for modern management and as a source of many of the most well regarded leaders in the world.
But for all of its famed executive talent, the best way to learn strategy from GE is not by focusing on the iconic individuals who have lead the corporate giant but rather to examine GE’s most enduring management practices, each famous in its own right. For it has been these business processes — from the prescriptive “blue books” of the 1950s to Jack Welch’s famous Work-Out sessions of the 1980s — that define the culture of this storied company.
In 1956, under the watch of then CEO Ralph Cordiner, GE purchased land north of New York City that would later become Crotonville. Since then, Crotonville has arguably become the most famous corporate university in the world. It became the mechanism used to disseminate the core practices of the company and to develop its up and coming managers. In those early days, Crotonville taught a highly prescriptive set of management practices that typified the scientific management of the day. Over the next decade that evolved into a formal set of strategic planning processes. At Crotonville’s height, GE had over two hundred staff in its strategic planning department.
Then in the 80s, Jack Welch famously dismantled that department, criticizing it as isolated and overly bureaucratic. In its place, Welch established more agile mechanisms. The Work Out emphasized dialogue among employees close to core work activities, focused on eliminating work that didn’t add value, and is still widely admired for the ability to speed up decision making. In a typical Work Out session, a problem is identified as the central topic of the session. Necessary research or data gathering is done in advance, and formal roles are established for a session’s sponsor, facilitator and participants. Emphasis is placed on ensuring the session includes both managers and those who do the work activities in question. Decisions are made within the session and participants leave with clear guidance on how to proceed and implement the established plan.
More recently, Jeff Immelt has started to bring back some of the emphasis on strategy and long range planning that distinguished GE’s past, updated with a new focus on creativity and innovation. Inheriting an organization from Welch that emphasized execution and efficiency across the vast array of business units GE had amassed over decades, Immelt found himself in an era marked by rapid changes in technology, disruption fueled by the Internet, and economic growth that largely slowed following the boom of the 1990s.
Given this challenge, Immelt turned his focus to growth. He re-introduced — and renamed — the GE strategic planning process as GE’s “Growth Playbook” and in 2005 he introduced a corresponding set of five “Growth Values” that every GE employee would be evaluated against (Prokesch, 2009). GE increased R&D spending by 43% between 2008 and 2011 and expanded a Global Research organization to over 2,800 employees and 1,000 PhDs. Crotonville added courses around innovation and strategic thinking.
This focus on innovation is an overt component of GE’s branding and marketing as well, stated as “GE imagination at work.” GE reinforced this message through several high profile advertising campaigns positioning it as an innovator: campaigns including “ecomagination” and “healthymagination” that spotlight the company’s more innovative products, its increasing focus on the environment, and its culture of creativity.
During each of these periods, GE has adopted management practices that have systemically driven strategy in line with management’s prevailing view of the status and needs of the organization. This disciplined approach — be it the prescriptive processes of the 1950s or the collaborative approach today — distinguishes GE as a company focused on a rigorous and disciplined governance model aligned to the times and the priorities of the company.
Minnesota Mining and Manufacturing — better known as 3M — is widely recognized as a benchmark for innovation among global companies, a reputation earned by its decades-long track record for introducing revolutionary products used in everything from household cleaning to NASA missions.
Founded in 1902 by two investors pursuing opportunities in local mineral deposits, the company quickly switched to a focus on manufacturing sandpaper — a shift that Silicon Valley would popularize as “pivoting” nearly a century later. The company faced similar challenges in this new market, but this time it chose to continue on. Through a combination of customer feedback, continuous improvement and product innovation, 3M reached profitability by its fifteenth year. Soon after, in 1921 the company took its first steps towards being a research driven company when it acquired a patent and hired its creator, Francis Okie. That patent lead to the introduction of Wetordry, a unique waterproof sandpaper quickly adopted by the automotive industry. It also laid the foundation for a century of product innovation that continues today.
As the company grew, it institutionalized values and codified routines that helped it scale and sustain the innovation that defined its first success. Today the company offers over 60,000 commercialized products and spends over $1.7 billion on R&D, an amount representing 5.6% of annual sales in 2013 (Black, 2013). It has also received widespread recognition for its achievements, ranking 3rd on PWC’s 2013 list of the World’s Most Innovative companies and being repeatedly listed on Fortune magazine’s annual list of the World’s 50 Most Admired Companies — it ranked 21st in 2013. In 1995, President Bill Clinton awarded 3M the National Medal of Technology and Innovation “for its many innovations over decades.”
Perhaps most famously, 3M’s management targets 30% of annual revenues to come from products introduced within the last five years. This metric provides a simple measure for both management and shareholders to evaluate the company’s execution on its innovation-based business model. While the company hasn’t always achieved the target — in 2008 that number had dropped to 25% — the number reached 35% in 2013 and a goal of 40% was set for 2017 (Black, 2013).
However, this metric alone can’t explain 3M’s sustained record of innovation. Plenty of CEOs set ambitious goals for revenue or operating performance. By themselves, these goals are no better than the claims by countless athletes and coaches that “this will be the year” to bring home the championship. Rather, it takes an integrated set of management routines and employee actions to achieve sustained results.
In the case of 3M, a key management principle gives us an indication of how 3M sustains its innovation-centered strategy: 15% time. Fifteen percent time is a well-known but undocumented policy within the company that allows any technical employee to spend up to fifteen percent of their week pursuing personal research interests. The result is a continuous exploration of new ideas and insights. Many of those insights have led to some of the company’s most successful products, including Scotch Brand Tapes and Post-It Notes.
A management practice critical to 3M’s innovation is their treatment of failure. Employees are rarely punished for failed projects. Rather, they are viewed as opportunities for continuous experimentation and employees are regularly encouraged to focus on lessons learned and alternative benefits. Again, Post-It Notes offers an informative example. First started as research focused on creating new adhesives, the outcome of the project was considered a failure due to its weak bonding properties. Rather than being discarded, the adhesive was retained. Years later, another employee picked up the project and started using the adhesive to temporarily attach paper to other surfaces. Today, Post-It Notes using that adhesive are one of the company’s most widely recognized products and an excellent example of 3M’s culture of experimentation and learning from failure. In fact, 3M now offers more than 400 Post-It Note products in over 100 countries.
These two principles — 15 percent time and continuous experimentation — offer a view in to the system of management practices that drive 3M’s core strategy of product innovation. The company’s goals, management practices and employee activities are aligned around a singular focus on incubating and commercializing projects that come not from the most senior executives but from the insights of thousands of 3M employees. The practices also provide an example of strategic leadership for others to follow. Numerous companies have followed 3M’s model of incubation. Google’s 20 percent time is a recent and equally famous example, and several of its core products such as Gmail and AdSense came out of a policy defined by Google’s founders that allowed engineers to pursue pet projects.
Nelson Mandela and South Africa’s Truth and Reconciliation Council
In 1995, South African President Nelson Mandela authorized the creation of a special body called the Truth and Reconciliation Commission. Its mission was to address the country’s 40-year history of racial segregation called apartheid, in which minority white Afrikaners ruled the country’s majority black inhabitants. Over the ensuing three years after it was formed, the commission played a central role in addressing that history. It is widely viewed by experts as setting the standard for addressing restorative justice and is commonly cited as a key element of South Africa’s successful transition to democratic rule. It also presents a process that we have come to view as an archetype for a particular form of strategic leadership.
One of us had the privilege of visiting South Africa in 1994 in the weeks following Mandela’s election as the nation’s first black president. During that tour, a series of political briefings and personal interactions with each of the country’s historically divided ethnic and political groups provided palpable insights. It revealed both the remarkable progress that had been made in the years leading up to the nation’s first democratic elections and the daunting challenges that lay ahead in achieving closure for the millions of citizens whose lives had been impacted by apartheid.
Mandela’s leadership during this transition has received increasing global recognition in the decades that followed, culminating in the global outpouring of respect that followed his death in 2013. His personal journey served as a remarkable example of the country’s transitions. Over the course of his life he emerged as a leading figure in the anti-apartheid movement, spent 27 years imprisoned by the government for treason, and then went on to be awarded the Nobel Peace Prize in 1993. Yet in the course of his growing stature, the role he played in establishing and supporting the Truth and Reconciliation Commission has received relatively less attention. That omission is remarkable in that the commission was a critical component of Mandela’s approach to leading the country during his presidency and it provides a window into his approach to leadership.
The commission was founded through legislation “to establish the truth in relation to past events as well as the motives for and circumstances in which gross violations of human rights have occurred, and to make the findings known in order to prevent a repetition of such acts in future” (Act 34 of 1995). It addressed these goals through three committees: an Amnesty Committee, Reparation and Rehabilitation Committee, and a Human Rights Violations Committee. The committees provided a structured process to hear from any and all individuals and stakeholders, establish a record of facts and findings, and form policies and recommendations. Importantly, the Commission and its committees focused strongly on establishing the conditions for healing and a future of peaceful co-existence. This stands in contrast to historical situations where a focus on punishment have at times been seen as perpetuating a cycle of retribution and ongoing social conflict.
As one example, the commission created a Register of Reconciliation designed to allow any citizen to make public comment. The resulting record provides a fascinating and often emotional look in to the lives of South Africans, many of whom express regret not just for actions taken but for a lack of action to oppose the apartheid system during that era.
Nelson Mandela played a visible role during this process, acting as the primary sponsor of the commission as a voice that articulated its vision. Speaking at the commissioning service, he said:
All South Africans face the challenge of coming to terms with the past in ways which will enable us to face the future as a united nation at peace with itself. To you has been entrusted the particular task of dealing with gross violations of human rights in a manner that ensures that the painful truth is laid bare and that justice is done to the victims within the capacity of our society and within the framework of the constitution and the law. […] The Truth and Reconciliation Commission affords all South Africans an opportunity to participate in reconciliation and nation building. There is a role for community based organizations and non-governmental organizations to play there part. There is a role, too, for individuals to make a contribution [Mandela, 1998].
It is in this comment that Mandela’s strategic leadership is revealed. His insight was the important role that participation of all South Africans would play in the Commission’s success. While there were many ways in which justice could be served both to victims and to perpetrators, it was only through direct participation that broader goals of closure, reconciliation and future peaceful co-existence could be achieved. By providing a carefully constructed process, Mandela and the Commission created the opportunity to establish trust. By creating avenues for participation in that process, they created the dialogue and interactions necessary to build trust.
The power of both process and participation are likewise evident in examples where trust is not established. In the decades following South Africa’s transition, several nations have attempted to navigate similar transitions in political rule or co-existence between ethnic groups. Some have even used truth commissions similar to the format used in South Africa. Those that have failed to reach their goal often demonstrate a failure of either process — marked by intervention of military or governmental entities that modify or invalidate prior established agreements — or participation — marked by the rejection of key aspects of the process by parties who do not feel their views were heard or respected. And indeed close examination reveals pointed objections and dissatisfaction in South Africa’s process. Our point is not that Mandela and South Africa’s Truth and Reconciliation Commission are beyond criticism, but rather that it stands as one of the best examples of both the characteristics and challenges to the approach to which they aspired, and which demonstrates an important approach to collaboration that we will continue to examine as we look more closely at the various manifestations of strategic leadership.
These four examples bring strategic thinking and leadership to life. In the key actors, you can see the building blocks of strategic thinking — cognitive psychology, systems thinking, and game theory — and the basic components leadership — context, focus, activity and role adaptation.
Yet when the elements of strategic thinking and leadership are applied in these four situations, the results look very different. The structured management approach preferred in the early days at GM could not feel more different than the experimental culture formed at 3M. The domineering personal style of Walt Disney was nearly the exact opposite of the collaborative approach chosen by Nelson Mandela.
If we accept that each of these leaders were both successful and highly strategic, what should we make of their differences? If their actions vary so widely, what does that tell us about “being strategic?” Would they be successful if placed in different situations? If not, why?
In these questions, we find interesting challenges. They are the issues our clients, colleagues and students have wrestled the most with when encountered. Indeed, they are the questions we’ve wrestled with ourselves when trying to teach other people to be more strategic. And it is in that struggle where we have gained insights in to the intersection of strategic thinking and leadership. As we turn to the exploration of that intersection, we’ll continue to draw on these four examples to help us find our way.
This was an excerpt from Chapter One of Leading with Strategic Thinking: Four Ways Effective Leaders Gain Insight, Drive Change and Get Results.
To find out more visit leadingwithstrategicthinking.com