Long Island University Brooklyn Strategic Leadership Issues at Facebook

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The chapter discusses several strategic leadership issues at Facebook. Several other firms are also noted in the chapter with some positive and some negative leadership results. Choose a firm mentioned in the chapter and discuss current controversial issues it faces. How should strategic leaders address the major issues you identified? In what situations is top-down planning likely to be superior to bottom-up emergent strategy development?

The assignment is to answer the question provided above in essay form. This is to be in narrative form. Bullet points should not to be used. The paper should be at least 1.5 - 2 pages in length, Times New Roman 12-pt font, double-spaced, 1 inch margins and utilizing at least one outside scholarly or professional source related to organizational behavior. This does not mean blogs or websites. This source should be a published article in a scholarly journal. This source should provide substance and not just be mentioned briefly to fulfill this criteria. The textbook should also be utilized. Do not use quotes. Do not insert excess line spacing. APA formatting and citation should be used.

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CHAPTER 2 Strategic Leadership: Managing the Strategy Process Chapter Outline Learning Objectives 2.1 After studying this chapter, you should be able to: Strategic Leadership What Do Strategic Leaders Do? How Do You Become a Strategic Leader? The Strategy Process across Levels: Corporate, Business, and Functional Managers 2.2 LO 2-1 Explain the role of strategic leaders and what they do. LO 2-2 Outline how you can become a strategic leader. LO 2-3 Top-Down Strategic Planning Scenario Planning Strategy as Planned Emergence: Top-Down and Bottom-Up Compare and contrast the roles of corporate, business, and functional managers in strategy formulation and implementation. LO 2-4 Describe the roles of vision, mission, and values in a firm’s strategy. Strategic Decision Making LO 2-5 Evaluate the strategic implications of product-oriented and customer-oriented vision statements. LO 2-6 Justify why anchoring a firm in ethical core values is essential for long-term success. LO 2-7 Evaluate top-down strategic planning, scenario planning, and strategy as planned emergence. LO 2-8 Describe and evaluate the two distinct modes of decision making. LO 2-9 Compare and contrast devil’s advocacy and dialectic inquiry as frameworks to improve strategic decision making. Vision, Mission, and Values Vision Mission Values 2.3 2.4 The Strategic Management Process Two Distinct Modes of Decision Making Cognitive Biases and Decision Making How to Improve Strategic Decision Making 2.5 Implications for Strategic Leaders 32 rot6128x_ch02_032-071.indd 32 01/11/19 1:55 PM CHAPTERCASE 2 Part I Leadership Crisis at Facebook? WITHIN A MERE SIX MONTHS, in the latter half of 2018, Facebook’s share price dropped by more than 30 percent, wiping out over $200 billion in shareholder value. Making matters worse was a seeming crisis of leadership swirling around Facebook’s two top executives: founder and Chief Executive Officer Mark Zuckerberg and Chief Operating Officer Sheryl Sandberg. After a decade of exponential growth and unabated success, the global social network with its more than 2 billion monthly active users found itself in serious trouble. The Zuckerberg–Sandberg leadership duo would turn out to be pure dynamite. It led to exponential growth—from 100 million users in 2008 to 1 billion users in 2012—a feat that no other firm has ever accomplished. Just five years later, in 2017, Facebook crossed the 2 billion users mark. By the summer of 2018, Facebook’s market capitalization stood at more than $600 billion, up over 630 percent since its initial public offering (IPO) in 2012—a mere six years earlier. THE END OF THE ZUCKERBERG–SANDBERG ERA? By 2019, Facebook found itself caught in a perfect storm, and many were demanding that Zuckerberg and Sandberg step down. What had happened? Due to its lenient privacy controls, third parties were able to siphon off the personal FACEBOOK’S LEADERSHIP DUO data of tens of millions of Facebook users; lax data overAs depicted in the Hollywood movie The Social Network sight also led to other alleged misdeeds, including the en(2010), Facebook began as a startup in 2004 in the Harvard abling of foreign interference during the 2016 U.S. dorm room of then 19-year-old Mark Zuckerberg with the suppresidential elections. Critics assert that because of its port of three college pals. At the time, Myspace was the leadsingle-minded pursuit of ing social networking site, exponential g rowth, and in 2005, it was acquired Facebook’s leadership by News Corp. for close to failed to consider the po$600 million. For several tentiality and gravity of years, Facebook lagged benegative side effects on hind Myspace in both inthe firm, its stakeholders, vestments and users, but it and its reputation. stayed alive thanks to cash Facebook’s exclusive injections from Microsoft, focus on user growth beYahoo, and a Russian ingan in 2012 shortly before vestment group. its IPO. In a fateful meetIn 2008 Mark Zuckering of top executives and berg made a genius move: lead product developers, He persuaded Sheryl Sand- Facebook’s dynamite leadership duo: CEO Mark Zuckerberg and COO Sandberg showed that berg, at the time the vice Sheryl Sandberg (left): David Ramos/Getty Images, (right): Justin Sullivan/Getty Images. Facebook’s revenues were president of global online flat and user growth was sales and operations at slowing considerably. For a social media company to grow, Google, to leave Google and join Facebook as the new secshe said, it must pursue a business model that provides free ond in command. Zuckerberg was a computer hacker at services to the end user but that charges advertisers for placheart. He opted to spend his energy on fulfilling his vision of ing online ads. Sandberg admonished the lead product deFacebook—to turn it into a tool that would “make a more velopers, saying “things had to change” and “we have to do open and connected world.”1 He preferred coding to busisomething.”2 This meant, as one of the software engineers ness deals and freely admitted that he did not have the skills present at the meeting recalls, that “we needed to pull out all to run a business successfully. Sandberg did. She brought of the stops and to experiment way more aggressively with with her all the business skills that Zuckerberg lacked. She user engagement with the goal to make money.”3 The marchhad demonstrated her superb leadership capabilities at ing orders were clear: Drive exponential growth and user Google and was recognized for her sales, business developengagement, while keeping costs down. Very quickly, softment, public policy, and communications prowess. Put simware engineers and product developers learned that four ply, and partially, Zuckerberg saw his role as bringing in the features could serve as the keys to increasing user users; he saw Sandberg’s role as bringing in the money. 33 rot6128x_ch02_032-071.indd 33 01/11/19 1:55 PM engagement and driving future growth: News Feed, Likes, polarizing news, and microtargeting. Facebook’s News Feed is akin to a personalized newspaper and gossip page. A proprietary algorithm identifies the content that will be most interesting to each unique user and accordingly compiles a customized News Feed for that user. Meanwhile, the Like button, internally described as a “social lubricant and social flywheel by which users [feel] they [are] heard,”4 has helped Facebook to better understand its users. Product developers noticed that polarizing news and messages were often the most liked. Note that Facebook’s algorithm doesn’t know which content is good or bad, polarizing or nonpolarizing, fake or real. It only knows to which content users most respond. About two-thirds of all Americans get their news from social media sites such as Facebook, and over time, hyped-up and outrageous content increasingly made its way into users’ personal News Feeds, creating a much more polarized and tribal user base. Further compounding this situation is the fact that Facebook does not engage in any editorial review of the content that surfaces on its site. Rather, it relies on its algorithm, fine-tuned to maximize user engagement, to LO 2.1 Explain the role of strategic leaders and what they do. strategic leadership Executives’ use of power and influence to direct the activities of others when pursuing an organization’s goals. serve as its editor. On top of the data breaches and privacy issues, this polarization of Facebook’s users has only exacerbated matters for the firm. Facebook and Google have captured most of the astronomical growth in online advertising spending over the past few years, reaching $100 billion in 2018.5 A massive base of more than 2 billion users, combined with high user engagement, has enabled Facebook to place and sell ads with extreme accuracy—what is known as microtargeting. For microtargeting to work effectively, it relies on accurate user profiles. Now that Facebook owns the photo-sharing app Instagram and the messaging service WhatsApp, it has additional data sources at its disposal to help it to create even more accurate user profiles. All these data are combined with a user’s “shadow profile,” which enables Facebook to not only track each of its user’s activities, but the activities of his or her friends as well, even as they move across the web visiting other non-Facebook sites. As a result, Facebook can offer the most detailed, accurate, and targeted data to advertisers. Part II of this ChapterCase appears in Section 2.5. HOW DO STRATEGIC LEADERS like Sheryl Sandberg guide their companies to gain and sustain a competitive advantage? How do they make strategic decisions? How do strategic leaders formulate and implement their companies’ strategies? How do they lead and motivate employees? In Chapter 2, we move from thinking about why strategy is important to what role strategic leaders play, specifically how strategic leaders select, guide, and manage the strategy process across different levels in the organization. One of the first things a strategic leader must do is to shape an organization’s vision, mission, and values, as each of these plays an important role in anchoring a winning strategy. We then explore some of the frameworks strategic leaders use to develop strategy and maintain an effective strategic management process. Next we delve deeper into strategic decision making, in particular how biases, even those that strategic leaders and groups may not be consciously aware of, can impact the ability to make rational decisions. Lastly, we summarize some of the most important practical insights in our Implications for Strategic Leaders. 2.1 Strategic Leadership Executives whose vision and decisions enable their organizations to achieve competitive advantage demonstrate strategic leadership.6 Strategic leadership pertains to executives’ use of power and influence to direct the activities of others when pursuing an organization’s goals.7 Power is defined as the strategic leader’s ability to influence the behavior of other organizational members to do things, including things they would not do otherwise.8 Strategic leaders can draw on position power as vested in their authority, for example as chief executive officer (CEO), as well as informal power, such as persuasion to influence others when implementing strategy. In leading Facebook to become the most successful social network and one of the most valuable companies worldwide, Sheryl Sandberg has clearly demonstrated effective strategic 34 rot6128x_ch02_032-071.indd 34 11/23/19 1:39 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process leadership. As chief operating officer (COO), Sandberg has tremendous position power because she is the second in command at Facebook and reports only to CEO Mark Zuckerberg. Sandberg’s business development skills are legendary: She transformed a money-losing outfit into a titan of online advertising, with over $65 billion in annual revenues. She designed and implemented Facebook’s business model (how it makes money). In particular, Sandberg attracted high-profile advertisers by demonstrating how Facebook can place precisely targeted and timed ads when it matches what it knows about each user, based on that person’s social network, with the advertisers’ targets. Less quantifiable, but perhaps an even more valuable contribution, Sandberg provides “adult supervision and a professional face” for a firm populated by socially awkward computer geeks.9 While the effect of strategic leaders may vary, they clearly matter to firm performance.10 Think of great business founders and their impact on the companies they built—Mark Zuckerberg at Facebook, Phil Knight at Nike, Elon Musk at Tesla and SpaceX, Jack Ma at Alibaba, Oprah Winfrey with her media empire, and Jeff Bezos at Amazon. Many strategic leaders also have shaped and revitalized existing businesses. In addition to Sheryl Sandberg at Facebook, we have Angela Ahrendts at Apple (left in 2019), Sundar Pichai at Google, Mary Barra at GM, Indra Nooyi at PepsiCo (left in 2018), Howard Schultz at Starbucks, and Satya Nadella at Microsoft.11 At the other end of the spectrum, some CEOs have massively destroyed shareholder value: Ken Lay at Enron, John Sculley at Apple, Bernard Ebbers at WorldCom, Charles Prince at Citigroup, Richard Fuld at Lehman Brothers, Richard Wagoner at GM, Robert Nardelli at The Home Depot and later Chrysler, Martin Winterkorn at VW, and Ron Johnson at JCPenney, among many others. Why do some leaders create great companies or manage them to greatness, while others lead them into decline and sometimes even demise? To answer that question, let’s first consider what strategic leaders actually do. 35 Indra Nooyi, PepsiCo CEO, 2006–2018. Nooyi is a transformational strategic leader who guided PepsiCo with a powerful vision of “performance with purpose.” Under Nooyi’s leadership, PepsiCo transformed itself into a company offering more healthy snack and beverage choices, while its revenues grew by 80 percent. Moreover, Nooyi’s 12-year tenure as CEO is more than double the length of the average Fortune 500 CEO. Alex Goodlett/Getty Images WHAT DO STRATEGIC LEADERS DO? What do strategic leaders do that makes some more effective than others? In a study of more than 350 CEOs, strategy scholars found that they spend, on average, roughly two-thirds of their time in meetings, 13 percent working alone, 7 percent on e-mail, 6 percent on phone calls, 5 percent on business meals, and 2 percent on public events such as ribbon-cutting for a new factory (see Exhibit 2.1).12 Other studies have also found that most managers prefer oral communication: CEOs spend most of their time “interacting—talking, cajoling, soothing, selling, listening, and nodding—with a wide array of parties inside and outside the organization.”13 Surprisingly given the advances in information technology, CEOs today spend most of their time in face-to-face meetings. They consider face-to-face meetings most effective in getting their message across and obtaining the information they need. Not only do meetings present data through presentations and verbal communications, but they also enable CEOs to pick up on rich nonverbal cues such as facial expressions, body language, and mood, that are not apparent to them if they use e-mail or even Skype, for example.14 HOW DO YOU BECOME A STRATEGIC LEADER? Is becoming an ethical and effective strategic leader innate? Can it be learned? According to the upper-echelons theory, organizational outcomes including strategic choices and performance levels reflect the values of the top management team.15 These are the individuals at rot6128x_ch02_032-071.indd 35 LO 2-2 Outline how you can become a strategic leader. upper-echelons theory A conceptual framework that views organizational outcomes—strategic choices and performance levels—as reflections of the values of the members of the top management team. 12/5/19 7:54 AM 36 CHAPTER 2 Strategic Leadership: Managing the Strategy Process the upper levels of an organization. The theory states that strategic leaders interpret situations through the Business Meals lens of their unique perspectives, shaped by personal cirPublic Events 5% 2% cumstances, values, and experiences. Their leadership actions reflect characteristics of age, education, and career experiences, filtered through personal interpretaCalls tions of the situations they face. The upper-echelons 6% theory favors the idea that effective strategic leadership is the result of both innate abilities and learning. E-mail In the bestseller Good to Great, Jim Collins explored 7% over 1,000 good companies to find 11 great ones. He identified great companies as those that transitioned from average performance to sustained competitive Working Alone advantage. He measured that transition as “cumulative 13% Face-to-Face Meetings stock returns of almost seven times the general market 67% in the 15 years following their transition points.”16 A lot has happened since the book was published almost two decades ago. Today only a few of the original 11 stayed all that great, including Kimberly-Clark and Walgreens. Some fell back to mediocrity; a few no longer exist in their earlier form. Anyone remember Circuit City or Fannie Mae? Let’s agree that competitive advantage is Source: Data from O. Bandiera, A. Prat, and R. Sadun (2012), “Management hard to achieve and even harder to sustain. But his capital at the top: Evidence from the time use of CEOs,” London School of Economics and Harvard Business School Working Paper. study remains valuable for its thought-provoking observations. Studying these large corporations, Collins found consistent patterns of leadership among the top companies, as pictured in the Level-5 leadership pyramid in Exhibit 2.2. The pyramid is a Level-5 leadership conceptual framework that shows leadership progression through five distinct, sequential pyramid A conceptual levels. Collins found that all the companies he identified as great were led by Level-5 framework of leadership progression with executives. So if you are interested in becoming an ethical and effective strategic leader, five distinct, sequential the leadership pyramid suggests the areas of growth required. levels. According to the Level-5 leadership pyramid, effective strategic leaders go through a natural progression of five levels. Each level builds upon the previous one; the individual can move on to the next level of leadership only when the current level has been mastered. On the left in Exhibit 2.2 are the capabilities associated with each level. But not all companies are Fortune 500 behemoths. On the right-hand side we suggest that the model is also valuable to the individual looking to develop the capacity for greater professional success. At Level 1, we find the highly capable individual who makes productive contributions through her motivation, talent, knowledge, and skills. These traits are a necessary but not sufficient condition to move on to Level 2, where the individual attains the next level of strategic leadership by becoming an effective team player. As a contributing team member, she works effectively with others to achieve common objectives. In Level 3, the team player with a high individual skill set turns into an effective manager who is able to organize the resources necessary to accomplish the organization’s goals. Once these three levels are mastered, in Level 4, the effective professional has learned to do the right things, meaning she does not only command a high individual skill set and is an effective team player and manager, but she also knows what actions are the right ones in any given situation to pursue an organization’s strategy. Combining all four prior levels, at Level 5, the strategic leader builds enduring greatness by combining willpower and humility. This EXHIBIT 2.1 rot6128x_ch02_032-071.indd 36 How CEOs Spend Their Days 01/11/19 1:55 PM CHAPTER 2 EXHIBIT 2.2 Strategic Leadership: Managing the Strategy Process 37 Strategic Leaders: The Level-5 Pyramid Adapted to compare corporations and entrepreneurs Capabilities Corporation Is efficient and effective in organizing resources to accomplish stated goals and objectives. Does things right. Level 4: Effective Leader Level 3: Competent Manager Uses high level of individual capability to work effectively with others in order to achieve team objectives. Level 2: Contributing Team Member Makes productive contributions through motivation, talent, knowledge, and skills. Level 1: Highly Capable Individual Personal growth in response to business needs Presents compelling vision and mission to guide groups toward superior performance. Does the right things. Level 5: Executive Distinct positions within corporate structure Builds enduring greatness through a combination of willpower and humility. Entrepreneur Source: Adapted from J. Collins (2001), Good to Great: Why Some Companies Make the Leap . . . And Others Don’t (New York: HarperCollins), 20. implies that a Level-5 executive works to help the organization succeed and others to reach their full potential. As detailed in the ChapterCase, Facebook CEO Mark Zuckerberg highly values COO Sheryl Sandberg. Here he says why: “She could go be the CEO of any company that she wanted, but I think the fact that she really wants to get her hands dirty and work, and doesn’t need to be the front person all the time, is the amazing thing about her. It’s that low-ego element, where you can help the people around you and not need to be the face of all the stuff.”17 Clearly, Sandberg appears to be a Level-5 executive: She built enduring greatness at Facebook through a combination of skill, willpower, and humility. After a highly successful decade, however, by early 2019 many critics questioned Sandberg and Zuckerberg’s leadership skills (see the ChapterCase at the beginning of this chapter). THE STRATEGY PROCESS ACROSS LEVELS: CORPORATE, BUSINESS, AND FUNCTIONAL MANAGERS According to the upper-echelons theory, strategic leaders primarily determine a firm’s ability to gain and sustain a competitive advantage through the strategies they pursue. Given the importance of such strategies, we need to gain a deeper understanding of how they are created. The strategy process consists of two parts: strategy formulation (which results from strategy analysis) and strategy implementation. rot6128x_ch02_032-071.indd 37 LO 2-3 Compare and contrast the roles of corporate, business, and functional managers in strategy formulation and implementation. 01/11/19 1:55 PM 38 CHAPTER 2 Strategic Leadership: Managing the Strategy Process EXHIBIT 2.3 Strategic Formulation and Implementation across Levels: Corporate, Business, and Functional Strategy Headquarters Where to compete? Corporate Strategy Business Strategy Functional Strategy strategy formulation The part of the strategic management process that concerns the choice of strategy in terms of where and how to compete. SBU 1 How to compete? SBU 2 How to compete? SBU 3 How to compete? Business Function 1 How to implement business strategy? Business Function 2 How to implement business strategy? Business Function 3 How to implement business strategy? Strategy formulation concerns the choice of strategy in terms of where and how to compete. In contrast, strategy implementation concerns the organization, coordination, and integration of how work gets done. In short, it concerns the execution of strategy. It is helpful to break down strategy formulation and implementation into three distinct areas—corporate, business, and functional. ■ ■ strategy implementation The part of the strategic management process that concerns the organization, coordination, and integration of how work gets done, or strategy execution. rot6128x_ch02_032-071.indd 38 Business Function 4 How to implement business strategy? ■ Corporate strategy concerns questions relating to where to compete as to industry, markets, and geography. Business strategy concerns the question of how to compete. Three generic business strategies are available: cost leadership, differentiation, or value innovation. Functional strategy concerns the question of how to implement a chosen business strategy. Different corporate and business strategies will require different activities across the various functions. Exhibit 2.3 shows the three areas of strategy formulation and implementation. Although we generally speak of the firm in an abstract form, individual employees make strategic decisions—whether at the corporate, business, or functional levels. Corporate executives at headquarters formulate corporate strategy, such as Sheryl Sandberg (Facebook), Mukesh Ambani (Reliance Industries), Rosalind Brewer (Starbucks), Mary Barra (GM), Larry Page (Alphabet), or Marillyn Hewson (Lockheed Martin). Corporate executives need to decide in which industries, markets, and geographies their companies should compete. They need to formulate a strategy that can create synergies across business units that may be quite different, and determine the boundaries of the firm by deciding whether to enter certain industries and markets and whether to sell certain divisions. They are responsible for setting overarching strategic objectives and allocating scarce resources among different business divisions, monitoring performance, and making adjustments to the overall portfolio of businesses as needed. The objective of 11/23/19 1:38 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process corporate-level strategy is to increase overall corporate value so that it is higher than the sum of the individual business units. Business strategy occurs within strategic business units (SBUs), the standalone divisions of a larger conglomerate, each with its own profit-and-loss responsibility. General managers in SBUs must answer business strategy questions relating to how to compete in order to achieve superior performance. Within the guidelines received from corporate headquarters, they formulate an appropriate generic business strategy, including cost leadership, differentiation, or value innovation, in their quest for competitive advantage. Rosalind Brewer, while president and CEO of Sam’s Club, pursued a somewhat different business strategy from that of parent company Walmart. By offering higher-quality products and brand names with bulk offerings and by prescreening customers via required Sam’s Club memberships to establish creditworthiness, Brewer achieved annual revenues of roughly $60 billion. This would place Sam’s Club in the top 50 in the Fortune 500 list. Although as CEO of Sam’s Club, Brewer was responsible for the performance of this strategic business unit, she reported to Walmart’s CEO, Doug McMillon, who as corporate executive oversees Walmart’s entire operations, with over $500 billion in annual revenues and 12,000 stores globally.18 In 2017, Brewer was appointed COO of Starbucks, the leading coffeehouse chain globally with $25 billion in annual revenues and some 300,000 employees. Brewer is in charge of all Starbucks operations in the Americas (Canada, the United States, and Latin America) as well as the company’s global supply chain, product innovation, and store development, which includes 15,000 stores globally. As second in command at Starbucks, Brewer reports directly (and only) to Kevin Johnson, Starbucks CEO. Many observers believe that Brewer is being groomed to become the next CEO of Starbucks. Within each strategic business unit are various business functions: accounting, finance, human resources, product development, operations, manufacturing, marketing, and customer service. Each functional manager is responsible for decisions and actions within a single functional area. These decisions aid in the implementation of the business-level strategy, made at the level above (see Exhibit 2.3). Returning to our ChapterCase, COO Sheryl Sandberg determines Facebook’s corporate strategy jointly with CEO Mark Zuckerberg. Facebook, with some 35,000 employees, is a far-flung internet firm—its various services are available in more than 100 languages and it has offices in more than 30 countries.19 Together, they are responsible for the performance of the entire organization, and decide ■ ■ ■ 39 Rosalind Brewer is chief operating officer of Starbucks and thus second in command, reporting directly to CEO Kevin Johnson. Previously, Brewer served as Sam’s Club president and CEO (2012–2017). Phelan M. Ebenhack/ AP Images strategic business units (SBUs) Standalone divisions of a larger conglomerate, each with their own profit-and-loss responsibility. What types of products and services to offer. Which industries to compete in. Where in the world to compete. One example of Sandberg’s effective strategic leadership is Facebook’s turnaround beginning in 2013 when it did not have much of a mobile presence. Part of the problem was the inferior quality of the mobile app; Zuckerberg had initially built Facebook for the desktop personal computer, not for mobile devices. Sandberg initiated a companywide “mobile first” initiative focusing its engineers and marketers on mobile. The success of this turnaround strategy is stunning: Today Facebook is a mobile advertising powerhouse, generating over 80 percent of its revenues of more than $65 billion annually from mobile advertising.20 rot6128x_ch02_032-071.indd 39 01/11/19 1:55 PM 40 CHAPTER 2 Strategic Leadership: Managing the Strategy Process LO 2-4 2.2 Vision, Mission, and Values Describe the roles of vision, mission, and values in a firm’s strategy. The first step in the strategic management process is to define an organization’s vision, mission, and values by asking the following questions: ■ ■ ■ Vision. What do we want to accomplish ultimately? Mission. How do we accomplish our goals? Values. What commitments do we make, and what safe guards do we put in place, to act both legally and ethically as we pursue our vision and mission? The vision is the first principle that needs to be defined because it succinctly identifies the primary long-term objective of the organization. Strategic leaders need to begin with the end in mind.21 In other words, strategic success begins when a vision is formulated; that success continues when that vision is implemented. This process of creating and implementing a vision begins with the formulation of (both business and corporate) strategies that enhance the chances of gaining and sustaining competitive advantage. It ends with the creation of a strategy that enables a firm to implement its vision. This is an iterative process that can be compared to designing and building a house. You need an approved blueprint in place before construction can even begin. The same holds for strategic success; it is first created through strategy formulation based on careful analysis before any actions are taken. Let’s look at this process in more detail. VISION vision A statement about what an organization ultimately wants to accomplish; it captures the company’s aspiration. strategic intent A stretch goal that pervades the organization with a sense of winning, which it aims to achieve by building the necessary resources and capabilities through continuous learning. rot6128x_ch02_032-071.indd 40 A vision captures an organization’s aspiration and spells out what it ultimately wants to accomplish. An effective vision pervades the organization with a sense of winning and motivates employees at all levels to aim for the same target, while leaving room for individual and team contributions. Tesla’s vision is to accelerate the world’s transition to sustainable transport. The goal is to provide affordable zero-emission mass-market cars that are the best in class. SpaceX is a spacecraft manufacturer and space transport services company, also founded by Elon Musk, whose inspirational vision is to make human life multi planetary. To achieve this goal, SpaceX aims to make human travel to Mars not only possible but also affordable. Moreover, SpaceX also sees a role in helping establish a self-sustainable human colony on Mars.22 Employees in visionary companies tend to feel part of something bigger than themselves. An inspiring vision helps employees find meaning in their work and value beyond monetary rewards. It gives them a greater sense of purpose. People have an intrinsic motivation to make the world a better place through their work activities. 23 In turn, this motivation, which inspires individual purpose, can lead to higher organizational performance. 24 Using the vision as its foundation, a firm will build the necessary resources and capabilities to translate a stretch goal or strategic intent into a reality, usually through continuous organizational learning, including learning from failure.25 A firm’s vision is expressed as a statement, and this statement should be forwardlooking and inspiring to ensure it provides meaning for employees in pursuit of the organization’s ultimate goals. Strategy Highlight 2.1 shows how at the heart of Teach for America’s (TFA) vision statement is an inspiring vision. This statement effectively and clearly communicates TFA’s stretch goal, as well as what it ultimately seeks to accomplish. 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process 41 Strategy Highlight 2.1 Teach for America: How Wendy Kopp Inspires Future Leaders Teach for America (TFA) is a nonprofit organization of future leaders that works to ensure that underprivileged youth get an excellent education. TFA corp members spend two years teaching in economically disadvantaged communities across the United States. Although TFA initially targeted college seniors, today it recruits both graduates and professionals to help achieve the following TFA vision: One day, all children in this nation will have the opportunity to attain an excellent education. TFA began as a college senior thesis written in 1989 by a then-21-year-old Wendy Kopp. Kopp was convinced that young people generally sought for meaning in their lives, and that they could create meaning by making a positive contribution to society. Kopp’s genius was that she flipped on its head the social perception of teaching—she turned a seemingly unattractive, low-status job into a highprestige, professional opportunity. In the first four months after creating TFA, Kopp received more than 2,500 applicants. She marketed the idea by passing out and posting flyers in college dorms. During its first academic year (1990–91), TFA served five states and changed the lives of 36,000 students. By 2018, TFA had some 60,000 corps members and alumni, more than 2,500 school partnerships, and impacted millions of students. To be chosen for TFA is considered an honor. Of the total number of applicants that TFA receives annually, approximately 15 percent are accepted; this is roughly equivalent to the admission rate of highly selective universities such as Northwestern, Cornell, and University of California, Berkeley. Compared to the national average of people of color in teaching positions (20 percent), 50 percent of TFA corps members are people of color—a more accurate reflection of the population they teach. TFA corps members receive the same pay as other first-year teachers in their respective local school districts. In an effort to eliminate educational inequity, Kopp deliberately enlists the nation’s most promising future leaders; this conscious decision to recruit only the best has rot6128x_ch02_032-071.indd 41 Wendy Kopp, Teach for America founder. Astrid Stawiarz/Getty Images had a hugely positive impact on students. Approximately 95 percent of all school principals working with TFA members say they have made significant strides with their students. Furthermore, a study commissioned by the U.S. Department of Education found that students being taught by TFA corps members showed significantly higher achievement, especially in math and science. TFA CEO Elisa Villanueva Beard was inspired to sign up for TFA when she was a college student at DePauw University. She recalls that what inspired her most was Wendy Kopp’s “audacity to believe young people could make a profound difference in the face of intractable problems standing between the ideals of a nation I loved and a starkly disappointing reality; who were bound by a fierce belief that all children, from American Indian reservations in South Dakota to Oakland to the Rio Grande Valley to the Bronx, should have the opportunity to write their own stories and fulfill their true potential.”26 Yet, despite all its remarkable success, TFA finds itself wrestling with several challenges. For instance, applications in the last few years have dropped (an estimated 35 percent over three years), causing TFA to fail to meet its recruiting target. Second, the short but intensive fiveweek summer boot camp intended to ready new recruits for teaching in some of the toughest schools in United States is increasingly criticized as insufficient.27 01/11/19 1:55 PM 42 CHAPTER 2 Strategic Leadership: Managing the Strategy Process That vision statements can inspire and motivate employees in the nonprofit sector comes as no surprise. Who wouldn’t find wanting to help children attain an excellent education, the vision of TFA, meaningful? Likewise, who wouldn’t be moved by the promise to always be there in times of need, the vision of the American Red Cross? But can for-profit firms inspire and motivate just as well? The answer is yes; a truly meaningful and inspiring vision—no matter if of a nonprofit or for-profit firm—makes employees feel they are part of something bigger, which can be highly motivating. When employees are highly motivated, firm financial performance can also improve. For example, visionary for-profit companies such as 3M and Walmart provide aspirational ideas that are not exclusively financial; as such, they tend to outperform their competitors over the long run. Tracking the stock market performance of companies over several decades, strategy scholars found that visionary companies outperformed their peers by a wide margin.28 However, as the ChapterCase on Facebook warns, single-mindedly pursuing a vision can also be detrimental, even if that vision inspires and motivates. When followed too strictly, it can generate unexpected challenges that can be difficult to overcome. Critics assert that Facebook’s leadership failed to consider the potential for serious negative side-effects, such as the mass-manipulation of users by nefarious actors, or the large-scale breach of user privacy that resulted in the siphoning off of personal data by mal-intent third parties. LO 2-5 Evaluate the strategic implications of productoriented and customeroriented vision statements. VISION STATEMENTS AND COMPETITIVE ADVANTAGE. Do vision statements help firms gain and sustain competitive advantage? It depends. The effectiveness of vision statements differs by type. Customer-oriented vision statements allow companies to adapt to changing environments. Product-oriented vision statements often constrain this ability. This is because customer-oriented vision statements focus employees to think about how best to solve a problem for a consumer.29 Clayton Christensen shares how a customer focus let him help a fast food chain increase sales of milkshakes. The company approached Christensen after it had made several changes to its milkshake offerings based on extensive customer feedback but sales failed to improve. Rather than asking customers what kind of milkshake they wanted, he thought of the problem in a different way. He observed customer behavior and then asked customers, “What job were you trying to do that caused you to hire that milkshake?”30 He wanted to know what problem the customers were trying to solve. Surprisingly he found that roughly half of the shakes were purchased in the mornings, because customers wanted an easy breakfast to eat in the car and a diversion on long commutes. Based on the insights gained from this problem-solving perspective, the company expanded its shake offerings to include healthier options with fruit chunks and provided a prepaid dispensing machine to speed up the drivethrough, and thus improve customers’ morning commute. A customer focus made finding a solution much easier. You could say that the restaurant company had a product orientation that prevented its executives from seeing unmet customer needs. Product-oriented vision statements focus employees on improving existing products and services without consideration of underlying customer problems to be solved. Our environments are ever-changing and sometimes seem chaotic. The increased strategic flexibility afforded by customer-oriented vision statements can provide a basis on which companies can build competitive advantage.31 Let’s look at both types of vision statements in more detail. PRODUCT-ORIENTED VISION STATEMENTS. A product-oriented vision defines a business in terms of a good or service provided. Product-oriented visions tend to force managers to take a more myopic view of the competitive landscape. Consider the strategic decisions of U.S. railroad companies. Railroads are in the business of moving goods and people from rot6128x_ch02_032-071.indd 42 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process 43 point A to point B by rail. When they started in the 1850s, their short-distance competition was the horse or horse-drawn carriage. There was little long-distance competition (e.g., ship canals or good roads) to cover the United States from coast to coast. Because of their monopoly, especially in long-distance travel, these companies were initially extremely profitable. Not surprisingly, the early U.S. railroad companies saw their vision as being in the railroad business, clearly a product-based definition. However, the railroad companies’ monopoly did not last. Technological innovations changed the transportation industry dramatically. After the introduction of the automobile in the early 1900s and the commercial jet in the 1950s, consumers had a wider range of choices to meet their long-distance transportation needs. Rail companies were slow to respond; they failed to redefine their business in terms of services provided to the consumer. Had they envisioned themselves as serving the full range of transportation and logistics needs of people and businesses across America (a customer-oriented vision), they might have become successful forerunners of modern logistics companies such as FedEx or UPS. Recently, the railroad companies seem to be learning some lessons: CSX Railroad is now redefining itself as a green-transportation alternative. It claims it can move one ton of freight 423 miles on one gallon of fuel. However, its vision remains product-oriented: to be the safest, most progressive North American railroad. CUSTOMER-ORIENTED VISION STATEMENTS. A customer-oriented vision defines a business in terms of providing solutions to customer needs. For example, “We provide solutions to professional communication needs.” Companies with customer-oriented visions can more easily adapt to changing environments. Exhibit 2.4 provides additional examples of companies with customer-oriented vision statements. In contrast, companies that define themselves based on product-oriented statements (e.g., “We are in the typewriter business”) tend to be less flexible and thus more likely to fail. The lack of an inspiring needs-based vision can cause the long-range problem of failing to adapt to a changing environment. Customer-oriented visions identify a critical need but leave open the means of how to meet that need. Customer needs may change, and the means of meeting those needs may change with it. The future is unknowable, and innovation is likely to provide new ways to meet needs that we cannot fathom today.32 For example, consider the need to transmit information over long distances. Communication needs have persisted throughout the millennia, Alibaba: To make it easy to do business anywhere. Amazon: To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online. Better World Books: To harness the power of capitalism to bring literacy and opportunity to people around the world. EXHIBIT 2.4 Companies with Customer-Oriented Vision Statements Facebook: To make the world more open and connected. GE: To move, cure, build, and power the world. Google: To organize the world’s information and make it universally accessible and useful. Nike: To bring inspiration and innovation to every athlete in the world. SpaceX: To make human life multi planetary. Tesla: To accelerate the world’s transition to sustainable energy. Walmart: To be the best retailer in the hearts and minds of consumers and employees. Warby Parker: To offer designer eyewear at a revolutionary price, while leading the way for socially conscious businesses. rot6128x_ch02_032-071.indd 43 01/11/19 1:55 PM 44 CHAPTER 2 Strategic Leadership: Managing the Strategy Process but the technology to solve this problem has changed drastically over time.33 During the reign of Julius Caesar, moving information over long distances required papyrus, ink, a chariot, a horse, and a driver. During Abraham Lincoln’s time, the telegraph was used for short messages while railroads handled larger documents, and an airplane transported letters when Franklin Delano Roosevelt was president. Today, we use connected mobile devices to move information over long distances at the speed of light. The problem to be solved—moving information over long distance—has remained the same, but the technology employed to do this job has changed quite drastically. Christensen recommends that strategic leaders think hard about how the means of getting a job done have changed over time and ask themselves, “Is there an even better way to get this job done?” It is critical that an organization’s vision should be flexible to allow for change and adaptation. Consider how Ford Motor Co. has addressed the problem of personal mobility over the past 100 years. Before Ford entered the market in the early 1900s, people traveled long distances by horse-drawn buggy, horseback, boat, or train. But Henry Ford had a different idea. In fact, he famously said, “If I had listened to my customers, I would have built a better horse and buggy.”34 Instead, Henry Ford’s original vision was to make the automobile accessible to every American. He succeeded, and the automobile dramatically changed how mobility was achieved. Fast-forward to today: Ford Motor Co.’s vision is to provide personal mobility for people around the world. Note that it does not even mention the automobile. By focusing on the consumer need for personal mobility, Ford is leaving the door open for exactly how it will fulfill that need. Today, it’s mostly with traditional cars and trucks propelled by gas-powered internal combustion engines, with some hybrid electric vehicles in its lineup. In the near future, Ford is likely to provide vehicles powered by alternative energy sources such as electric power or hydrogen. Moreover, vehicles will be driven autonomously, and thus a human driver is no longer needed. With this expected shift to arrive in the near future, automobiles will unlikely be owned personally but rather rides will be provided on demand by ride hailing services such as Uber or Lyft. In the far-reaching future, perhaps Ford will get into the business of individual flying devices. Throughout all of this, its vision would still be relevant and compel its managers to engage in future markets. In contrast, a product-oriented vision would greatly constrain Ford’s degree of strategic flexibility. MOVING FROM PRODUCT-ORIENTED TO CUSTOMER-ORIENTED VISION STATEMENTS. In some cases, product-oriented vision statements do not interfere with the firm’s success in achieving superior performance and competitive advantage. Consider Intel Corp., one of the world’s leading silicon innovators. Intel’s early vision was to be the preeminent buildingblock supplier of the PC industry. Intel designed the first commercial microprocessor chip in 1971 and set the standard for microprocessors in 1978. During the personal computer (PC) revolution in the 1980s, microprocessors became Intel’s main line of business. Intel’s customers were original equipment manufacturers that produced consumer end-products, such as computer manufacturers HP, IBM, Dell, and Compaq. In the internet age, though, the standalone PC as the end-product has become less important. Customers want to stream video and share selfies and other pictures online. These activities consume a tremendous amount of computing power. To reflect this shift, Intel in 1999 changed its vision to focus on being the preeminent building-block supplier to the internet economy. Although its product-oriented vision statements did not impede performance or competitive advantage, in 2008 Intel fully made the shift to a customer-oriented vision: to delight our customers, employees, and shareholders by relentlessly delivering the platform and technology advancements that become essential to the way we work and live. Part of this shift was reflected by the hugely successful “Intel Inside” advertising campaign in the 1990s that rot6128x_ch02_032-071.indd 44 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process 45 made Intel a household name worldwide. Yet, even more than a decade later, this is still Intel’s vision statement. Intel accomplished superior firm performance over decades through continuous adaptations to changing market realities. Its formal vision statement lagged behind the firm’s strategic transformations. Intel regularly changed its vision statement after it had accomplished each successful transformation.35 In such a case, vision statements and firm performance are clearly not related to one another. It is also interesting to note that customer-oriented visions also frequently change over time. When Tesla was founded in 2003, its vision was to accelerate the world’s transition to sustainable transport. Over the last decade or so, Tesla completed several steps of its initial master plan (as detailed in ChapterCase 1), including providing zero-emission electric power generation options (Step 4), through the acquisition of the SolarCity. Tesla, therefore, no longer views itself as a car company but as a fully integrated clean-tech company. To capture this ambition more accurately Tesla changed its vision: to accelerate the world’s transition to sustainable energy. To reposition Tesla as an integrated clean-tech energy company, in 2017 Tesla changed its official name from Tesla Motors to simply Tesla, Inc. Taken together, empirical research shows that sometimes vision statements and firm performance are associated with one another. A positive relationship between vision statements and firm performance is more likely to exist under certain circumstances: ■ ■ ■ The visions are customer-oriented. Internal stakeholders are invested in defining the vision. Organizational structures such as compensation systems align with the firm’s vision statement.36 The upshot is that an effective vision statement can lay the foundation upon which to craft a strategy that creates competitive advantage. MISSION Building on the vision, organizations establish a mission, which describes what an organization actually does—that is, the products and services it plans to provide, and the markets in which it will compete. People sometimes use the terms vision and mission interchangeably, but in the strategy process they differ. ■ ■ A vision defines what an organization wants to be, and what it wants to accomplish ultimately. A vision begins with the infinitive form of a verb (starting with to). As discussed in Strategy Highlight 2.1, TFA’s vision is to attain an excellent education for all children. A mission describes what an organization does and how it proposes to accomplish its vision. The mission is often introduced with the preposition by. Thus, we can cast a mission statement for TFA that reads: To attain an excellent education for all children by enlisting, developing, and mobilizing as many as possible of our nation’s most promising future leaders to grow and strengthen the movement for educational equity and excellence. mission Description of what an organization actually does—the products and services it plans to provide, and the markets in which it will compete. To be effective, firms need to back up their visions and missions with strategic commitments, in which the enterprise undertakes credible actions. Such commitments are costly, long-term oriented, and difficult to reverse.37 However noble the mission statement, to achieve competitive advantage companies need to make strategic commitments informed by economic fundamentals of value creation. As mentioned in ChapterCase 1, Tesla is investing billions of dollars to equip its car factory in California with cutting-edge robotics and to build the Gigafactory producing lithiumion batteries in Nevada. These investments by Tesla are examples of strategic commitments rot6128x_ch02_032-071.indd 45 01/11/19 1:55 PM 46 CHAPTER 2 Strategic Leadership: Managing the Strategy Process because they are costly, long-term, and difficult to reverse. They are clearly supporting Tesla’s vision to accelerate the world’s transition to sustainable transport. Tesla hopes to translate this vision into reality by providing affordable zero-emission mass-market cars that are the best in class, which captures Tesla’s mission. LO 2-6 Justify why anchoring a firm in ethical core values is essential for long-term success. core values statement Statement of principles to guide an organization as it works to achieve its vision and fulfill its mission, for both internal conduct and external interactions; it often includes explicit ethical considerations. organizational core values Ethical standards and norms that govern the behavior of individuals within a firm or organization. rot6128x_ch02_032-071.indd 46 VALUES While many companies have powerful vision and mission statements, they are not enough. An organization’s values also need to be clearly articulated in the strategy process. A core values statement matters because it provides touchstones for employees to understand the company culture. It offers bedrock principles that employees at all levels can use to manage complexity and to resolve conflict. Such statements can help provide the organization’s employees with a moral compass. Consider that much of unethical behavior, while repugnant, may not be illegal. Often we read the defensive comment from a company under investigation or fighting a civil suit that “we have broken no laws.” However, any firm that fails to establish extra-legal, ethical standards will be more prone to behaviors that can threaten its very existence. A company whose culture is silent on moral lapses breeds further moral lapses. Over time such a culture could result in a preponderance of behaviors that cause the company to ruin its reputation, at the least, or slide into outright legal violations with resultant penalties and punishment, at the worst. Organizational core values are the ethical standards and norms that govern the behavior of individuals within a firm or organization. Strong ethical values have two important functions. First, ethical standards and norms underlay the vision statement and provide stability to the strategy, thus laying the groundwork for long-term success. Second, once the company is pursuing its vision and mission in its quest for competitive advantage, they serve as guardrails to keep the company on track. The values espoused by a company provide answers to the question, how do we accomplish our goals? They help individuals make choices that are both ethical and effective in advancing the company’s goals. For instance, Teach for America (TFA) has a set of core values that focus on transformational change through team-based leadership, diversity, respect, and humility. These values guide TFA corp members in their day-to-day decision making. It aids each corp member in making ethical and value-based decisions in teaching environments that can often be quite stressful. One last point about organizational values: Without commitment and involvement from top managers, any statement of values remains merely a public relations exercise. Employees tend to follow values practiced by strategic leaders. They observe the day-to-day decisions of top managers and quickly decide whether managers are merely paying lip service to the company’s stated values. Organizational core values must be lived with integrity, especially by the top management team. Unethical behavior by top managers is like a virus that spreads quickly throughout an entire organization. Take, for example, Volkswagen (VW), the largest carmaker by volume worldwide. Although one of its long-time marketing slogans was Truth in Engineering, this did not prevent the forced resignation of VW CEO Martin Winterkorn in the fall of 2015—a consequence of an emissions cheating scandal dubbed Dieselgate. Moreover, in 2018, Winterkorn was indicted on fraud and conspiracy charges. What had happened? VW had illegally installed so-called “defeat devices” in some 11 million vehicles. When programmed and installed, the software for these devices enabled emissions controls when the vehicle was on a test stand. However, the device disabled emissions controls when the vehicle was in daily driving mode on public roads. These defeat devices helped VW diesel cars pass stringent 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process emissions tests, even though in reality they were emitting up to 40 times the allowed level of pollutants. In the end, Volkswagen paid more than $22 billion in fines and damaged its stellar reputation. Ironically, the fines alone were much higher than the cost of equipping the diesel engines with the appropriate pollution controls.38 As the VW example demonstrates, it is imperative that strategic leaders set the example of ethical behavior by living their firm’s core values. Strategic leaders have a strong influence in setting their organization’s vision, mission, and values—the first step of the strategic management process, which we turn to next. 2.3 The Strategic Management Process An effective strategic management process lays the foundation for sustainable competitive advantage. Strategic leaders design a process to formulate and implement strategy. In the Strategic Leadership section, we gained insight into the corporate, business, and functional levels of strategy. Here we turn to the process or method by which strategic leaders formulate and implement strategy. When setting the strategy process, strategic leaders rely on three approaches: 1. Strategic planning. 2. Scenario planning. 3. Strategy as planned emergence. This order also reflects the sequence of development of these approaches: We begin with strategic planning, followed by scenario planning, and then strategy as planned emergence. The first two are relatively formal, top-down planning approaches. The third begins with a strategic plan but offers a less formal and less stylized approach. Each approach has its strengths and weaknesses, depending on the circumstances under which it is employed. 47 LO 2-7 Evaluate top-down strategic planning, scenario planning, and strategy as planned emergence. strategic management process Method put in place by strategic leaders to formulate and implement a strategy, which can lay the foundation for a sustainable competitive advantage. top-down strategic planning A rational, data-driven strategy process through which top management attempts to program future success. TOP-DOWN STRATEGIC PLANNING The prosperous decades after World War II resulted in tremendous growth of corporations. As company executives needed a way to manage ever more complex firms more effectively, they began to use strategic planning.39 Top-down strategic planning, derived from military strategy, is a rational process through which executives attempt to program future success.40 In this approach, all strategic intelligence and decision-making responsibilities are concentrated in the office of the CEO. The CEO, much like a military general, leads the company strategically through competitive battles. Exhibit 2.5 shows the three steps of strategic management: analysis, formulation, and implementation in a traditional top-down strategic planning process. Strategic planners provide detailed analyses of internal and external data and apply them to all quantifiable areas: prices, costs, margins, market demand, head count, and production runs. Five-year plans, rot6128x_ch02_032-071.indd 47 EXHIBIT 2.5 Analysis Formulation Implementation Top-Down Strategic Planning in the AFI Strategy Framework                  01/11/19 1:55 PM 48 CHAPTER 2 Strategic Leadership: Managing the Strategy Process revisited regularly, predict future sales based on anticipated growth. Top executives tie the allocation of the annual corporate budget to the strategic plan and monitor ongoing performance accordingly. Based on a careful analysis of these data, top managers reconfirm or adjust the company’s vision, mission, and values before formulating corporate, business, and functional strategies. Appropriate organizational structures and controls as well as governance mechanisms aid in effective implementation. Top-down strategic planning more often rests on the assumption that we can predict the future from the past. The approach works reasonably well when the environment does not change much. One major shortcoming of the top-down strategic planning approach is that the formulation of strategy is separate from implementation, and thinking about strategy is separate from doing it. Information flows one way only: from the top down. Another shortcoming of the strategic planning approach is that we simply cannot know the future. There are no data. Unforeseen events can make even the most scientifically developed and formalized plans obsolete. Moreover, strategic leaders’ visions of the future can be downright wrong, save for a few notable exceptions. At times, strategic leaders impose their visions onto a company’s strategy, structure, and culture from the top down to create and enact a desired future state. Under its co-founder and long-time CEO Steve Jobs, Apple was one of the few successful tech companies using a top-down strategic planning process.41 Jobs felt that he knew best what the next big thing should be. Under his top-down, autocratic leadership, Apple did not engage in market research because Jobs firmly believed that “people don’t know what they want until you show it to them.”42 In his well-researched, 700-page biography on Steve Jobs, Walter Isaacson presents to readers Jobs’ lessons in strategic leadership in 14 memorable aphorisms, including push for perfection, tolerate only “A” players, and bend reality, among others.43 The traditional top-down strategy process served Apple well in its journey to becoming the world’s first company to be valued above $1 trillion. Under Tim Cook, Jobs’ successor as CEO, Apple’s strategy process has become more flexible. The company is now trying to incorporate the possibilities of different future scenarios and bottom-up strategic initiatives.44 SCENARIO PLANNING scenario planning Strategy planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to derive strategic responses. rot6128x_ch02_032-071.indd 48 Given that the only constant is change, should managers even try to strategically plan for the future? The answer is yes—but they also need to expect that unpredictable events will happen. Strategic planning in a fast-changing environment happens in a fashion similar to the way a fire department plans for a fire.45 There is no way to know in advance where and when the next emergency will arise; neither we can know in advance its magnitude. Nonetheless, fire chiefs always consider the “what-if” scenarios; they put contingency plans in place that address a wide range of emergencies and their different dimensions. When scenario planning, managers also ask those what-if questions. Similar to topdown strategic planning, scenario planning also starts with a top-down approach to the strategy process. In addition, in scenario planning, top management envisions different scenarios, to anticipate plausible futures in order to derive strategic responses. For example, new laws might restrict carbon emissions or expand employee health care. Demographic shifts may alter the ethnic diversity of a nation; changing tastes or economic conditions will affect consumer behavior. Technological advances may provide completely new products, processes, and services. How would any of these changes affect a firm, and how should it respond? Scenario planning takes place at both the corporate and business levels of strategy. Typical scenario planning addresses both optimistic and pessimistic futures. For instance, strategy executives at UPS identified a number of issues as critical to shaping its future 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process 49 EXHIBIT 2.6 Scenario Planning within the AFI Strategy Framework Analysis Mon it ori ng mance rfor Pe Identify Multiple Future Scenarios F ormulation Feed Develop Strategic Plans to Address Future Scenarios bac I mplementation kL oo p Execute Dominant Strategic Plan t va A c ti w Pl Ne nt na mi sary o D es ard ec si c if N D an Pl e an and if N E xecu te ece ssary Create Strategic Options Through Developing Alternative Plan(s) competitive scenarios: (1) big data analytics; (2) being the target of a terrorist attack, or having a security breach or IT system disruption; (3) large swings in energy prices, including gasoline, diesel and jet fuel, and interruptions in supplies of these commodities; (4) fluctuations in exchange rates or interest rates; and (5) climate change.46 Managers then formulate strategic plans they could activate and implement should the envisioned optimistic or pessimistic scenarios begin to appear. To model the scenario-planning approach, place the elements in the Analysis, Formulation, Implementation (AFI) strategy framework in a continuous feedback loop, where analysis leads to formulation to implementation and back to analysis. Exhibit 2.6 elaborates on this simple feedback loop to show the dynamic and iterative method of scenario planning. The goal is to create a number of detailed and executable strategic plans. This allows the strategic management process to be more flexible and more effective than the more static strategic planning approach with one master plan. In the analysis stage, managers brainstorm to identify possible future scenarios. Input from several levels within the organization and from different functional areas such as R&D, manufacturing, and marketing and sales is critical. UPS executives considered, for example, how they would compete if the price of a barrel of oil was $35, or $100, or even $200. Strategic leaders may also attach probabilities (highly likely versus unlikely, or 85 percent likely versus 2 percent likely) to different future states. Although strategic leaders often tend to overlook pessimistic future scenarios, it is imperative to consider negative scenarios carefully. Exporters such as Boeing, Harley-Davidson, or John Deere would want to analyze the impact of shifts in exchange rates on profit rot6128x_ch02_032-071.indd 49 01/11/19 1:55 PM 50 CHAPTER 2 Strategic Leadership: Managing the Strategy Process Bernd Wolter/ Shutterstock black swan events Incidents that describe highly improbable but high-impact events. rot6128x_ch02_032-071.indd 50 margins. They might go through an exercise to derive different strategic plans based on large exchange rate fluctuations of the U.S. dollar against major foreign currencies such as the euro, Japanese yen, or Chinese yuan. What if the euro depreciated to below $1 per euro, or the Chinese yuan depreciated rather than appreciated? How would Disney compete if the dollar were to appreciate so much as to make visits by foreign tourists to its California and Florida theme parks prohibitively expensive? Or, they might consider the implications of tariffs being levied in the trade war between the U.S. and China. The metaphor of a black swan, therefore, describes the high impact of a highly improbable event. In the past, most people assumed that all swans are white, so when they first encountered swans that were black, they were surprised.47 Strategic leaders need also consider how black swan events might affect their strategic planning. In the UPS scenario planning exercise, a terrorist attack or a complete security breach of its IT system are examples of possible black swan events. Looking at highly improbable but high-impact events allows UPS executives to be less surprised and more prepared should they indeed occur. Other examples of black swan events include the 9/11 terrorist attacks, the British exit from the European Union (Brexit), and the European refugee and migrant crisis. Such black swan events are considered to be highly improbable and thus unexpected, but when they do occur, each has a profound impact. For instance, the BP oil spill was a black swan for many businesses on the Gulf Coast, including the tourism, fishing, and energy industries. In 2010, an explosion occurred on BP’s Deepwater Horizon oil drilling rig off the Louisiana coastline, killing 11 workers. The subsequent oil spill continued unabated for over three months. It released an estimated 5 million barrels of crude oil into the Gulf of Mexico, causing the largest environmental disaster in U.S. history. Two BP employees even faced manslaughter charges. The cleanup alone cost BP $14 billion. Because of the company’s haphazard handling of the crisis, Tony Hayward, BP’s CEO at the time, was fired. In the aftermath of the oil spill, BP faced thousands of claims by many small-business owners in the tourism and seafood industries. These business owners were not powerful individually, and pursuing valid legal claims meant facing protracted and expensive court proceedings. As a collective organized in a class-action lawsuit, however, they were powerful. Moreover, their claims were backed by the U.S. government, which has the power to withdraw BP’s business license or cancel current permits and withhold future ones. Collectively, the small-business owners along the Gulf Coast became powerful BP stakeholders, with a legitimate and urgent claim that needed to be addressed. In response, BP agreed to pay over $25 billion to settle their claims and cover other litigation costs. Even so, this was not the end of the story for BP. The oil company was found to have committed “gross negligence” (reckless and extreme behavior) by a federal court. Additional fines and other environmental costs added another $8.5 billion. BP’s total tab for the Gulf of Mexico disaster was $56 billion! BP CEO Bob Dudley sold about $40 billion in assets, turning BP into a smaller company that aims to become more profitable. What should strategy leaders do about possible future black swan and other unexpected circumstances? In the formulation stage in scenario planning, management teams develop different strategic plans to address possible future scenarios. This kind of what-if exercise forces managers to develop detailed contingency plans before events occur. Each plan relies on an entire set of analytical tools, which we will introduce in upcoming chapters. 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process 51 They capture the firm’s internal and external environments when answering several key questions: ■ ■ ■ What resources and capabilities do we need to compete successfully in each future scenario? What strategic initiatives should we put in place to respond to each respective scenario? How can we shape our expected future environment? By formulating responses to the varying scenarios, managers build a portfolio of future options. They then continue to integrate additional information over time, which in turn influences future decisions. Finally, managers transform the most viable options into fullfledged, detailed strategic plans that can be activated and executed as needed. The scenarios and planned responses promote strategic flexibility for the organization. If a new scenario should emerge, the company won’t lose any time coming up with a new strategic plan. It can activate a better suited plan quickly based on careful scenario analysis done earlier. In the implementation stage, managers execute the dominant strategic plan, the option that top managers decide most closely matches the current reality. If the situation changes, managers can quickly retrieve and implement any of the alternate plans developed in the formulation stage. The firm’s subsequent performance in the marketplace gives managers real-time feedback about the effectiveness of the dominant strategic plan. If performance feedback is positive, managers continue to pursue the dominant strategic plan, fine-tuning it in the process. If performance feedback is negative, or if reality changes, managers consider whether to modify further the dominant strategic plan in order to enhance firm performance or to activate an alternative strategic plan. The circular nature of the scenario-planning model in Exhibit 2.6 highlights the continuous interaction among analysis, formulation, and implementation. Through this interactive process, managers can adjust and modify their actions as new realities emerge. The interdependence among analysis, formulation, and implementation also enhances organizational learning and flexibility. dominant strategic plan The strategic option that top managers decide most closely matches the current reality and which is then executed. STRATEGY AS PLANNED EMERGENCE: TOP-DOWN AND BOTTOM-UP Critics of top-down and scenario planning argue that strategic planning is not the same as strategic thinking.48 In fact, they argue that strategic planning processes are often too regimented and confining. As such, they lack the flexibility needed for quick and effective response. Managers engaged in a more formalized approach to the strategy process may also fall prey to an illusion of control, which describes an inclination by managers to overestimate their ability to control events.49 Hard numbers in a strategic plan can convey a false sense of security. According to critics of strategic planning, to be successful, a strategy should be based on an inspiring vision and not on hard data alone. They advise that strategic leaders should focus on all types of information sources, including soft sources that can generate new insights, such as personal experience, deep domain expertise, or the insights of front-line employees. The important work, according to this viewpoint, is to synthesize all available input from different internal and external sources into an overall strategic vision. An inspiring vision in turn should then guide the firm’s strategy (as discussed in the previous section). In today’s complex and uncertain world, the future cannot be predicted from the past with any degree of certainty. Black swan events can profoundly disrupt businesses and society. Moreover, the other two approaches to planning just discussed do not account sufficiently for the role employees at all levels of the organization may play. This is because rot6128x_ch02_032-071.indd 51 01/11/19 1:55 PM 52 CHAPTER 2 Strategic Leadership: Managing the Strategy Process lower-level employees not only implement the given strategy, but they also frequently come up with initiatives on their own that may alter a firm’s strategy. In many instances, front-line employees have unique insights based on constant and unfiltered customer feedback that may elude the more removed executives. Moreover, hugely successful strategic initiatives are occasionally the result of serendipity, or unexpected but pleasant surprises. In 1990, for example, online retailing was nonexistent. Today, almost all internet users have purchased goods and services online. As a total of all sales, online retailing was about 15 percent in 2018 and is expected to double by 2030.50 Given the success of Amazon as the world’s leading online retailer, brick-and-mortar companies such as Best Buy, The Home Depot, JCPenney, and even Walmart have all been forced to respond and adjust their strategies. Others such as Kmart, Radio Shack, and even the venerable Sears filed for Chapter 11 bankruptcy (a provision of the U.S. bankruptcy code, which allows reorganization and restructuring of debts owed), while Circuit City, Borders, and others went out of business altogether (liquidation bankruptcy). Given the more or less instant global presence of online retailers,51 Alibaba is emerging as the leading internet-based wholesaler connecting manufacturers in China to retailers in the West, as well as a direct online retailer. In a similar fashion, the ride-hailing services Uber, Lyft, Didi Chuxing, and Grab are disrupting the existing taxi and limousine businesses in many metropolitan areas around the world. Having been protected by decades of regulations, existing taxi and limo services scramble to deal with the unforeseen competition. Many try through the courts or legislative system to block the new entrants, alleging the ride-sharing services violate safety and other regulations. Another new sharing economy venture, Airbnb, is facing a similar situation. Airbnb is an online platform that allows users to list or rent lodging of residential properties. The critics of more formalized approaches to strategic planning, most notably Henry Mintzberg, propose a third approach to the strategic management process. In contrast to the two top-down strategy processes discussed above, this one is a less formal and less stylized approach to the development of strategy. To reflect the reality that strategy can be planned or emerge from the bottom up, Exhibit 2.7 shows a more integrative approach to EXHIBIT 2.7 Realized Strategy Is a Combination of Top-Down Intended Strategy and Bottom-Up Emergent Strategy Analysis Formulation Intended Strategy Implementation      Realized Strategy Unrealized Strategy     Bottom-Up Emergent Strategy   y      rot6128x_ch02_032-071.indd 52 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process managing the strategy process. Please note that even in strategy as planned emergence, the overall strategy process still unfolds along the AFI framework of analysis, formulation, and implementation. According to this more holistic model, the strategy process also begins with a top-down strategic plan based on analysis of external and internal environments. Top-level executives then design an intended strategy—the outcome of a rational and structured, top-down strategic plan. Exhibit 2.7 illustrates how parts of a firm’s intended strategy are likely to fall by the wayside because of unpredictable events and turn into unrealized strategy. A firm’s realized strategy is generally formulated through a combination of its top-down strategic intentions and bottom-up emergent strategy. An emergent strategy describes any unplanned strategic initiative bubbling up from deep within the organization. If successful, emergent strategies have the potential to influence and shape a firm’s overall strategy. The strategic initiative is a key feature in the strategy as a planned emergence model. A strategic initiative is any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. Strategic initiatives can come from anywhere. They could emerge as a response to external trends or come from internal sources. As such, strategic initiatives can be the result of top-down planning by executives, or they can also emerge through a bottom-up process. Many high-tech companies employ the planned emergence approach to formulate strategy. For example, the delivery-by-drone project at Amazon was conceived of and invented by a lower-level engineer. Even relatively junior employees can come up with strategic initiatives that can make major contributions if the strategy process is sufficiently open and flexible.52 The arrows in Exhibit 2.7 represent different strategic initiatives. In particular, strategic initiatives can bubble up from deep within a firm through ■ ■ ■ 53 Amazon Prime Air is a future service that will deliver packages up to five pounds in 30 minutes or less using small drones. This strategic initiative was conceived of and invented by a lower-level engineer. Johannes Schmitt-Tegge/ dpa/Alamy Stock Photo intended strategy The outcome of a rational and structured topdown strategic plan. Autonomous actions. Serendipity. Resource-allocation process (RAP).53 AUTONOMOUS ACTIONS. Autonomous actions are strategic initiatives undertaken by lower-level employees on their own volition and often in response to unexpected situations. Strategy Highlight 2.2 illustrates that successful emergent strategies are sometimes the result of autonomous actions by lower-level employees. Functional managers such as Diana, the Starbucks store manager featured in Strategy Highlight 2.2 , are much closer to the final products, services, and customers than are the more removed corporate- or business-level managers. They also receive much more direct customer feedback. As a result, functional managers may start strategic initiatives based on autonomous actions that can influence the direction of the company. To be successful, however, top-level executives need to support emergent strategies that they believe fit with the firm’s vision and mission. Diana’s autonomous actions might not have succeeded or might have got her in trouble if she did not garner the support of a senior Starbucks executive. This realized strategy Combination of intended and emergent strategy. rot6128x_ch02_032-071.indd 53 emergent strategy Any unplanned strategic initiative bubbling up from the bottom of the organization. strategic initiative Any activity a firm pursues to explore and develop new products and processes, new markets, or new ventures. autonomous actions Strategic initiatives undertaken by lowerlevel employees on their own volition and often in response to unexpected situations. 01/11/19 1:55 PM 54 CHAPTER 2 Strategic Leadership: Managing the Strategy Process Strategy Highlight 2.2 Starbucks CEO: “It’s Not Whatt We Do” Starbucks stores were supposed to offer only company-approved drinks. Diana, a Starbucks store manager in Southern But Diana told him the new drink was California, received several requests a day selling well. cal for an iced beverage offered by a local Behar flew Diana’s team to Starbucks competitor. After receiving more than headquarters in Seattle to serve the 30 requests one day, she tried the iced-coffee drink to the executive beverage herself. Thinking it might committee. They liked its taste, but be a good idea for Starbucks to ofstill said no. Then Behar pulled out the fer a similar iced beverage, she resales numbers that Diana had carefully quested that headquarters consider kept. The drink was selling like crazy: adding it to the product lineup. Diana 40 drinks a day the first week, 50 drinks had an internal champion in Howard a day the next week, and then 70 drinks Behar, then a top Starbucks executive. a day in the third week after introduction. Behar presented this strategic initiaTThey had never seen such growth numtive to the Starbucks executive commitbbers. These results persuaded the executee. The committee voted down thee ti tive team to give reluctant approval to idea in a 7:1 vote. Starbucks CEO How-in introduce the drink in all Starbucks stores. ard Schultz commented, “We do coffee;; You’ve probably guessed by now that we don’t do iced drinks.” we we’re talking about Starbucks Frappuccino. he Diana, however, was undeterred. She Frap Frappuccino is now a multibillion-dollar busiexperimented until she created the ness ffor Starbucks. At one point, this iced drink M. Unal Ozmen/Shutterstock iced drink, and then she began to ofbrought in more than 20 percent of Starbucks’s total fer it in her store. When Behar visited Diana’s store, he revenues, which were over $26 billion in 2019.54 was shocked to see this new drink on the menu—all serendipity Any random events, pleasant surprises, and accidental happenstances that can have a profound impact on a firm’s strategic initiatives. rot6128x_ch02_032-071.indd 54 executive championed her initiative and helped persuade other top executives. Internal champions, therefore, are often needed for autonomous actions to be successful. Although emergent strategies can arise in the most unusual circumstances, it is important to emphasize the role that top management teams play in this type of strategy process. In the strategy-as-planned-emergence approach, executives need to decide which of the bottom-up initiatives to pursue and which to shut down. This critical decision is made on the basis of whether the strategic initiative fits with the company’s vision and mission, and whether it provides an opportunity worth exploiting. Executives, therefore, continue to play a critical role in the potential success or failure of emergent strategies because they determine how limited resources are allocated. After initial resistance, as detailed in Strategy Highlight 2.2, the Starbucks executive team around CEO Howard Schultz fully supported the Frappuccino strategic initiative, providing the resources and personnel to help it succeed. SERENDIPITY. Serendipity describes random events, pleasant surprises, and accidental happenstances that can have a profound impact on a firm’s strategic initiatives. There are dozens of examples where serendipity had a crucial influence on the course of business and entire industries. The discovery of 3M’s Post-it Notes or Pfizer’s Viagra, first 01/11/19 1:55 PM CHAPTER 2 Strategic Leadership: Managing the Strategy Process 55 intended as a drug to treat hypertension, are well known. Less well known is the discovery of potato chips.55 The story goes that in the summer of 1853, George Crum was working as a cook at the Moon Lake Lodge resort in Saratoga Springs, New York. A grumpy patron ordered Moon resort’s signature fried potatoes. These potatoes were served in thick slices and eaten with a fork as was in the French tradition. When the patron received the fries, he immediately returned them to the kitchen, asking for them to be cut thinner. Crum prepared a second plate in order to please the patron, but this attempt was returned as well. The third plate was prepared by an annoyed Crum who, trying to mock the patron, sliced the potatoes sidewise as thin as he could and fried them. Instead of being offended, the patron was ecstatic with the new fries and suddenly other patrons wanted to try them as well. Crum later opened his own restaurant and offered the famous “Saratoga Chips,” which he set up in a box and some customers simply took home as a snack to be eaten later. Today, PepsiCo’s line of Frito-Lay’s chips are a multibillion-dollar business. How do strategic leaders create a work environment in which autonomous actions and serendipity can flourish? One approach is to provide time and resources for employees to pursue other interests. Google, the online search and advertising subsidiary of Alphabet, for example, organizes the work of its engineers according to a 70-20-10 rule. The majority of the engineers’ work time (70 percent) is focused on its main business (search and ads).56 Google also allows its engineers to spend one day a week (20 percent) on ideas of their own choosing, and the remainder (10 percent) on total wild cards such as Project Loon, which places high-altitude balloons into the stratosphere to create a high-speed wireless network with global coverage. Google reports that half of its new products and services came from the 20 percent rule, including Gmail, Google Maps, Google News, and Orkut.57 With the restructuring of Google into a corporation with multiple strategic business units, engineers spending their 10 percent time on total wild cards do so within Google X, its research and development unit.58 RESOURCE-ALLOCATION PROCESS. A firm’s resource-allocation process (RAP) determines the way it allocates its resources and can be critical in shaping its realized strategy.59 Emergent strategies can result from a firm’s resource-allocation process (RAP).60 Intel Corp. illustrates this concept.61 Intel was created to produce DRAM (dynamic randomaccess memory) chips. From the start, producing these chips was the firm’s top-down strategic plan, and initially it worked well. In the 1980s, Japanese competitors brought better-quality chips to the market at lower cost, threatening Intel’s position and obsoleting its top-down strategic plan. However, Intel was able to pursue a strategic transformation because of the way it set up its resource-allocation process. In a sense, Intel was using functional-level managers to drive business and corporate strategy in a bottom-up fashion. In particular, during this time Intel had only a few fabrication plants (called “fabs”) to produce silicon-based products. It would have taken several years and billions of dollars to build additional capacity by bringing new fabs online. With constrained capacity, Intel had implemented the production-decision rule to maximize margin-per-wafer-start. Each time functional managers initiated a new production run, they were to consider the profit margins for DRAM chips and for microprocessors, the “brains” of personal computers. The operations managers then could produce whichever product delivered the higher margin. By following this simple rule, front-line managers shifted Intel’s production capacity away from the lower-margin DRAM business to the higher-margin microprocessors business. The firm’s focus on microprocessors emerged from the bottom up, based on resource allocation. Indeed, by the time top management finally approved the de facto strategic switch, the company’s market share in DRAM had dwindled to less than 3 percent.62 rot6128x_ch02_032-071.indd 55 resource-allocation process (RAP) The way a firm allocates its resources based on predetermined policies, which can be critical in shaping its realized strategy. 01/11/19 1:55 PM 56 CHAPTER 2 Strategic Leadership: Managing the Strategy Process planned emergence Strategy process in which organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management. EXHIBIT 2.8 Strategy Process Taken together, a firm’s realized strategy is frequently a combination of top-down strategic intent and bottom-up emergent strategies, as Exhibit 2.7 shows. This type of strategy process is called planned emergence. In that process, organizational structure and systems allow bottom-up strategic initiatives to emerge and be evaluated and coordinated by top management.63 These bottom-up strategic initiatives can be the result of autonomous actions, serendipity, or the resource allocation process. Exhibit 2.8 compares and contrasts the three different approaches to the strategic management process: top-down strategic planning, scenario planning, and strategy as planned emergence. Comparing and Contrasting Top-Down Strategic Planning, Scenario Planning, and Strategy as Planned Emergence Description Pros Top-Down Strategic Planning A rational strategy process through which top management attempts to program future success; typically concentrates strategic intelligence and decision-making responsibilities in the office of the CEO. Ψ Cb_fXRScNQ[SNbcdbNdSVi`b_QScc Ψ 8NXb[ibXVXRN^RX^WXPXdc Ψ ;XVW[ibSVe[NdSRN^R and lines of communication. flexibility. stable industries such as utilities, e.g., Ψ 3TT_bRcQ__bRX^NdX_^N^RQ_^db_[ Ψ G_`ΝR_g^͹_^SΝgNi Georgia Power in of various business activities. communication limits Southeast United Ψ ESNRX[iNQQS`dSRN^Re^RSbcd__R feedback. States or Framatome, as process is well established Ψ 3cce]ScdWNddWS state-owned nuclear and widely used. future can usually be operator in France. predicted based on Ψ J_bZcbS[NdXfS[igS[[X^cdNP[S Ψ 9_fSb^]S^d past data. environments. Ψ FS`NbNdScS[S]S^dc_T Ψ @X[XdNbi AFI framework so that top management (analysis & formulation) are removed from line employees (implementation). Scenario Planning Strategy-planning activity in which top management envisions different what-if scenarios to anticipate plausible futures in order to plan optimal strategic responses. Ψ Cb_fXRScNQ[SNbcdbNdSVi`b_QScc Ψ G_`ΝR_g^͹_^SΝgNi and lines of communication. communication limits feedback. Ψ 3TT_bRcQ__bRX^NdX_^N^RQ_^db_[ rot6128x_ch02_032-071.indd 56 Cons Where Best Used Ψ 8NXb[icdNP[S industries, often characterized by some degree of of various business activities. Ψ FS`NbNdScS[S]S^dc_T regulation such as AFI framework so that Ψ ESNRX[iNQQS`dSRN^Re^RSbcd__R airlines, logistics, or top management as process is well established medical devices, e.g., (analysis & formulation) and widely used. American Airlines, are removed from line 6S[dN3Xb?X^Sc͹N^R Ψ Cb_fXRScc_]ScdbNdSVXQ employees United Airlines; FedEx flexibility. (implementation). and UPS; Medtronic. Ψ 3cdWSTedebSXc unknown, responses to Ψ ?NbVSbTXb]cX^ industries with a all possible events small number of other cannot be planned. large competitors Ψ ?SNRSbcdS^Rd_Nf_XR (oligopoly). planning for pessimistic scenarios. 01/11/19 1:55 PM CHAPTER 2 Strategy Process Strategy as Planned Emergence Strategic Leadership: Managing the Strategy Process Description Pros Cons Where Best Used Blended strategy process in which organizational structure and systems allow both top-down vision and bottom-up strategic initiatives to emerge for evaluation and coordination by top management. Ψ 5_]PX^ScN[[S[S]S^dc_TdWS AFI framework in a holistic and flexible fashion. Ψ H^Q[SNbcdbNdSVi process and lines of communication can lead to employee confusion and lack of focus. Ψ ASgfS^debScN^R smaller firms. Ψ @N^iXRSNcdWNd bubble up from the bottom may not be worth pursuing. Ψ
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OUTLINE
Topic: Chapter Response
Thesis Statement: this paper responds to a chapter on strategic management.
1. Controversial Issues
2. Ways strategic leaders could address the concerns
3. Top down and bottom up emergent strategies
4. References


Running head: CHAPTER RESPONSE

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Chapter Response
Name
Institution

CHAPTER RESPONSE

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Chapter Response

According to the chapter, BP Plc. experienced a controversial issue involving a huge oil
spill following an eruption on its Deep-water Horizon oil excavation gear on the coast of
Louisiana in 2010. Essentially, this spill discharged an approximated 5 million drums of
unrefined emollient into the Mexican harbor, which led to the biggest ecological tragedy in the
history of America. Additionally, it also caused the death of 11 BP employees, while othe...


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