Hugh D. Sherman Brazilian Executive Seminar August, 2012

Seminar Objective Using the General Electric case as the example we will do the following: 1.Review the concept of strategy and strategic leadership 2.Examine how change in competitive environment has forced firms to change their strategy to be more effective 3.Conclude with what strategy are firms focusing on today

Top Performing CEO’s in the World Embraer - Frederico Curado (3rd largest airplane maker, regional jets). New ventures into defense and security Petrobras – No 54 on Fortune’s global corporations. Developed first floating deepwater oil and natural gas production and storage facility in the Gulf. But significant issues and new CEO.

New Competitive Environment Major Trends in the Environment? 1.Shift in Economic Power Among Nations 2.Sustainability as an Opportunity 3.Others?

What is Strategy? 4M 4M Corporate versus Business level Strategy What is the strategy of Wal-Mart, Starbucks?

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

AN EXAMPLE OF HOW THE MANAGEMENT OF STRATEGY HAS CHANGED OVER THE PAST YEARS IN RESPONSE TO ENVIRONMENTAL CHANGES Discussion of GE Case

Jeff Immelt Took over 2001 – key changes in demographics, digital connections, emerging markets, environmental issues New Strategy – Transform into Technology Growth Company – Selected ten industries to focus on – increased R&D and acquisitions in these areas – Heathcare, energy &water, aviation & rail, financial services – 2008-less emphasis on financial services, NBC Universal – Dec. announcement will sell NBC Universal to Comcast

Jeff Immelt Change in strategy requires a change in management style, culture and recruitment and promotion of personnel – More collaborative, team building – Visits Global research center every two months – Developing more specialized managers (Welch trained financially oriented generalists)

Jeff Immelt yYI yYI (Listen to minute 3- 15) (Listen to 15 minutes – third point on leadership 4 th is simplify. 5 th systems thinker)

Strategic Focus Strategy was about Positioning your firm versus your competition. Strategy is a choice of where you want to compete, in what industry and what spot within that industry (price, innovation, quality) today - Strategy is about internal focus, processes, procedures that companies use to get things done (6 sigma, process redesign, core competence).

Strategic Focus Future – Strategy is about People. Recognition that people are the key to innovation and innovation is the requisite for future success. Organizational learning – no strategy ever was as originally intended. Set off in a direction and find response from competitors, customers and learn and adapt. Competition even more fiercer, competitive advantages disappear quicker and quicker.

General Electric Welch was focused on positioning and internal processes and procedures. Focused on benchmarking, best practices, and efficiency. Recognized need to become global. Immelt emphasis on innovation and globalization to build growth technology organization. Focus on people. Both were correct for the environment the competitive environment found themselves.

Global Job Market 1.Creative- Creators – Non-routine work performed in a distinct way – best lawyers, doctors, accountants, writers, scientists. 2.Routine Creators – Non-routine work in a routine way – average writers, scientists. 3.Creative servers- Non-routine low skilled workers who perform jobs in inspired ways. 4.Routine servers Friedman& Mantlebaum

Global Job Market Required Qualities: Critical thinking is the price of admission. The most important quality is ability to innovate. Change is coming too fast innovation is what will create new value. Creativity cannot happen without trust and collaboration. Friedman & Mandelbaum, 2011

Conclusion The key to the future leaders need to cultivate effective teams, networks of expertise whose members share a common purpose New style of leadership:  Lead with purpose and meaning  Build enduring relationships with people  We need people to feel empowered to be innovative and entrepreneurial, to share their learning

Conclusion To respond to (use of old word) “fiercening” of competition – need people on the front line with customers and market to have more responsibility Need to be encouraged & incentivized to experiment, even to fail, send information office for incorporation into strategic consciousness of firm

Conclusion Neoclassical economists organizations held together by a web of contracts among self interested individuals. May be effective in short term but to coordinate activities over time and build for the future need to develop human capital and a culture of mutual trust and collaboration to create a culture of innovation.