Class 02

Strategic leadership
 Issues to be covered

 Criticism of formal planning model

 Intended strategy vs realized strategy
 Best practices in formal strategic planning
 Cognitive biases & strategic decision-making
 Techniques for improving decision-making
 Characteristics of strong strategic leaders
 Criticism of formal planning model

A. The unpredictability of the real world:

Google’s emergence through “pay-per-click” business model
Demise of Bangladeshi music labels
B. Autonomous actions by lower-level managers:
Tim Jones’ (Seattle’s university village Starbuck’s manager) intervention – Starbucks started to sell music
CD
William Pearson’s (a young software guy working for Charles Schwab) intervention – eSchwab
C. Serendipity:
3M’s innovation of Scotchgurad (from Fluorocarbons)
Western Union’s myopia
 Intended strategy vs realized strategy

Henry Mintzberg’s observation is critical here.

a. Realized strategies are most often the combination of deliberate/formal/intended strategy and
unplanned/informal/emergent strategy.
b. Emergent strategies should go through the evaluation process.
Example: Honda’s Los Angeles venture of 1959
 Best practices in formal strategic planning

 Scenario planning: Formulating plans that are based upon ‘’ what-if’’ scenarios about the future
Example: Royal Dutch Shell’s ploy - ‘’Dynamics as usual’’ & ‘’The spirit of the coming age’’ scenario
 Decentralized planning: Ivory tower approach is a wrong paradigm.
Example: GE’s epic blunder in home appliance market
 Cognitive biases & strategic decision-making

 Prior hypothesis bias

 Escalating commitment: George Ball’s 1970’s letter
 Reasoning by analogy: ‘’Interest rate mania”
 Representativeness: Dot-com bubble
 Illusion of control: Richard Roll’s hubris hypothesis
 Availability error
 Techniques for improving decision-making

 Devil’s advocacy: One member of a decision-making team identifies all the considerations that might
make a proposal unacceptable.
 Dialectic inquiry: Plan (thesis) + counterplan (antithesis) = final plan (synthesis)
 Outside view: Proper reference group
 Characteristics of strong strategic leaders

 Vision, eloquence & consistency: Bill Gates (Microsoft), Jack Welch (General Electric) & Sam Walton
(Walmart)
 Articulation of business model: Michael Dell (Dell)
 Commitment: Ken Iverson (former CEO of Nucor)
 Being well informed: Jim Donald (former CEO of Starbucks) Herb Kelleher (founder of Southwest
Airlines)
 Willingness to delegate and empower
 Astute use of power
 Emotional intelligence: Self-awareness, self-regulation, motivation, empathy & social skills
Thank You