Leadership and Coaching Executive Education Seminar End of Competitive Advantage: How Strategic Leadership is Changing Hugh Sherman, PhD September 2015

Seminar Objectives 1.Review the concept of strategy and strategic leadership 2.Using the General Electric experience, examine how context impacted the strategic leaders’ approach to managing the corporation. 3.Conclude with how today’s context is shaping the approach of strategic leaders.

Top Performing CEO’s Embraer – Maurício Novis Botelho The world's third-largest maker of commercial aircraft. The company has dominated recent orders for regional jets seating 70 to 120 passengers, especially in fast-growing Asian markets. Total Shareholder Return - Industry Adjusted 2,895%

Worst Performing CEO Eike Batista, Chairman and CEO, EBX Group Destroyed tens of billions of dollars in shareholder value. Blamed the CEOs of each of his companies for the problems he created Oil company OGX filed for bankruptcy and a week later shipbuilder OSX, whose fortunes depended on OGX, also went bankrupt. Stock prices dropped 95% Batista lost most of his personal wealth, once worth $30 billion and now less than $400 million

Definition: Means by which obtain objectives – Strategy is about doing things differently – making choices – Requires allocation of resources Two Basic Questions – Where to compete – How to compete What is Strategy?

Performance of Firm Determined by: Corporate Strategy (where to compete) Choice of Industries in which we will compete Issues include types of diversification, acquisitions, allocation of resources between industries Business Level Strategy (how to compete) How to establish a competitive advantage in a specific market Examples include low cost, differentiated, niche strategies

What is Strategy?

Berlitz Example Positioning worldwide was as a Language Company –Proven business model (in person classes) Marcos Justus Brazil GM – became CEO In U.S. language training is “nice to do” not a necessity New positioning a global cultural training organization – can help your company develop a global team

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

Leadership is Contextual Environment Market Demand, growth Quasi-legal constraints Powerful outside forces (suppliers, customers, competitors) Organization Skills, knowledge of employees Inertial forces – culture Resources available

Discussion of GE Case 1. What are Jack Welch’s the key strategic initiatives? 2. What are Jeff Immelt’s the key strategic initiatives?

Who had the Right Strategy? : Welch focused on developing a cost advantage as his strategy. Welch was focused on high performance culture, by using benchmarking, best practices, and Six Sigma Present: Immelt focus on creating a high growth technology, innovative strategy.

Strategy Change Requires Change in all Organizational Dimensions Welch’s Approach Focus on Performance and Efficiency - Culture -Competitive, confrontational - Managers were financially oriented, generalists - Focused on efficiency, process improvement, - Promoted from within Immelt’s Approach Focus on Technology Growth - Culture – team, collaborative - In depth industry, specialized managers - Focused on innovation, increasing organic growth - Investment in R&D - Recruited industry experts - Marketing focus

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

Today’s Environment: Accelerating Technological Change Unprecedented amounts of information in hands of consumers/buyers Increasing pace of technological adoption & innovation shortening the life cycle of products and firms

The New Strategy Playbook Competitive Advantage is Transient One of purposes of strategy is to achieve a sustainable competitive advantage However, today change is the norm not stability Key is to build temporary advantages, innovation becomes continuous and become core to how the business operates Prediction and being right less important than reacting quickly and taking corrective action

The New Strategy Playbook Organizational learning Approach: Set off in a direction and adjust in real time. Listen/learn -find response from competitors, customers and learn and adapt. Strategic Leaders need to focus on not just on core business but equally building options –continuous renewal and innovation

New Strategic Mindset From Assumption existing advantages will persist Few & homogeneous people involved in strategy Internally focused on optimization Talent directed at solving problems To Assumption existing advantages will be eroded Broader involvement with diverse inputs Aggressively focused on external world Talent directed at identifying & seizing opportunities Rita McGrath, The End of Competitive Advantage (2013)

New Strategic Mindset From Resources devoted primarily to exploitation People work on innovation in addition to their day jobs Failure to test assumptions, little learning Planning orientation To Balanced portfolio of initiatives, core, new platforms and options Resources dedicated to innovation Assumptions continually tested Experimental orientation Rita McGrath, The End of Competitive Advantage (2013)

Conclusion – Strategy Today Competitive Advantage is Transient: Competitive advantage embedded in people and the relationships between people People are the key to innovation and innovation is the requisite for future success. Requires a Leadership Style which: Leads with purpose and meaning Build enduring relationships with people People to feel empowered to be innovative and entrepreneurial, to share their learning

The Rules for Personal Success Have Changed From Hired for Existing Skills & knowledge Stable career path Hierarchies and teams Infrequent job changes Careers managed by organization To Hiring for ability to acquire new skills (learnability) A series of engagements Teams & Superstars Permanent career campaigns Careers managed by Individual Rita McGrath, The End of Competitive Advantage (2013)