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MGF5928: Strategic Leadership
Week 2: Managing the strategy process and the quest for competitive
advantages
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 Successful use of power and influence
 Directing the activities of others
 Pursuing an organization’s goals
 Enabling organizational competitive advantage
What Is Strategic Leadership?
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Level-5 Leadership Pyramid
(Adapted to compare corporations and entrepreneurs) SOURCE: Adapted from J. Collins (2001), Good to Great: Why Some
Companies Make the Leap . . . And Others Don’t (New York: HarperCollins), 20.
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The Strategy Process
Strategy
Formulation
The choice of
strategy
Where and
how to
compete
Strategy
Implementation
Organization,
coordination,
integration
How work
gets done
The
execution of
strategy
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 Strategic planning
– A formal, top-down planning approach
 Scenario planning
– A formal, top-down planning approach
 Strategy as planned emergence
– Begins with a strategic plan, but is less formal
Three Approaches to Organizational Strategy
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 Data-driven strategy process
 Top management attempts to program future success through
– Analysis of:
 Prices
 Costs
 Margins
 Market demand
 Head count
 Production runs
– Five year plans and correlated budgets
– Performance monitoring
Top Down Strategic Planning
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 Asks “what if” questions:
– Top management envisions different scenarios
– Then they derive strategic responses
 Optimistic and pessimistic futures planned
 Considerations can include:
– New laws
– Demographic shifts
– Changing economic conditions
– Technological advances
Scenario Planning
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Scenario Planning
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 What resources and capabilities do we need to compete successfully
in each scenario?
 What strategic initiatives should we put in place to respond to each
scenario?
 How can we shape our expected future environment?
Key questions in Scenario Planning
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 May not adapt well to change
 Formulation separate from implementation
 Information flows one-way
 Leaders’ future vision can be wrong
 Example: Apple
– Steve Jobs predicted customers needs
– Apple didn’t engage in market research
– Since Cook took over, their planning process has evolved
Shortcomings of the Top-Down Approach
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 Top Down and Bottom Up
– Bottom-up strategic initiatives emerge
– Evaluated & coordinated by management
 Relies on data, plus:
– Personal experience
– Deep domain expertise
– Front line employee insights
Strategy as Planned Emergence
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 Organizations, groups, and individuals
 Can affect or are affected by a firm’s actions
 Have an interest in the performance and survival of the firm
 Internal stakeholders:
– Stockholders, employees (including executives, managers, and workers), and
board members
 External stakeholders:
– Customers, suppliers, alliance partners, creditors, unions, communities, media,
and governments at various levels
Stakeholders
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 An integrative approach to managing a diverse set of stakeholders to
gain and sustain competitive advantage
 Stakeholder management benefits firm performance
– Stakeholders more cooperative
– Lower business transaction cost
– Greater adaptability and flexibility
– More predictable returns
– Stronger reputation
Stakeholder Strategy
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 A decision tool
 Helps strategic leaders can recognize, prioritize, and address the
needs of different stakeholders.
 Important stakeholder attributes:
– Power: control over actions
– Legitimacy: valid concerns
– Urgency: require immediate attention
Stakeholder Impact Analysis
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Stakeholder Impact Analysis
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 What is the firm’s accounting profitability?
 How much shareholder value does the firm create?
 How much economic value does the firm generate?
Three Standard Performance Dimensions
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Stock Market Valuations of Apple and Microsoft, 1990–2017
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Firm B’s Competitive Advantage
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Firm C’s Competitive Advantage
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 Helps managers achieve their strategic objectives
 Uses internal and external performance metrics
 Balances both financial and strategic goals
The Balanced Scorecard
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 Customers
– Revenue, profit, customer satisfaction
 Value Creation
– Competitiveness, innovation, organizational learning
 Core Competencies
– Key business processes
 Shareholders
– Cash flow, operating income, ROIC, ROE, total returns to shareholders
Examples of Metrics for Each Balanced Scorecard Section
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 Links strategic vision to responsible parties
 Translates vision into measurable goals
 Designs and plans business processes
 Implements feedback and organizational learning
 Alerts to needed strategic goal adaptation
Advantages of the Balanced Scorecard
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 Focused on implementation
– Not formulation
 Managers must identify the right metrics to track
 Lacks guidance:
– Which metrics to use?
– How to address setbacks?
Disadvantages of the Balanced Scorecard
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 Focus: economic, social and ecological performance
 Three dimensions:
– Economic Dimension: Profits
 Businesses must be profitable to survive
– Social Dimension: People
– Ecological Dimension: Planet
 Considers the natural environment
The Triple Bottom Line
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 Chapters: 2 and 5
– Rothaermel, F. (2019). Strategic management 4th edition. New
York: McGraw-Hill Irwin.
Reference

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