HI6006

Competitive Strategy

Lecture 11: Leadership &

Entrepreneurship
FIGURE 1.1

THE
STRATEGIC
MANAGEME
NT
PROCESS
KNOWLEDGE OBJECTIVES

Define strategic leadership and Explain how top

management teams affect firm performance

Define organisational culture and explain what must be

done to sustain an effective culture.

Explain what strategic leaders can do to establish ethical

practices.

Discuss the influence of leadership in determining the firm’s

strategic direction

Appreciate the managerial succession process using

internal and external managerial labour markets.
 STRATEGIC LEADERSHIP
Strategic leadership:
• refers to the ability to anticipate, envision,
maintain flexibility and empower others to create
strategic change as necessary
• it is a multifunctional task that involves:
 managing through others
 managing an entire enterprise rather than a
functional subunit
 coping with change that is increasing in the
global economy
 attracting and managing human (includes
intellectual) capital.
STRATEGIC LEADERSHIP
STRATEGIC LEADERSHIP

Build strong
ties with
external
stakeholders

Understand
Promote and how their
nurture decisions
innovation impact their
firm

Effective
Strategic
Inspire and Leaders Sustain above-
enable others
average
to realise their
performance
potential

Do not
delegate attract and
decision- manage human
making capital
responsibilities
 In-Class Activity

1. Consider (in small groups) all the things that leaders do

to shape the strategic direction of a firm.

2. Make a list of what you believe are the 5 most important

leadership responsibilities

3. Can you think of a well-known business leader who

exemplifies these? Who is it?

4. How do you think today’s business leaders develop the

skills and charisma to be effective in the role?

5. Consider your own (future) career. What aspects of

leadership would you say you personally need to
improve (i.e. as being useful or necessary to you
personally in you career)
Effective Strategic Leadership
Managerial Discretion
 MANAGERIAL SUCCESSION
• Managerial succession involves preselecting and
shaping the skills of tomorrow’s leaders.

– Internal managerial labour market: opportunities

for managerial positions to be filled from within the
firm

– External managerial labour market: opportunities

for managerial positions to be filled by candidates
from outside of the firm.

Activity: Form teams and create an argument FOR or AGAINST

‘promoting from within’

[this could be orchestrated as a ‘debate’ if time permits]

Succession Strategies
 Internal SUCCESSION

Continuity

Retention of
Continued
‘private
commitment
knowledge’ Benefits of
the internal
managerial
labour
market

Reduced
Familiarity
turnover

Internal succession is usually most prevalent in firms enjoying

high performance
 External SUCCESSION

A long tenure with

the same firm is
thought to reduce
innovation.

Benefits of
the external
managerial
labour
market
Diverse
knowledge bases
and social
Bring fresh networks -
paradigms. potential for
synergy and new
competitive
advantages.

External succession is often preferred if the firm’s performance is

considered below expectation.
 ORGANISATIONAL CULTURE

Sustaining an effective organisational

culture
• Organisational culture:
(the way we do things in this firm)
– the complex set of ideologies, symbols and
core values shared throughout the firm
– influences the way business is conducted
– helps regulate and control employees’
behaviour
– may become a competitive advantage when
strong and sustained.
 ORGANISATIONAL CULTURE
Changing the organisational culture and
restructuring
• It is difficult to change a firm’s culture.
• Sometimes change is necessary.
• Effective strategic leaders recognise when change in
culture is needed.
• Change requires:
– selecting the right people
– Re-establishing the firm’s core values
– engaging in effective performance appraisals, i.e.
measuring individual performance towards goals that fit with
new values, and designing appropriate reward systems.
– effective communication and problem solving

Activity: Why is a change in culture sometimes needed? How would

a leader discern when change is due?
 ETHICAL PRACTICES
Ethical practices - actions that foster a morally
acceptable organisational culture include:
– establishing and communicating goals that are
societally-valuable
– revising, updating and managing an employee
code of conduct
– creating or using specific reward systems that
recognise virtuous acts
– creating a working environment in which all are
treated with dignity and respect

Activity: Discuss and list some ethical (or

unethical) practices you have personally
experienced. What was good / bad? Why?
 ETHICAL PRACTICES

Ethical practices
• The effectiveness of strategy implementation
processes increases when they are based on
ethical practices.

• Ethical practices create social capital and goodwill

for a firm (and accrue to ‘brand reputation’)
 BALANCED SCORECARD
Establishing balanced organisational controls

The balanced scorecard is a framework to evaluate if

firms have achieved the appropriate balance among
strategic and financial controls

The Balanced Scorecard prevents overemphasis on

financial controls at the expense of strategic controls.
 Tutorial Case

Consider the Case of W L Gore in the

light of what we have learnt about
Leadership and Culture

1. How did W L Gore link their Core Beliefs to the

firm’s everyday practices to enable the
organisational core competency they call
‘Freedom with Discipline’ to thrive? [see Figure 2]

2. What is the significance of having ‘no titles or

bosses’?

3. Observe the ‘Virtuous Cycle’, as illustrated in

Figure 4, and relate it to the successes of Gore’s
‘hundreds of projects in various stages of
development’
Part 2: Entrepreneurship
 ENTREPRENEURSHIP

• Entrepreneurship is concerned with:

– the discovery of profitable opportunities
– the exploitation of profitable opportunities.
• Entrepreneurship is the process by which
individuals or groups identify and pursue
entrepreneurial opportunities without the
immediate constraint of the resources they
currently control.
 INNOVATION
• Three types of innovation activities according to
Schumpeter:
– Invention
– Innovation
– Imitation
• Three ways to innovate
– Internal innovation (autonomous vs induced)
– Cooperative strategies (e.g. strategic
alliances)
– Acquisitions
 INNOVATION

• The act of creating or developing

Invention a new product or process
• Brings something new into being
• Success of an invention
determined by technical criteria
 INNOVATION

Invention • Process of creating a commercial

product from an invention
• Brings something new into use
• Success of an invention
Innovation determined by commercial criteria
 INNOVATION

• Adoption of an innovation by similar

Invention firms
• Usually leads to product or process
standardisation
• Products based on imitation often
Innovation offered at lower prices and without as
many features
• Results of imitation
– Product or process standardisation
Imitation – Products with fewer features
– Products offered at lower prices
 ENTREPRENEUR defined
• Entrepreneurs are individuals, acting
independently or as part of an organisation, who
see an entrepreneurial opportunity and then take
risks to develop an innovation to exploit it.
• An entrepreneur is a person who creates
something of value and assumes the risk of
building a business around it
• The entrepreneurial mind-set values uncertainty
in the marketplace and seeks to continuously
identify opportunities with the potential to lead to
important innovations.
Key concepts: Innovation, Risk, Implementation,
Disruption
 ENTREPRENEURS
Highly motivated

Willing to take
Excellent
responsibility for
Planning skills
their projects

Good social
Passionate
skills

Entrepreneurial
characteristics

Alert to
Optimistic
opportunities

Emotional about
Able to deal with the value and
uncertainty importance of
their ideas

Entrepreneurial
mind-set
 INTERNAL INNOVATION
• Firms take deliberate efforts to develop inventions and
innovations within the organisation, selecting from
several types of innovation and the specific processes
through which each type is produced.
• Most innovation is due to R&D.
– The outcomes of investments are uncertain and
often not achieved in the short term.
– Firms innovate internally in two ways:
• autonomous strategic behaviour
• induced strategic behaviour.
 INCREMENTAL AND RADICAL INNOVATION

Incremental innovation: Radical innovation:

• is evolutionary and linear • is revolutionary and
• is common nonlinear
• builds on existing • is rare because of
knowledge bases and difficulty and risk
provides small • generates significant
improvements in current technological
product lines/processes. breakthroughs and
creates new
knowledge/processes
• requires creativity.

Recommendation: Draw a graph (X=time; Y=innovation) to illustrate each.

Remember that it’s not an ‘either-or’ but rather ‘BOTH’ forms of innovation.
 INCREMENTAL vs RADICAL INNOVATION

• Facilitates incremental
AUTONOMOUS and radical innovation
STRATEGIC • Primarily radical
BEHAVIOUR innovation

• Facilitates incremental
INDUCED and radical innovation
STRATEGIC • Primarily incremental
BEHAVIOUR innovation
 INTERNAL INNOVATION
Internal corporate venturing refers to the set of
activities firms use to develop internal inventions
and innovations, both autonomous and induced.

AUTONOMOUS
STRATEGIC • Bottom-up process
BEHAVIOUR

INDUCED
STRATEGIC • Top-down process
BEHAVIOUR
 PRODUCT DEVELOPMENT TEAMS

• Teams aim to integrate and

coordinate activities and apply
knowledge from different functional
activities to maximise innovation.
• New product development
processes can be completed more
quickly.
• Products can be more easily
commercialised when cross-
Cross-functional
functional teams work effectively.
product development
team
 FACILITATING INTEGRATION AND INNOVATION

• Shared values:
– are framed around the firm’s strategic intent and
mission
– become the glue that promotes integration between
functional units.
• Effective leadership:
– sets goals (e.g. integrated development and
commercialisation of new goods and services) and
allocates resources.
• Effective communication

All are important to successfully innovate and

facilitate cross-functional integration.
Corporate Entrepreneurship (‘Intrepreneurship’)
STRATEGIC ENTREPRENEURSHIP

Entrepreneurial Larger, well-established

ventures: firms:
• Produce more radical • Produce more
innovations incremental
• Possess strategic innovations
flexibility and • Possess more
willingness to take resources and
risks capabilities to exploit
• Do more opportunity identified opportunities
seeking • Must relearn how to
• Must learn how to gain identify entrepreneurial
a competitive opportunities
advantage (advantage- (opportunity-seeking
seeking behaviours). skills).
 Entrepreneurship Tutorial

Make a list of at least 10 innovations that have occurred in your

lifetime

How would you ensure that a company you manage is able to

foster (encourage) innovation

How could your firm reward employees that ‘create value’

through their ideas

How would you facilitate cross-functional teamwork to ensure

incremental improvements become part of the firm’s culture

What can management do to ensure that our firm is not ‘leap-

frogged’ by rivals who adopt radical innovation