1. Some reading materials attached.

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Chapter 1

Strategic leadership “A leader is a dealer in hope.” – Napoleon Bonaparte1 

“Before you are a leader, success is all about growing yourself. When you become a leader, success is all about growing others.” – Jack Welch2

LEARNING OBJECTIVES This chapter introduces the topic of strategic leadership as a variable of organisational success or failure. We support the view of Phil Rosenzweig that leadership and culture “are perhaps better understood as attributions based on performance rather than causes of performance”3. This chapter covers the topic of ethics in strategic management and presents virtuous leadership as a practice to foster sound moral decision-making, and provide guidance for leadership modelling or setting positive examples. At the end of this chapter, you will be able to use the following perspectives and tools to develop your own strategic leadership capacity:

• Understand the dynamic context of business and the implications for leaders. • Describe different ways to lead in a VUCA world to build organisational agility. • Explain the rationale for the different strategic thinking departure points. • Describe what strategy is, what it is not and how it is changing. • Outline the role of strategic leadership in an organisation. • Explain the concept of strategic architecture and how it fits with strategy. • Value and apply business ethics and virtuous leadership as part of strategic leadership.

INTRODUCTION This chapter is about strategic leadership, ethical aspects related to strategy and virtuous leadership as a sound example of virtue- and values-based leadership practice. In this chapter we show how strategic leadership gives life, meaning and focus to the strategic management processes.

Strategic leadership is an organisational capacity that should be spread wide and deep in organisations, as it can never only be the exclusive task of a few executives at the “top” of the organisation. In this chapter, we therefore highlight the need for distributed values-based leadership capacity as a crucial part of managing in the twenty- first century.

Figure 1.1 positions strategic leadership thinking and practices, business ethics through virtuous leadership (chapter 1) and entrepreneurial thinking and practices (chapter 9) as the foundation for launching strategic management processes such as: external and internal analysis and synthesis4, strategy formulation (chapter 2–3), exploring multiple futures (chapter 4), strategy execution (chapter 5) and strategy renewal and innovation (chapter 6–8). In this it is acknowledged that strategic management processes can only become an organisational

C o p y r i g h t 2 0 1 6 . K R P u b l i s h i n g .

A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .

EBSCO Publishing : eBook Collection (EBSCOhost) - printed on 6/26/2020 8:40 PM via COLORADO STATE UNIVERSITY - GLOBAL CAMPUS AN: 1427028 ; Ungerer, Marius, Ungerer, Gerard, Herholdt, Johan.; Navigating Strategic Possibilities : Strategy Formulation and Execution Practices to Flourish Account: ns125356.main.ehost

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Navigating strategic possibilities

reality through the involvement of many organisational actors and collaborators who all contribute their strategic leadership thinking and capabilities to explore and act on possibilities.

Remember the words of Rumelt:5 “strategy cannot be a useful concept if it is a synonym for success. Nor can it be a useful tool if it is confused with ambition, determination, inspirational leadership, and innovation”.

Strategic success is not based on a single cause, but is the result of various variables interacting in a virtuous way. Two strategic variables that contribute hugely to strategic success are (1) the ability of leaders to choose the winners from amongst the many available strategic options and (2) the ability to consistently execute these strategic choices in an excellent way.6 Jim Collins7 once said that: “Greatness is not a matter of circumstances. Greatness, it turns out, is largely a matter of conscious choice.”

Chapter 2 • Generic strategic options and choices

 organisational identity  generic strategies  grand strategies

Chapter 3 • Business model

 value creation  efficiency  engines of growth

• Normative assessment of competitive strategies

Strategic leadership

Chapter 1 • Strategic leadership thinking and practices • Business ethics through virtuous leadership practices Chapter 9 • Entrepreneurial thinking and practices

External and internal contexts* • Analysis and synthesis

� global macro context � competitive context � customer context � internal organisational context

Strategy formulation

Chapter 2 • Generic strategic options and choices

� organisational identity � generic strategies � grand strategies

Chapter 3 • Business model

� value creation � efficiency � engines of growth

• Normative assessment of competitive strategies

Chapter 4: Multiple futures

• Scenario planning and foresight development

Chapter 5: Strategy execution

• Change enablement • Strategic gap closing • Making strategy a reality for all

� strategy translation � strategy mobilisation � strategic performance monitoring

*Covered in the book Crystallising the Strategic Business Landscape by

Ungerer, Ungerer and Herholdt, 2016

Strategy renewal and innovation

Chapter 6 • Strategy innovation tools

� exponential organisations

� blue ocean strategy � sources of e-value

• Break-through stall-points and decline

• Portfolio of experiments and prototypes

Chapter 7 • Inorganic growth

(alliances and M&As)

Chapter 8 • Management innovation

Figure 1.1: The strategic architecture landscape

In the next part of this chapter we discuss the context strategic leaders operate in today as well as the concepts “strategic thinking”, “strategy-making”, “strategic leadership” and “strategic architecture”. This is followed by a perspective on ethics in strategic management and virtuous leadership practices.

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Chapter 1: Strategic leadership

THE CONTEXT The world we live in today is characterised by experts as a so-called VUCA environment, which represents features of Volatility, Uncertainty, Complexity and Ambiguity.8 The last decade was even labelled by Time magazine as “the decade from hell”9.

Volatility is the nonpredictability of changes and the speed, magnitude and nature of these changes. Uncertainty is associated with our difficulty in making future-orientated forecasts and decisions, especially if they are based on what we know about past issues and events. This impedes our capacity to predict and prepare for the future. Complexity relates to the fact that most problems have multiple causes and mitigating factors that are difficult to understand. This adds to the strain of decision-making. Ambiguity represents the lack of clarity and the difficulty of ascertaining the causes of patterns and events and identifying the “who, what, where, how and why” associated with what is happening around us. This relative chaotic, turbulent, disruptive and fast-changing environment has become a permanent condition and reality, as well as the “new normal”, for organisations at the beginning of the twenty-first century.10 The VUCA world realities are not only influencing how we do business in future; they also impact on how we lead in an ever-changing, dynamic context.

Experts11 indicate that the above context requires a skill-set from leaders that reflects aspects such as personal agility, complex and adaptive thinking abilities and innovative and critical thinking skills. In a VUCA world “leaders must make continuous shifts in people, process, technology, and structure. This requires flexibility and quickness in decision-making”.12 The focus is on creating adaptive institutions that can learn and change fast in an economical way continuously.13 Examples of firms with this adaptive ability are Apple, Google, 3M, Unilever, Amazon and Naspers. The departure point is:

“you can say, “It’s a very tough world”, or you can say, “It’s a world that’s changing fast” … Two and-a-half billion more people will be added to the planet between now and 2050, of which 2 billion will be added in developing countries. The digital revolution, the shift in consumer spending, all this suggests that companies have to reinvent the way they do business.”14

Other skills that assist leaders to thrive in a VUCA world are self-awareness about how to leverage personal strengths and compensate consciously for weaknesses through partnering with others; an openness to engage with change to understand more and develop clarity about opportunities and threats; the development of knowledge and an understanding of their organisation beyond their own functional or business line domains; the ability to work collaboratively on challenges; and an ability to learn fast in a constantly changing environment.15 The capacity to enable the development of “just-in-time” solutions as a flexible response to changes is part of the future requirements for leaders.16 Risk scanning by all functions and levels to deliberately widen and deepen this activity is part of risk management and creates a greater anticipation of potential disruptive changes.17 The more risk-scanning processes and interactions are diverse and devolved, the higher the possibility that they will generate useable knowledge and understanding to inform strategising activities. Later in this chapter we also explore leadership styles and approaches such as values-based leadership, authentic leadership and responsible leadership that resonate with a VUCA context (see Virtuous leadership).

It also needs to be highlighted that business is not the victim of VUCA, but in many instances the source of and major contributor to it.18 Globalised businesses mitigate volatility risks and uncertainty in trading environments

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Navigating strategic possibilities

through externalising risks and costs to society in the form of structural unemployment, variable tax discounts and, in extreme emergencies, by bail-out arrangements funded from public taxes. Impact International states that major future threats19 evolve around the following events: more banking failures; currency volatilities; hostile new economic blocks advancing their self-interest; oil price volatility; sudden collapse of demand; loss of services, species depletion and biodiversity loss; skill shortages; and competition from fast-growing manufacturing nations, including African countries. In a sense we can anticipate many probable scenarios, but the uncertainty about timing and scale remains.

Organisational resilience is a required capability that assists companies to deal with the challenges associated with a VUCA world. The features of a resilient enterprise20 include efficiency in resource and energy utilisation; active strategies to prevent resource depletion and price volatility; a diversified business portfolio across markets; positive cash-flows; and a reputable brand. A resilient business invests in the prevention of environmental damage and pollution. It also invests in rigorous employment, strategy and decision-making practices and contributes positively to the society it operates in. Two features associated with leaders in agile organisations include the ability to anticipate and recognise challenges and to initiate and respond to the change required to ensure a sustained high organisational performance.21 The main routines and practices associated with organisational agility are summarised in Table 1.1 to integrate our understanding of how to prepare organisations be more prepared for a VUCA world.

Table 1.1: The routines of agility22

Strategising Dynamically

Sense of shared purpose The purpose or mission (outcomes other than profit or growth) and the business model (how we make money) are widely shared. Values embedded in these statements drive behaviour on a daily basis.

Change-friendly identity There is a clear sense of “who we are” and “what inspires us”. This long-term strategy explains success and encourages the organisation to change.

Robust strategic intent The current business strategy is relevant in today’s market. It clearly distinguishes the firm from other companies, but is flexible enough to change at short notice.

Perceiving Environmental Change

Sensing The organisation explores the future deeply, and many people within the organisation maintain continuous contact with parts of the business environment.

Communicating Information from the environment gets to decision-makers rapidly, in an unfiltered way. Information flows easily, in both directions, between the bottom and top of the organisation.

Interpreting Information is evaluated on the basis of the company’s existing identity, intent, business model and risk tolerance.

Testing Responses

Slack in resources Capable resources (people, money, time, tools) are available and can be readily deployed to experiment with new ideas.

Risk management Experiments are bounded by agreed-upon criteria for judging success and failure; the possibility of failure is accepted as a vehicle for learning.

Learning Experience with running experiments is captured and applied with each new round, so that the company’s capabilities are continuously improved.

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Chapter 1: Strategic leadership

Implementing Change

Management and organisational autonomy

Executives delegate sufficient authority to line and business managers so that the company can execute changes with success; there is no second-guessing from headquarters, only alignment with basic strategic objectives.

Embedded change capability

The pragmatic ability to change collective habits, practices, and perspectives is embedded in line operations, not isolated in staff groups.

Performance management

Clear, unambiguous, accepted performance measures and targets are based on business model drivers with rewards that matter.

It is clear from the contextual patterns described above that we cannot continue to think about reducing uncertainty only by sound traditional decision-making and planning practices. We need to actively engage with uncertainties by using leadership agility and critical and complex thinking skills.

Practical guideline

Impact International23 suggests the following general leadership practices to navigate successfully in a VUCA world:

• Always retain a clear vision against which judgements can be made, with agility to flex and respond appropriately to rapidly unfolding situations.

• Provide clear direction and consistent messaging against a backdrop of continually shifting priorities, supported with the use of new virtual modes of communication where necessary.

• Anticipate risks but don’t invest too much time in long-term strategic plans. Don’t automatically rely on past solutions and instead place increased value on new, temporary solutions, in response to such an unpredictable climate.

• Think big picture. Make decisions based as much on intuition as analysis. • Capitalise on complexity. If your talent management strategy is working, then you should be confident that you

have the right people in the right place. This will enable you to rapidly break down any challenge into bite-sized pieces and trust in the specialist expertise and judgement of those around you.

• Be curious. Uncertain times bring opportunities for bold moves. Seize the chance to innovate. • Encourage networks rather than hierarchies – as we reach new levels of interconnection and interdependency

collaboration yields more than competition. • Leverage diversity – as our networks of stakeholders increase in complexity and size, be sure to draw on the

multiple points of view and experience they offer. Doing so will help you expect the unexpected. • Never lose focus on employee engagement. Provide strategic direction, whilst allowing people the freedom they

need to innovate new processes, products and services. • Get used to being uncomfortable. Resist the temptation to cling on to outdated, inadequate processes and

behaviours. Take leaps of faith and enjoy the adventure.

Leaders should use their convening power to stimulate fresh thinking. Leaders from everywhere in the organisation should host a variety of strategic conversations to foster inclusion, multi-perspectives and innovation.

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 Questions to reflect on: How many of the above leadership practices and thinking are part of your way of leading your team, unit or organisation? What can you do to create a context conducive to just-in-time solutions based on new emerging market and industry opportunities and threats?

#

&

Application tool

Think about your own career and skill-sets to function optimally in a VUCA context. Answer the following questions to create evidence of your skills and abilities to lead positively in a VUCA world:24

• Give an example of when you performed well in a work environment that featured rapid change and/or ambiguity. Did you enjoy this environment? What did you learn?

• Give an example of where your ability to be decisive was put to the test when you had to convey a sense of urgency in decision-making. What was the situation, what factors did you consider when making the decision, and what was the outcome?

• How do you determine when you need to gather more information before making a decision versus making a decision based on the information you have at hand? Give recent examples of when you made a quick decision based on the information you had immediately available and a situation where you opted to collect more information before making a decision. Which decision-making style was more comfortable for you and why?

• Give an example of when you modified your personal style to achieve an important work objective. What was the situation, how did you change your approach, and what was the outcome?

To conclude this contextual overview we look at the British multi-national mining company Vedanta to illustrate that we still have a long way to go in order to make business a mutually beneficial and true partner of societies and Mother Earth.

Case study of Vedanta

The 2010 annual report of the British Mining MNC Vedanta states:25

Introduction: Vedanta Resources plc is a London-listed FTSE 100 diversified metals and mining major. The Group produces aluminium, copper, zinc, lead, iron ore and commercial energy.

Our vision: To be a world-class, diversified resources company providing superior returns to our shareholders with high-quality assets, low-cost operations, and sustainable development.

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Chapter 1: Strategic leadership

Our values:

Entrepreneurship: We foster an entrepreneurial spirit throughout our businesses and value the ability to foresee business opportunities early in the cycle and act on them swiftly. Whether it be developing organic growth projects, making strategic acquisitions or creating entrepreneurs from within, we ensure an entrepreneurial spirit at the heart of our workplace.

Growth: We continue to deliver growth and generate significant value for our shareholders. Moreover, our organic growth pipeline is strong as we seek to continue to deliver significant growth for shareholders in the future. We have pursued growth across all our businesses and into new areas, always on the basis that value must be delivered.

Excellence: Achieving excellence in all that we do is our way of life. We strive to consistently deliver projects ahead of time at industry-leading costs of construction and within budget. We are constantly focused on achieving a top decile cost of production in each of our businesses. To achieve this, we follow a culture of best practice benchmarking.

Trust: The trust that our stakeholders place in us is key to our success. We recognise that we must responsibly deliver on the promises we make to earn that trust. We constantly strive to meet stakeholder expectations of us and deliver ahead of expectations.

Sustainability: We practise sustainability within the framework of well-defined governance structures and policies and with the demonstrated commitment of our management and employees. We aim not only to minimise damage to the environment from our projects but to make a net positive impact on the environment wherever we work.

Vedanta at a Glance:26 With an empowered talent pool of 30,000 employees globally, Vedanta places strong emphasis on partnering with all its stakeholders based on the core values of entrepreneurship, excellence, trust, sustainability and growth.”

In 2014 the Guardian reported the following:

India’s rejection of Vedanta’s bauxite mine is a victory for tribal rights:27 Landmark decision backing India’s 8,000-strong Dongria Kondh tribe could set a precedent for tribal people across the country.

India’s decision to reject a London mine’s request to mine bauxite on tribal land marks a major victory for human rights in the country. For too long, tribal communities have been pushed off their land in the name of development and industrialisation, their attempts to defend their lands brushed aside or brutally suppressed. The Dongria Kondh’s determination to protect the Niyamgiri hills from the mining heavyweight Vedanta Resources has paid off, despite the state government’s complicity in the $2bn project.

Like many tribal communities worldwide, the Dongria have a strong connection to their land. They have expert knowledge of local forests, plants and wildlife – families grow more than 100 crops and gather food from the forests including mangoes, mushrooms and honey. The 8,000-strong community has been campaigning against the mining project for almost a decade amid alleged intimidation by paramilitary police and local goons. Many locals and organisations, including activists and international groups

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including Survival and Amnesty International, have worked hard to amplify the Dongria’s voices. They understood this was a David and Goliath-style battle of India’s tribal people fighting to protect their ways of life, and the integrity of their forests, from the wanton industrialisation that would destroy them.

The pressure on Vedanta was increased by Survival’s complaint to the UK government under the Organisation for Economic Co-operation and Development guidelines for multinational companies, which in turn helped persuade many important shareholders, including the Church of England, to disinvest on ethical grounds from a company that had become notorious for the Niyamgiri project.

In 2010 the Indian government blocked Vedanta’s bid to build the mine. And, finally, last April, India’s Supreme Court ordered that affected communities must be consulted about the project before it could go ahead. In what was described as the country’s first environmental referendum, the Dongria unanimously rejected Vedanta’s proposal during 12 village consultations in August.

The central government and the Supreme Court bucked the trend of siding with industry, and defended the Dongria’s right to their lands, their livelihoods and to determine their own future. And the environment ministry’s decision to block Vedanta should serve as a warning to any company intent on extracting resources from tribal land without members’ informed consent. Vedanta has learned this the hard way. It opened a refinery to turn Niyamgiri’s bauxite into aluminium before receiving approval for the mine, and has lost millions of pounds as a result.

Some commentators are angry that such a small tribe has been able to derail a major industrial project. But the benefits of the scheme would have lined the pockets of very few, while the devastation of the Dongria and their homeland would have been irreversible. The landmark decision also flies in the face of those who believe that so-called backward or primitive tribes should be “developed” and join the mainstream. Vedanta tried repeatedly to insist that the mine would help bring “development” to the Dongria, but seemed to overlook the fact that the construction of an open-pit mine would devastate their mountain, therefore achieving little in the form of development for the tribe. The initiatives that would accompany the projects were all oriented towards permanently altering the Dongria’s way of life and independence.

As the Dongria leader, Lodu Sikaka, put it: “We’ll lose our self-esteem if they take away our hills and forests. Other Adivasis [India’s tribal peoples] who have lost their homes are dying of desperation; they are being destroyed. Earlier they used to till their land but now they are only drinking without working. They have become kind of beggars.”

The Dongria case was about much more than the community and their homeland. India has been studying the events closely as a litmus test for its democracy. It raises the following questions: when citizens reject such projects strongly, peacefully and tirelessly, should the state be allowed to bulldoze ahead with its agenda? Should the rights of the people trump the interests of industry or vice versa?

The ministry’s decision to ensure that some places can – and must – be off limits to mining restores hope that India will not abandon human rights in the pursuit of foreign investment – the rights of its people will – at least sometimes – be upheld.

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 Questions to reflect on: What can we learn from this case study about the role of business in society? If you were the strategy advisor for Vedanta, what would your advice to them be?

STRATEGIC THINKING DEPARTURE POINTS Why is it that seemingly reasonable and intelligent people continue to operate in nonvirtuous ways? One of the contributing factors is the way people think and talk about the nature of individuals and organisations. “The way people talk about the world has everything to do with the way the world is ultimately understood and acted in”.28 If we continue to think about business as a cut-throat zero-sum game where dog-eat-dog is the norm, then we will have a world where people act and do in this way. However, if business were created and managed on the basis of individual trust and respect as well as collective gain based on a process led by virtuous people, a different way of doing business would emerge.29 When we can create a more positive picture of human beings and organisation, we increase the chances of making the world a better place to live in and organisations better places to work for.30 31 The core departure point is that all human beings, which includes business and organisation leaders, inherently have the capacity and potential to do both good and evil. If however we continue to present organisations as characterised only by cut-throat competition, greed and selfishness, we end up feeding a corruptible monster. On the other hand, if we focus on the bright side of organisations, we “aim to increase the possibilities that organisational virtuousness will be self-fulfilling”.32 In this paradigm both business and their leaders serve as a force for good.

The way we think affects the opportunities and possibilities we can see, or not. In part, we are the result of our own thinking capacity and stance. The question we all need to think about regularly is: Do we think and reflect about how and what we think? Are we thinking good, positive things or are we overwhelmed by the continuous flow of negative data supplied by the mass media? Are we critical about what is presented as “the truth”?

In this section we will explore five interrelated thinking stances that enable strategic leaders to gift themselves with a winning starting point. They are ‘Possibility thinking’, ‘Collaborative thinking’, ‘Abundance thinking’, ‘New Economy Values thinking’ and ‘Paradox thinking’.

Possibility thinking

“We can re-invent our work as a place of contribution rather than an arena for my success … a contribution produces a shift away from self-concern and engages us in a relationship

with others that is an arena for making a difference” – Roz and Ben Zander33

Leaders of winning teams and enterprises think positively and focus on possibilities. You cannot do strategy work that focuses on changing, improving and transforming an organisation when your mind-set and attitude are negative. A hallmark of excellent leaders with a positive and empowering influence on stakeholders is that they think good things for themselves and for others. Adrian Gore, CEO of the Discovery Group, indicated at a Discovery Invest Leadership Summit that he believes that positivity and optimism are the fuel and fundamental attributes of leadership.34 Strategy allows an organisation to be purposefully opportunistic.35

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Ben and Rosamund Zander36 introduced the concept of upward and downward spiral thinking. Downward spiral talk represents a way of speaking that excludes possibilities and tells us compellingly how things are going from bad to worse. We all know this type of talk and it is sometimes prevalent around smoking rooms, dinner tables, braaivleis fires, and even boardrooms. Downward spiral talk is wholly reactive to circumstance, has a victim mind- set and focuses on the abstraction of scarcity, where the limits to what is possible are emphasised. The end result of downward spiral thinking is a place of no hope, negativity and depression. It is also a place where the obstacles and problems are emphasised with a general attitude that “we” are right and “they” are wrong; or “we” cannot do anything about the current situation which “they” must fix. This is clearly not a route for strategic leaders with the intention of making a positive difference.

Finding the courage, authenticity and moral will to speak about possibilities creates an upward spiral conversation. Zander advises us that upward spiral conversations do not ignore the way things are, but thinking about possibilities empowers us to accept current challenges without being held hostage by circumstances or feeling helpless to change current realities. This is about seeing the glass as “half-full” and not “half-empty”. The focus is on what we have now, whatever it may be and however little it is, that we can use to take a positive step towards developing solutions by thinking about possibilities, moving away from the bondage of problems that keep us from taking personal action. This is not about a simplistic kind of optimism, but a realistic stance on attending to real things that make up the substance in the glass. Openly attending to and appreciating what we have and acknowledging it as a gift takes us into the realm of possibility. “The capacity to be present to everything that is happening, without resistance, creates possibility”.37

Upward- or downward-spiralling conversations have the same dynamics. Whenever there is a clear winner or loser you are in a downward spiral. Upward-spiralling conversations seek win-win solutions and are based on partnerships, mutual respect and a shared future dream, vision or intent to improve a current situation or condition.

An Afro-optimistic view of the African continent, her people and potential is part of possibility thinking. Seeing the opportunities associated with a developing continent and capitalising on them is part of a winning mind-set. The choice is clear – we can make the most of what we have or we can wait for perfect conditions that may never happen. Strategic leaders seek and seize opportunities as they emerge. Leaders with impact constantly seek ways to enlarge their personal influence domain by thinking about themselves not as victims, but victors, who are agents for change, not targets for change.

Support for this “positive possibility” thinking stance comes from Daniel Kahneman, the 2002 Nobel Prize winner in economic sciences, who indicates that optimists are more psychologically resilient, have stronger immune systems, and live longer on average than more pessimistic opposites. Optimism protects us from “loss aversion”, our tendency to fear losses more than we value gains.38 Research confirms that individuals with an optimistic and hopeful future orientation are better performers, have more perseverance and display better moods at work.39 Kim Cameron40 indicates that strategies that capitalise on the positive aspects of a situation or issue tend to produce life-giving, flourishing outcomes in individuals and organisations.

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Chapter 1: Strategic leadership

 Questions to reflect on: • Do you actively think about the way you think? Is it mostly upward- or downward-spiral thinking? • Do you think of yourself as a victim or victor? What are the implications? • What should you do more of to be experienced by others as a “possibility” thinker?

Collaborative thinking

A collaborative mind-set is another helpful thinking stance for leaders who want to work in an inclusive way to achieve results. It needs to be stressed that collaboration is not a sign of weakness nor is it a form of incompetence.

Collaboration is a powerful choice, based on the following reality check on ourselves and others: Do we all accept that none of us have THE ANSWER? Only if we do accept that we actually do not know it all – which is always the case in high human interaction-dependent situations – then we open ourselves up to the views of others. As leaders we burden ourselves with the unnecessary load of trying to be superhuman by pretending we know everything. This is a false and inauthentic starting point.

A characteristic of the work of leaders is that it always happens in the presence of other people – leadership by its nature is a team activity. We are human and no leader is perfect nor does he or she possess everything required for success. All leaders have holes, but they can become whole through their team members by capitalising on team members’ strengths to augment the leader’s strengths. Collaborating on skills, competences, talents and passions creates extraordinary results. The same principle is applicable to business – focus on the areas that make your business unique and find partners for the rest.

Individual collaboration manifests in different ways and is a choice between different thinking stances, as can be seen in Table 1.2.

Table 1.2: Collaborative thinking stances

Thinking stances Self-centred: ME thinking Collaboration: WE thinking Dependency: I thinking

Self-concept Expert Collaborator Pair of hands

Impact effect Aggressive: ME Assertive: Win-win Passive-Aggressive

Relationship orientation Parent Adult Child

Power/Love focus Power without love is reckless

Power and Love Love without power is sentimental

Attitude Blame 100% Accountability Complain

Role in society Ruler Citizen Subject

Hierarchy focus Boss Community/Team Employee

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One aspect that needs to be emphasised is the interplay between power and love as a combined intent in Table 1.2. This refers to uniting power as a drive towards self-realisation, with love as an intentional disposition to help other people to develop their full potential. This enables co-existence by acknowledging and respecting others.41 Power relations can be used in virtuous or corrupt ways, in the service of negative or positive goals, as inner and self- directed or in the service of others.42 The positive use of power makes it possible for things to happen that would otherwise not have been feasible, by introducing new aspects relevant for creation. Positive power use also involves more listening and less force.

A collaborative mind-set fosters teamwork, zero-plus win-win outcomes and diversity – based on an acceptance of others as responsible citizens and adults who take accountability for mutually beneficial outcomes. Collaboration also requires sharing power and unconditionally embracing others as equal team members.

Linux is an example of open-source software that is developed in a collaborative way. The principles43 that Linux follows to guide open-source development in an emergent way are: meritocratic division of labour to ensure ongoing development is done by the best willing and able human capital; conversational manners – largely virtual to create a flow and exchange of ideas; and agreed-upon standards and protocols relating to the development, testing and sequencing of product releases.

One way to increase collaboration in an organisation is group selection as a way for cooperation to take root. As tribes include members who are ready to serve one another and to sacrifice themselves for the common good, organisations can focus on selecting leaders with a preference and inclination for natural cooperation. This grows the collective and individual capacity in the organisation to perform selfless acts for the greater good. Another way to stimulate cooperation is direct reciprocity – “you scratch my back, I’ll scratch yours”. Simulations showed that over time direct reciprocity gives way to a more generous strategy in which players might still cooperate even if their rivals defect. This is the evolution of forgiveness where a direct reciprocity strategy allows players to overlook the occasional mistake. A variation is indirect reciprocity, where one individual decides to aid another based on the needy individual’s reputation. Those who have a reputation for assisting others who fall on hard times might even find themselves on the receiving end of goodwill from strangers when their own luck takes a turn for the worse. Thus, the co-operator in this situation thinks “I’ll scratch your back, and someone will scratch mine”.44

Collaborative thinking does not however mean a new utopia. Evolutionary simulations show that cooperation is intrinsically unstable and that periods of cooperative prosperity inevitably give way to defective doom. Yet the altruistic spirit always seems to rebuild itself when our moral compasses realign.45

To show how a collaborative mind-set influences the way we think about managing and leading organisations, the difference between a self-centric heroic leadership approach and a collaborative leadership approach is illustrated in Table 1.3.

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Table 1.3: Two ways to manage46

Heroic leader Collaborative leader

There is clear separation between those who manage and those who develop products and deliver services.

The role of leaders is to help other people to do the important work of developing products and delivering services.

The “higher up” a manager is, the more important they become. The CEO is at the “top”.

An organisation is an interacting network, not a vertical hierarchy. Effective leaders work throughout, they do not sit on top.

The strategy of an organisation comes down the hierarchy – clear, deliberate and bold. Strategy emanates from the chief who makes the dramatic moves. Everyone else “implements”.

Strategy emerges from the network of people interacting on challenges to initiate strategic initiatives.

To manage is to make decisions and to allocate resources from the top.

Managing is about bringing out the positive energy which resides naturally in people.

The leaders get the rewards for increasing performance. Rewards for making the organisation a better place go to all.

Leadership is bestowed on those who thrust their will upon others.

Leadership is a sacred trust earned through the respect of others.

 Questions to reflect on: • Have you made a conscious choice not to be a person who “knows it all”? • Do you work in ways that allow others to find their voice in your presence? Examples?

Abundance thinking

How often do we think that the future will be better than we can imagine? This is the hallmark of an abundance and positive deviance thinking mind-set that does not accept scarcity as the dominant departure point. Although the threat of scarcity still dominates our worldview, scarcity as a condition in our world is often contextual and relative.47

Abundance thinking accepts that innovation can turn scarcity into abundance. Humanity is entering a radical transformation period where technology can raise the standards of living for all on the planet. Technology is a powerful enabler of new innovations and creates unending possibilities. According to Diamandis and Kotler48 abundance is not, however, about providing everyone on this planet with a life of luxury: rather it is about providing all with a life of possibility. These authors identified four emerging forces – exponential technologies, the DIY innovator, the techno-philanthropist, and the rising billion – that are conspiring to solve our biggest problems. They argue that the future will be better than we think because of the following forces with abundance-raising potential:

• Technologies in computing, energy, medicine and many other areas are improving at an exponential rate and will soon enable breakthroughs that today seem impossible.

• These technologies have allowed independent DIY innovators to achieve startling advances in many areas of technology with little money or manpower. A do-it-yourself revolution is happening where DIY-ers can accomplish what was once the sole domain of large corporations and governments.

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• Technology has created a generation of “techno-philanthropists”, such as Bill Gates and Mark Zuckerberg, who are using their billions to try and solve the seemingly unsolvable problems of the world, especially of the developing world, such as hunger, disease and Internet ubiquity.

• The lives of the world’s poorest people are being improved substantially because of technology. Examples include the “rising billion”, who connect to the global economy through the Internet, microfinance and wireless communication technology.

Impactful strategic leaders accept that their job is not only to overcome major problems and challenges in the world, but also to enable the highest human potential – that is, to empower people to do innovative breakthrough work as a way of life and as a contribution to life. To live into this possibility, we need a positive deviance orientation that represents intentional behaviours and targets that depart significantly from the norms of a referent group in an honourable way.49 The continuum of positive deviance thinking to illustrate the stretch associated with abundance gaps is reflected in Table 1.4.

Table 1.4: A continuum illustrating positive deviance50

Negative Deviance Normal Positive Deviance

Individual:

• Physiological illness health vitality

• Psychological illness health flow

Organisational:

• Economics unprofitable profitable generous

• Effectiveness ineffective effective excellent

• Efficiency inefficient efficient extraordinary

• Quality error-prone reliable perfect

• Ethics unethical ethical benevolent

• Relationships harmful helpful honouring

• Adaptation Threat – rigidity coping flourishing

 Deficit gaps

 Abundance gaps

The positive deviance position is clearly a high aspirational target – way beyond “normal”. This is the terrain of the extraordinary, the zone of excellence based on honouring relationships and flourishing while adapting to changes. We need to remember that leadership is about learning how to shape the future and creating new realities.51 Embracing a positive deviance stance and abundance thinking is a key departure point for leaders who want to make a positive long-term impact with and through people they encounter.

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 Questions to reflect on: • Do you think scarcity or abundance? What can you do to have more abundance thinking and less scarcity

thinking? • How can positive deviance thinking help you to far exceed performance expectations every time?

New economy values thinking

A VUCA world not only represents the challenges of unexpected radical and discontinuous changes, but also requires us to rethink how we do and fulfil our leadership tasks. Drucker52 states:

“Every few hundred years in Western history there occurs a sharp transformation. Within a few short decades, society – its world view, its basic values, its social and political structures, its arts, its key institutions – rearranges itself. And the people born then cannot even imagine a world in which their grandparents lived and into which their own parents were born. We are currently living through such a transformation.”

One of the main shifts that affect the way we respond to external changes comes from the shift in values between the old and new economy. Christo Nel53 has developed a view of new economy leadership practices as a response to the old economy way of doing things. He states “every facet of leadership practices and organisational life is an extension of deeper underlying values”.54 The imperatives and drivers of this shift are reflected in Table 1.5.

Table 1.5: The imperatives of a values shift55

Old Economy thinking New Economy thinking

Capitalism didn’t win – Communism lost first Refining social democracy and capitalism

Market economics = Consumerism True markets = society & community

Purpose of business is profit (Milton Friedman, Reaganism, Thatcherism)

Business is an integral part of society and must be fit and friendly to human life

Aristocracy of power Diffusion of power and democratic values

Turf protection and control Webs of energy and leadership

Privilege and technocratic opaqueness of information Transparency and accessibility of information

Leadership as position & entitlement Servant leadership and stewardship

Self-serving individualism Sense of internal locus of control

Hero leader and hierarchic power Diffused leadership and unleashing energy

Mechanistic – whole is the sum of the parts Holographic – whole is in the part; part reflects the whole

Hamel56 supports the view of redefining and re-inventing capitalism when he says that in general there is a growing societal disgruntlement with large corporations’ interpretation of the implicit contract that governs their rights and obligations toward society. The current pattern of large benefits to a few executives is unsustainable in an era of stakeholder activism. The movement of business towards a more active positive partnering with societies is a

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growing trend. Research57 shows that CEOs across all sectors measure their business impact by more than just profit and want their organisations to be part of shaping a better society.

The twenty-first century is the age of knowledge workers. Drucker58 indicates that the most valuable asset of a twenty- first century institution, whether business or nonbusiness, will be its knowledge workers and their productivity. The challenge to use more than just muscle power, but also the intellect of people requires from us to re-think the assumptions we make about the abilities of people to contribute and the way we open up these spaces for them. We have to accept that all workers are knowledge workers and respect them for that.

Leading from a new economy values perspective represents a specific way of being a leader as well as doing things in a different way by serving the interest of others as a core starting point. Nel describes four waves of values that are present in varying degrees all of the time: 1st Wave – driven by coercion; 2nd Wave – driven by co-option; 3rd Wave – driven by collaboration; and 4th Wave – driven by co-creation. He acknowledges that there is no simplistic or absolute cut-off point between Old and New Economy values. “Instead it represents a spectrum of world views and values that includes everything from harsh autocracy and control to open system engagement and integration of interests”.59 Each of the waves of values form an intricate web of attitudes, relationships, beliefs and behaviours – see Table 1.6.

Table 1.6: The waves of values60

Leadership values Old Economy values New Economy values

Primary intent Coercion Co-option Collaboration Co-creation

Secondary effect and application

Violence and demand Money and control Knowledge and participation

Ecology, community and imagination

Overt or sublimated Ownership and patronage

Information and self-insight

Environment and “7th generation”

Leading servants Aristocracy Democracy Servant leadership

Relational impact Dependence Co-dependence Independence and interdependence

Integration

Power orientation Power over Power to Power through Power by, for, with

Energy manifestation Dictate Control Guide Unleash energy

Performance orientation

Demand Exploit/entitlement Productivity and quality Continuous improvement

Rewards orientation Privilege Patronage Performance-based Partnerships

It is clear from the above comparison on the uses of power that coercive power “should be the refuge of last resort for the diplomatically challenged …, not the hallmark of management’s right to manage”.61 In a new economy values perspective, power is not used in a self-centric way by leaders, but to empower others to do great things. The focus is on the responsibilities of leaders rather than their power. Paradoxically (see next section) the positive use of personal and positional power in an organisational context is all about giving it away and sharing it, not with egocentric motives, not claiming special privileges, but working with and through others to make things happen that would otherwise not be possible. Power is experienced through relationships and its virtue is visible in the way leaders choose to do what they do.

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Another reality is that the command-and-control approach to leadership is becoming less and less viable due to globalisation, new technologies and new ways of value creation and interaction with customers. The leader as a host and convenor of a series of conversations is using his or her collaboration and co-creation intent to move the strategic agenda of an organisation forward. Strategy emerges from a cross-organisational conversation and from leaders who take time to carefully explain the strategic agenda to stakeholders in an inclusive and participative way.

The above view of the shift in values aligns with Kanter’s values-based capitalism paradigm62 where the best companies fulfil three conditions:

• They obey the laws and regulations of the countries they operate in. • They are guided by an enlightened self-interest to do lots of good using their core competences to develop new

products and services. • They are guided by values that stimulate them to make a positive difference in a global and local context.

 Questions to reflect on: By leading with a new economy values perspective, leaders create the conditions for sustainable high individual and organisational performance. Our strategic choices start with a personal choice about the personal leadership values and intent we embrace. When we do this we accept that the question63 has changed from “Who am I as a future leader?” to “What type of future leader does the world need me to be?”

Also develop insights on:

• What are the implications of leading from a new economy values perspective? • What should I personally do to lead from a new economy values perspective?

Paradox thinking

Strategic leaders with high impact and influence embrace paradox thinking as a way of dealing with complexities in a context. Paradox thinking is the ability to hold two seemingly competing ideas or “truths” in the same time and space. In this way we break the pattern of choosing between two “right” options by thinking “and” rather than “or”. This is what Jim Collins64 calls the genius of the “and”. Examples of paradox thinking by leaders in high-performing organisations are reflected in Table 1.7.

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Table 1.7: Paradox thinking examples65

Disciplined thinking and doing and Creative thinking and doing

Empirical validation and Bold strategic moves

Prudent and frugal and Big Hairy Audacious Goals (BHAGs)

Ferociously ambitious and Not egocentric

Cannot predict the future and Prepared for what they cannot predict

Zoom out – big picture and Zoom in – detail

Stability and Change

Never count on luck and Get high return on luck when luck comes

Strategic leaders also need to manage the paradox of logical thinking based on analysis and intuitive thinking based on synthesis and holistic reasoning. The paradoxes to embrace are shown in Table 1.8.

Table 1.8: Strategic thinking paradoxes66

Dimensions Analytical reasoning perspective Holistic reasoning perspective

Emphasis on Logic over creativity Intuition over logic

Dominant cognitive style Analytical Holistic

Thinking follows Formal, fixed rules Informal, variable rules

Mode of thinking Structured Unstructured

Direction of thinking Vertical Lateral

System at work Conscious, reflective Unconscious, reflexive

Problem-solving seen as Analysing activities Sense-making activities

Assumptions about reality Objective, partially knowable Subjective, partially creatable

Thinking hindered by Incomplete information Adherence to current cognitive map

Strategising speed Slow Fast

Strategising based on Calculation Judgement

Metaphor Strategy as science Strategy as art

Paradox thinking empowers strategic leaders with the capacity to think innovatively and inclusively about challenges and dilemmas. By upholding two competing possibilities and not choosing between them, opportunities open and enlarge. This is challenging, but possible if we want to accept complexity as an ongoing reality.

Next we explore the content and processes associated with strategy-making.

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STRATEGY-MAKING A key question to address is: What is strategy and how is it created? Mintzberg67 reminds us of the complexities associated with strategy:

“Strategy is not just a notion of how to deal with an enemy or a set of competitors or a market, it draws us into some of the most fundamental issues about organisations as instruments for collective perception and action.”

There is general consensus that strategy is a multi-dimensional concept with the following key ingredients:68

“Strategy is concerned with both the organisation and the environment; The substance of strategy is complex; Strategy affects the overall welfare of the organisation; Strategy involves issues of both content and process; Strategies are not purely deliberate; Strategies exist on different levels; and Strategy involves various thought processes.”

Strategy is not an end-product in itself, but rather a construct with a clear future intent that is continuously moulded and shaped in a journey with many feedback mechanisms, e.g. customer take-up and feedback; practical application experiences; and insights of strategy collaborators.69 Strategy formulation and execution have no end-line, but have many humble beginnings and rebuilds scattered throughout, based on the inspiration, foresight and future aspirations of people relating in a particular context. This means that strategy is a pattern of behaviour in a stream of actions that have consequences for the survival of the organisation in its competitive environment and that emerge in the day-to-day activities of the organisation70.

Strategy has intangible features and is both a frame of mind (see Table 1.10 on strategic thinking departure points) to be developed and nurtured over time and a plan to be executed. From this perspective, strategy is much more than a document or an occasional event. It represents a way of thinking about the business, a way of looking at the world and interpreting insights and experiences to influence the view of why this organisation matters at all. Yes, there are formal strategy analysis, formulation and execution practices that make it an organisational capability, but the deeper ethos associated with strategy is a nonstop, continuous cycle. When strategy practices are mere “check- the-box” exercises to fulfil a corporate governance requirement (like King 3) and not embedded in brutally frank, transparent and courageous dialogues about the facts, they are a rain-dance into nowhere. Strategy is like an electric current – it keeps the business machine operating in a constant and fluid way. Although you cannot directly see either strategy or an electric current, you can identify its absence when the machine stops working and things start falling apart. Strategy has subtleties that are associated with the leadership and culture of an organisation. It takes time and focused effort to create a strategically focused organisation, but such an organisation can also be destroyed by leaders who do not respect the intangibles associated with strategy-making. “The process of strategy formation requires insight, creativity and synthesis, all the things that formalisation discourages”.71

Strategy is also more than just an aspiration or a future dream. Strategy is a system of value creation with mutually reinforcing parts.72 The idea is to create systemic growth engines (R-loops)i via an activity system(s) that fulfil the core strategic choices of an organisation. Porter states: “The essence of strategy therefore lies in the activities, choosing to perform activities differently or performing different activities than rivals”.73

i R-loops have been covered in Ungerer, M., Ungerer, G. & Herholdt, J. 2016. Crystallising the Strategic Business Landscape. Bryanston: KR Publishing. pp. 23–26.

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Organisational strategy is the collaborative and conscious behaviour people in organisations exhibit in an effort to ensure sustainable organisational survival. This view reflects strategy-making as a people-centric approach where organisational actors (leaders and followers) cooperate to execute strategic choices. The intended role of strategy in a firm is to create alignment on strategic efforts and focus in order to contribute to the longer-term sustainability of the organisation.

If we track organisational strategy over time, we can identify the main strategic choices that have been made to ensure a viable future. Viability is dependent on an organisation’s ability to compete and assert itself in a competitive business environment and to meet multiple stakeholder expectations. The reality is that the robustness of a strategy is continuously tested in the marketplace and that different stakeholders (customers, competitors, investors, regulators, employees etc.) all expect different results and benefits from the strategic outcomes of the organisation. The evaluation of the success of an organisation is always relative to the competition within an industry. The central goal of strategy in a free-market environment should be to achieve sustainable, superior long-term returns on investment74 and to create multiple shared values that meet the expectations of a variety of stakeholders.75 Value creation for stakeholders is the new norm. Making a difference that matters for stakeholders is the intent. Research indicates that firms that focus on creating multiple stakeholder value, the so-called consciousness capital players,76 deliver superior financial results while creating many other forms of wealth and wellbeing for all of their stakeholders, including society. How do they do it? It boils down to these factors:

“these companies generate very high levels of sales because they excel at creating value for customers; they willingly operate with lower gross margins than they are capable of, yet they achieve higher net margins than their traditional counterparts. Over time, conscious businesses develop sterling reputations and grow faster. They attract more loyal customers, committed team members, higher quality suppliers and generate greater community goodwill. All of this also helps these firms earn more and receive higher valuations relative to their earnings.”77

Drucker indicates that strategic choices should be made with a present future-time horizon mind-set. “Strategy deals with the futurity of present decisions”.78 Decisions only exist in the present and the strategic decision-maker should not focus on what the organisation should do in the future but rather on what the organisation has to do now to be ready for an uncertain future.

Differentiation is at the heart of the competitive strategy game79 and leaders who understand this feature create and grow businesses based on sound competitive advantages (see chapter 2 for more on core competitive choices). Porter says competitive strategy is about being different, deliberately choosing a different set of activities to deliver a unique mix of values.80 Differentiation through sound ecological and social practices embedded in the DNA of the organisation is an integral part of the strategy of the firm and the hallmark of future winners. Sustainability from a strategic perspective is more than just financial success over time, and includes ecological and social sustainability. The activities of business should create beneficial outcomes for the societies and ecologies it operates in as well as doing no harm to these bottom lines. Ray Anderson, ex-CEO of Interface, states that:

“The economy is the wholly owned subsidiary of nature, not the other way around and ... there is no more strategic issue for a company, or any organisation, than its ultimate purpose. For those who think business exists to make a profit, I suggest they think again. Business makes a profit to exist. Surely it must exist for some higher, nobler purpose than that.”81

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The sustainability of an organisation comes not only from a competitive advantage (which can over time be eroded by competitors), but also from the ongoing capability of an organisation to create and add value to stakeholders.

“Strategy is therefore the collective, emerging pattern – based on strategic choices – an organisation consciously exhibits and executes over time to ensure its sustainable endurance by differentiating itself in unique ways to create and add value for stakeholders. Strategy is about explaining how an organisation wants to move forward and how it wants to advance the interests of stakeholders.”

Strategy-making is an organic emergent learning process of people relating to a shared future in a specific context that they have the power to influence. The dynamic nature of strategy as both a plan and an emerging pattern is illustrated in Figure 1.2.

Strategy as a pattern (backward looking)

Realised strategy

Figure 1.2: Deliberate and emergent strategies82

“Achieving and maintaining strategic momentum is a challenge that confronts an organisation and its leader every day of their entwined existence. It’s a challenge that involves multiple choices over time – and, on occasion, one or two big choices”.83

A great strategy reflects the following elements:84

• The compelling reason for the existence of the organisation is clear and is reflected in an idea and identity. The question about the difference the organisation makes in the world and why that matters is answered.

• The core strategic choices of the organisation are well understood: to do what is required today to matter tomorrow.

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• The differentiating features of the strategy are well described and difficult to imitate. • A tailored and interwoven set of activities as part of an activity system(s) for value creation is clear. • Progress is monitored through meaningful metrics. • A passion and a deep concern for the strategy by stakeholders to make it a lived reality.

Rumelt states: “A good strategy does more than urge us forward toward a goal or vision. A good strategy honestly acknowledges the challenges being faced and provides an approach to overcoming them. And the greater the challenge, the more a good strategy focuses and coordinates efforts to achieve a powerful competitive punch or problem-solving effect”.85

The features associated with winning strategy players86 are:

• They focus relentlessly on creating and maintaining a competitive advantage for today and tomorrow. • They focus on employing an indirect tactic to outmanoeuvre and surprise competitors by applying resources

where rivals are least able to defend themselves. • They mobilise the will of their employees to win by employing action-orientated people who are impatient with

the status quo. • They stay on the edge of a caution zone and respect the game of business and the places you can play as stipu-

lated by society.

It is however important to note that the existence of a strategy does not guarantee business success. No guarantees exist and the only way to try and create a sustainable business is by doing the hard work required to forge good strategies and flawlessly executing them.87 This view is supported by Rosenzweig, who indicates that strategy always involves risk because we don’t know for sure how our strategic choices will turn out. Risks are related to uncertain customer demands, unpredictable competition, changing technology and uncertainties surrounding internal capabilities. This makes talk about blueprints, guarantees and immutable laws a delusion.88

A common misconception about strategy is that it is the exclusive domain of executive management. In a VUCA world and a democratised work environment strategy is clearly the domain of all people in the organisation, as well as strategic partners such as suppliers, distributors, unions and other internal and external stakeholders. The drivers for a higher focus on transparency and inclusion on strategy matters relate to societal, regulatory, technology and economic trends.89 Societal changes include a new generation of Facebook employees who are all connected and informed, and expect to be included in matters that influence their future. An increase in stakeholder activism is part of a societal movement world-wide to hold companies more accountable for their strategies and demand more transparency from organisations. Regulatory trends include guidelines by the Global Reporting Initiative (GRI) for integrated corporate reports that are more informative and transparent on strategy items. Technology trends that support inclusivity and openness are E-voting and Wikis as well as a continuous flow of new electronic formats and connections. Economic trends that contribute to higher demand levels for inclusion and disclosure on strategy issues are powerful stock markets and globalisation of enterprises spanning multiple economic trading areas.

This shift in the focus of strategy-making processes to being more inclusive, collaborative and co-created is well illustrated by Oxford-based Richard Whittington’s view, reflected in Table 1.9.

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Table 1.9: Breaking the mind-set: Strategy is only for a few, mainly inside the firm90

Traditional view of strategy New view of strategy

Elitist strategy Open strategy

Strategy as exclusion Strategy as inclusion

Strategy as telling Strategy as asking

Hiding strategy Transparent strategy

Hamel indicates: “An elitist approach to strategy creation engenders little more than compliance. That which is imposed is seldom embraced. To help revolutionary strategies emerge, senior managers must supplement the hierarchy of experience with a hierarchy of imagination”.91

This movement towards an open and inclusive view of strategy does not take any decision rights away from executives, but empowers many collaborators.

A general failure of thinking about strategy is not distinguishing planning from strategising.92 Planning is about breaking down a process into clearly articulated steps, whilst crafting strategy is a dynamic process of connecting thought and action.93 In this book we distinguish between the strategy activities of strategy analysis,94 strategy formulation and strategy execution/strategy planning, the latter two of which are shaped by insights about external and internal contexts, multiple futures, strategy renewal and innovation, and entrepreneurial practices (see Figure 1.1).

Within a VUCA context and an ever-changing external environment the rhythm of strategy-making has changed. The traditional approach to strategy had the following drumbeat: Plan, plan, plan, and eventually execute. The new pattern of strategy is: Discover, do something and learn, Discover, do something and learn … This reflects a shorter gap between decision-making and execution as well as the existence of an ongoing portfolio of experiments to test potentially viable strategic options.

Another change in strategy practices is an emphasis on ensuring the execution of strategic choices that were made as part of the strategy development process. Those players who can implement their strategic choices fast have a strategic competitive advantage over their rivals. But it is not only strategy execution that matters. A delicate relationship and interrelatedness exists within the strategy process, which consists of strategy analysis, strategy formulation and strategy execution. All three of these parts are vital and require equal attention. Taking the strategy process apart and focusing only on one part is not optimal or advisable. Analysis is not strategy and strategy is not only action. Furthermore, strategies evolve over time as learning from execution brings new insights.95 Great firms like Nike, Toyota, Amazon and Woolworths all evolved and changed over time.

Regarding the flow of the strategy process, Hamel gives us the following guideline: Traditionally it is believed that the thinkers behind strategy creation are at the top and the doers at the bottom; however, in reality the thinkers lie deep in the organisation. In order to achieve a perspective that is diversified as well as to provide unification around purpose, the strategy-making process must involve a deep diagonal slice of the organisation.96 A top-down perspective often only achieves unity of purpose and a bottom-up process sometimes only achieves diversity of perspective, as many voices are heard and many options are explored. “Unity without diversity leads to dogma and diversity without unity results in competing strategy agendas and fragmentation of resources. Only a strategy-making process, which is both deep and wide, can achieve both diversity and unity”.97

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The main contributing features of strategy in an organisation are:98 it sets direction; creates focus; defines an identity; sets parameters for consistency; and enables the organisation to focus its resources and exploit opportunities.

We conclude this section on strategy-making by showcasing in Table 1.10 the contrast between a pure micro- economic view and an abundance view of organisational strategy. We support both an economic and an abundance view of strategy, as it enlarges the competitive spaces and options for an organisation. We have to put an end to “either/or” thinking and embrace “and/also” thinking to reflect the contextual complexities of the world we live in – see the section on Paradox Thinking earlier in this chapter.

Table 1.10: Different strategic management departure points

Departure points Micro-economic view of strategy Abundance social learning view of strategy

Primary paradigm Strategy as a plan Choice perspective Red ocean strategy

Emergent strategy Social learning perspective Blue ocean strategy

Inter-organisation views: mind-set

Scarcity: Win–lose – slicing the pie, creating a zero-sum game Independence Beating the competition

Win-win – increasing the pie, leading to a zero- plus game Interdependence Collaboration & co-opetition

Intra-organisation views: mind-sets

Political power: Centralised strategising Key actors: Top management team

Decision-making primarily driven by rules and regulations Meet minimum requirements on eco-compliance Primarily about physical world and tangible assets

Distributed power – inclusive strategising Key actors: Multiple actors across hierarchical levels and boundaries Principle and values-based decision-making

Strive for eco-leadership by exceeding requirements Digital and intangible assets

Case study of strategy-making in Southern Africa

Local research on the strategy-making practices in eight case study companies in Southern Africa was done from 2011 to 2013.99 The broad purpose of the research was to develop a deeper understanding of how business strategy practices are actually being done and used in organisations in Southern Africa. Of particular interest was the underlying strategy thinking and views of strategic actors about strategy practices associated with strategic episodes. A strategic episode is a narrative description of a specific strategy activity in a context with a beginning and ending.100 All eight company-based case studies focus on answering the following research question: What are the underlying perceived meaning and intent of strategic actors when they engage in doing strategy? The study produces both a virtuous (Figure 1.3) and a vicious (Figure 1.4) storyline about the role of strategic actors in strategising praxis.

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M Ungerer USB Strategic Management

Strategy actors are mainly executives, senior and middle managers...

Who are

• Proactive and personally involved in strategising praxis

Who have

• A visionary long- term, big-picture orientation towards strategy

• Analytical thinking and sensing strategising praxis

Who use

• Aspirational strategy descriptions (vision, mission, values) to shape and direct strategising praxis

Who create

• A balanced top- down and bottom-up flow of strategic exchanges

Realising conducive strategy outcomes where:

• strategising processes are experienced as meaningful ongoing sensemaking • strategy is evaluated as “substantial and central” to business success

Figure 1.3: A possible virtuous story about strategic actors enabling praxis

The strategy actors selected for this study were mainly executives and senior and middle managers. These respondents indicated that strategy actors are proactively and personally involved in strategising praxis where a visionary long-term orientation is followed, were based on both analytical and intuitive thinking as core departure points for strategy. When strategic actors use aspirational descriptions and organisation structures to direct and enable strategising praxis and foster a balanced top-down and bottom-up cascading of strategic information exchanges, the cumulative re-enforcing virtuous effect of the above praxis create conducive conditions for strategising processes to be experienced as meaningful ongoing sense-making where the impact of strategy activities is described by stakeholders as substantial and central to the success of the organisation.

A vicious storyline based on the data and patterns from this study is reflected in Figure 1.4.

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Navigating strategic possibilities

Strategy actors are mainly executives, senior and middle managers...

Who have

• A primarily short-term action orientation towards strategy

• A strategy script where aspirational descriptions play no role

Who use

• Strategy- making activities primarily as a top-down process

Who do

• Strategy- making primarily from an analytical thinking stance with less regard for intuition and emotions

Contributing to

• corporate governance practices as mainly a box-checking, reactive and compliance-driven activity

• strategy processes experienced as restrictive, strictly governed, rigid and bureaucratic

• strategy processes experienced as an annual rain-dance with relatively little meaning and impact

• strategy impact on business is evaluated as minimal and doubtful

Figure 1.4: An alternative story about strategic actors disabling praxis

Strategic actors with a short-term orientation towards strategy and a script where aspirational descrip- tions play no role, who use strategis- ing activities in a primarily top-down way and who do strategy-making primarily from an analytical stance, contribute to creating conditions for less optimal strategic outcomes. In these conditions corporate gover- nance practices become mainly box- checking, reactive and compliance- driven activities where strategic processes are experienced as restric- tive, rigid and bureaucratic. This con- tributes to strategy processes being viewed by some strategic actors in the case study organisations as an an- nual rain-dance with relatively little meaning and impact on business success.

STRATEGIC LEADERSHIP We have already indicated that strategy is the contribution domain of many collaborators. So we can have a cadre of people taking responsibility for their involvement in both the creation and execution of strategy. Strategy and leadership cannot be separated and all leaders in an organisation must accept and own strategy as a core responsibility. The final accountability for the strategy of an organisation rests with board members and executive leaders. They take explicit public and legal accountability for the strategy of an organisation. Due to the complex nature of the context in which most organisations operate, it is advisable to embed the responsibility for strategy into the role description of everyone in the organisation (see chapter 5 on strategy translation). This creates the condition of strategic leadership as a shared responsibility in an organisation.

It does not matter how democratic and participative the strategy development and execution processes are, someone still needs to lead the process. These are the people we call strategic leaders. Strategy can never be based on less-than- ambitious aspirations, and to succeed with the implementation of strategy we need the commitment and support of

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Chapter 1: Strategic leadership

others. This is where strategic leadership needs to balance competing demands and interests to ensure that the best strategic choices are made and executed to the benefit of stakeholders and the longer-term interest of the organisation.

We support the thinking of Mintzberg,101 who said that it is possible to separate leading and management conceptually, but not in practice. “How would you like to be managed by someone who doesn’t lead? … why would you want to be led by someone who doesn’t manage?”102 In this integrated view of leadership and management the departure point is that leadership cannot just delegate management. All managers are seen as leaders and leadership includes the practices of management.

The goal of strategic leaders in an organisation is to participate with others in the building of something that is not already there.103 We have indicated that strategy-making is a process of continual influencing, and involves creating and shaping strategic ideals into practical executable building blocks and steps. Strategic leadership is not limited to a specific position, title or rank, but is a way of thinking and doing that advances the interests of an organisation in a positive way to the benefit of many. In this way leadership is learnt and earned, not anointed or granted.104

Strategic leaders make a major difference to how a firm performs, regardless of their length of time in a strategic leadership position.105 Strategic leaders need to be seen to lead the strategy processes in an organisation in an active way and to make strategic decisions and choices based on information and sound logic (business and moral) in a timely way. The setting of a strategic agenda and ensuring progress in the execution of it are key focus areas of strategic leaders.106 However this is not easy nor is it without challenges. Figure 1.5 reflects the broad flow of how strategic leaders shape and influence the strategy of an organisation.

M Ungerer USB Strategic Management

Iterative processes

Shapes the formation of

6

Effective strategic

leadership

Organisational identity and aspirations:

• vision • mission • values • strategic

scope

Influence strategic choices

Strategy execution

Strategy formulation

Strategic analysis

Strategy renewal and innovation

To yield

Strategic advantages and competitiveness

Strategic sustainability:

• profit • people • planet

Strategic stakeholder satisfaction

Figure 1.5: Strategic leadership and strategic management107

Strategic leadership108 is the capacity to anticipate change and envision strategies, whilst maintaining flexibility and empowering others to create and sustain strategic momentum to ensure a flourishing organisation benefiting a variety of stakeholders.

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So what do strategic leaders do? Mintzberg109 helps us by identifying a variety of roles for managers and grouping them into three categories:

Interpersonal roles: • figurehead – performing symbolic duties as a representative of the organisation • leader – establishing the atmosphere and motivating the subordinates • liaiser – developing and maintaining webs of contacts outside the organisation

Informational roles: • monitor – collecting all types of information that are relevant and useful to the organisation • disseminator – transmitting information from outside the organisation to those inside • spokesman – transmitting information from inside the organisation to outsiders

Decisional roles: • entrepreneur – initiating change and adapting to the environment • disturbance handler – dealing with unexpected events • resource allocator – deciding on the use of organisational resources • negotiator – negotiating with individuals and dealing with other organisations

The above view was later updated by Mintzberg and is summarised in Table 1.11.

Table 1.11: The dynamic practices of managers110

Managerial practice

The managerial context This consists of both an internal and external organisational dimension.

Purpose of managing To ensure the organisation serves its basic purpose as well as a higher purpose. This requires taking effective actions.

The person in the job

Framing the job

Scheduling the work

Within their own heads managers frame situations (conceive strategies, establish priorities etc.) and schedule their own time.

Managers frame their work by making particular decisions, focusing on particular issues, developing particular strategies to establish the context for everyone working in the unit or organisation.

Scheduling determines what is important and what needs to be done. It represents freedom to influence what gets onto the agenda.

Managerial activities take place in three forms, from the conceptual to the concrete

Managing through information

Information dimension: Managers communicate and control. Internal communication: • Monitoring • Nerve centre for information integration

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Chapter 1: Strategic leadership

Managing through information (continued)

External communication: • Spokesperson to various publics • Nerve centre for information aggregation • Disseminating information for cross-pollination

Internal controlling: • Designing strategies, structures, systems • Delegating responsibilities • Designating choices by influencing outcomes • Distributing resources • Deeming performance

Managing with people

Managing action directly

People dimension: Managers lead inside the organisation and link to the outside.

Internal leading: • Energising individuals • Developing individuals • Building teams • Strengthening culture

External linking: • Networking • Representing • Convincing/Conveying • Transmitting • Buffering and gatekeeping in the flow of influence

Action dimension: Managers do inside the organisation and deal outside.

Internal doing: • Managing projects • Handling disturbances

External dealing: • Building coalitions • Mobilising support • Negotiating

The ongoing challenge is to balance the above managerial roles to carry out a well-rounded job by swallowing the whole pill.111 Managing multiple relationships, both lateral and hierarchical, both inside the organisation and outside its boundaries, is an integral part of the information and communication exchange role of leadership. The roles of strategic leaders go beyond merely managing an enterprise’s bottom line, as can be seen from the summary perspective in Figure 1.6. Strategic leaders need to manage internal value-creation processes with and through others to create a positive societal and environmental impact that exceeds the expectations of stakeholders.

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Navigating strategic possibilities

7

Strategic leadership

Establish the strategic direction

Develop management

team and successors

Manage resource

portfolio – tangible and

intangible assets

Build entrepreneurial

culture

Promote virtuousness and ethical

practices

Implement effective controls

Enable a positive influence of business in society

Figure 1.6: Strategic leadership roles 112

Leadership is all about influencing for a positive impact on team-members and stakeholders. The ongoing test for a leader is whether his or her constituents and followers experience a positive contribution and influence in every situation where they interact. Do followers experience the results of decisions by the leader that are helpful to them? Leadership is therefore never only about our intent – that which we want to achieve – but always more about the impact of our interactions with others and the impact of our decisions.

Taking up a strategic leadership stance and/or role implicitly implies a shift from just thinking about a function or a part of an organisation to thinking and leading with an enterprise-wide mind-set. This transition from a specialist to a generalist is a challenge for most people. What keeps us back is what Christo Nel calls our tyranny of competency, which refers to the human tendency to hold onto ways of work that caused past success, but stand in the way of future success. Strategic leaders need to transform themselves into generalists and specialists. Research113 indicates to make this transition successfully leaders must navigate a tricky set of changes in their leadership focus and skills. The main learnings around new skills and cultivating new mind-sets that need to be mastered by strategic leaders are reflected in Table 1.12.

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Chapter 1: Strategic leadership

Table 1.12: The seven seismic shifts for strategic leaders114 and seven things they need to know115

Key shifts Specialist to generalist

Analyst to integrator

Tactician to strategist

Bricklayer to architect

Problem-solver to agenda setter

Warrior to diplomat

Supporting cast member to lead role

Required skills and mind-set change

Understand the mental models, tools, and terms used in key business functions and develop templates for evaluating the leaders of those functions.

Integrate the collective knowledge of cross- functional teams and make appropriate trade-offs to solve complex organi- sational problems.

Shift fluidly between the details and the larger picture, perceive important patterns in complex en- vironments, and anticipate and influence the reactions of key external players.

Understand how to analyse and design organisational systems so that strategy, structure, operating models, and skills bases fit together effectively and efficiently, and harness this understanding to make needed organisational changes.

Define the problems the organisation should focus on, and spot issues that don’t fall neatly into any one function, but are still important.

Proactively shape the environment in which the business operates by influencing key external constituencies, including the government, NGOs, the media, and investors.

Exhibit the right behaviours as a role model for the organisation and learn to communicate with and inspire large groups of people both directly and, increasingly, indirectly.

Key surprise for new CEOs

You can’t run the organisation

Giving orders is very costly

It is hard to know what is really going on

You are always sending a message

You are not the boss

Pleasing shareholders is not the goal

You are still only human

Key challenge

Manage your diary in such a way so as to balance the need of a variety of stakeholders for face-time with you.

Expand the power of those around you.

Have access to reliable information.

Be aware of the signals you are sending, dampen mis- interpretations and maximise the messages you want to send.

Manage upwards to get agreement from individual board members with different agendas.

Resist actions that are not to the benefit of the ultimate competitive position of the organisation.

Resist the illusion of self- importance and omnipotence.

Warning signs

• You are in too many meetings and in too many tactical discussions.

• There are too many days that you feel you have lost control over your time.

• The bottleneck is you.

• Employ- ees overly consult you before they act.

• You become the endorser of everything (“Frank says. …”).

• You keep hearing things that surprise you.

• You learn about events after the fact.

• Concerns and dissent reach you through the grapevine and not directly.

• Employees circulate stories about your behaviour that magnify or distort reality.

• People around you act in ways that indicate they’re trying to anticipate your likes and dislikes.

• You don’t know where you stand with board members.

• Division of roles and responsibilities between board members and management are not clear.

• Board discussions are limited to feedback and reporting on results.

• Executives and board members judge actions by their effect on the share price.

• Analysts who don’t know the business push for decisions that can harm the business.

• Management incentives are dispropor- tionately linked to the share price.

• You give interviews about you rather than about the organisation.

• You have a more lavish lifestyle than other executives.

• You have few, if any, activities connected to the organisation.

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The key decisions associated with a general management role are reflected in Table 1.13. Meeting these decision challenges and developing appropriate responses are an integral part of leading an organisation successfully.

Table 1.13: The GM’s activity guidance system116

Key roles Key choices Responsibility

Originating How can wealth be created? To formulate and sell to key stakeholders a competitive basis for the organisation, thereby ensuring that it maintains a winning edge in the marketplace.

Designing How should the organisation be organised?

To design the means and methods – that is, the structures, processes and a supporting culture – by which to organise and implement a winning competitive model.

Energising How will people and systems be powered?

To ignite and fuel people’s enthusiasm to drive the business system – not just within the top team but throughout the organisation.

Integrating How should the components be optimised across various areas and levels of the business system?

To synthesise the many contributions from all parts of the organisation and to bring people and roles together in pursuit of opportunities and to overcome challenges.

Protecting How will the assets of the organisation be maintained and renewed?

To shield the organisation – its economic and human assets – from threats, risks and disruptions emanating from external forces and from elsewhere in the firm.

 Questions to reflect on: • What are the big issues on our corporate agenda? • What opportunities and threats does the whole business face and what are the implications? • How can I ensure the success of the entire organisation? • Am I actively seeking to cross the edge on the seven seismic shifts for strategic leaders? • Do I manage or do I lead?

We end this part on strategic leadership by summarising the habits of spectacularly unsuccessful executives to learn what we should not do. Learning from the mistakes of others guides us to prevent disaster proactively – see Table 1.14.

Table 1.14: Seven common characteristics associated with spectacularly unsuccessful leaders117

Destructive habits Explanation Warning signs Rhetoric

They see themselves and their companies as dominating their environment.

Unlike successful leaders, failed leaders who never question their dominance fail to realise that they are at the mercy of changing circumstances.

A lack of respect for their customers and suppliers based on the illusion of personal pre- eminence and arrogance

“Our products are superior, and so am I. We’re untouchable. My company is successful because of my leadership and intellect – I made it happen.”

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Chapter 1: Strategic leadership

Destructive habits Explanation Warning signs Rhetoric

They identify so completely with the organisation that there is no clear boundary between their personal interests and their corporation’s interest.

Instead of treating organisations as enterprises that they needed to nurture, failed leaders treat them as extensions of themselves with a “private empire” mentality.

Characters who are not trustworthy stewards. Denial and defensiveness that do not create trust.

“I am the sole proprietor. This company is my baby. Obviously, my wants and needs are in the best interest of my company and shareholders.”

They think they have all the answers.

They create an image of knowing everything, but fail to learn the implications of decisions or to listen to other viewpoints.

A leader without followers, because they do not really need other people and dissent is discouraged.

“I am a genius. I believe in myself and you should too. Don’t worry, I know all the answers. I’m not micro-managing; I’m being attentive. I don’t need anyone else, certainly not a team.”

They ruthlessly eliminate anyone who isn’t completely behind them.

Anyone who is not rallying behind the cause is seen as undermining the vision.

Executives depart as fast as they come on board. A revolving door at the top is a strong indication of leadership failure.

“If you’re not with me, you’re against me! Get with the plan, or get out of the way. Where’s your loyalty?”

They are consummate spokespersons, obsessed with the image of the organisation.

High-profile CEOs who are constantly in the public eye settle for the appearance of accomplishing things, instead of actually achieving things. Creative accounting is used to promote the image of the organisation.

Blatant attention-seeking starting with an executive lifestyle featuring expensive tastes and places. A striking new headquarters to serve as a corporate symbol is part of this image obsession.

“I’m the spokesperson. It’s all about image. I’m a promotions and public relations genius. I love making public appearances; that’s why I star in our commercials. It’s my job to be socially visible; that’s why I give frequent speeches and have regular media coverage.”

They underestimate obstacles.

CEOs become so hooked on their vision that they overlook the difficulties in achieving it. Even when data suggest challenges ahead, they push right ahead into the storm. This is driven by a need to be right, because admitting failure is not an option.

Excessive hype to hide problems or mask intentions that, if known, would lead people to make different decisions.

“It’s just a minor roadblock. Full steam ahead! Let’s call that division a ‘partner company’ so we don’t have to show it on our books.”

They stubbornly rely on what worked for them in the past.

The decline of the organisation is accelerated by reverting to tried- and-tested practices. Instead of considering a range of options that fit a new context, they use their own past experiences as the only decision guide.

Constantly referring to what worked in the past.

“It has always worked this way in the past. We’ve done it before, and we can do it again.”

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Navigating strategic possibilities

Case study from a Zen master

The following old Zen story illustrates the need and willingness of strategic leaders to be open to new ideas and new thinking; to be perpetually curious as a lifelong learner.

A powerful and self-assured man goes to a Zen master and asks to be taught about enlightenment. After sizing up the guest in an initial conversation, the Zen master invites him to have tea. The master pours. He goes on pouring even though the tea is flowing over the brim of the cup. “Stop!” the visitor calls out. “Can’t you see that the cup is overflowing?” “Yes,” the Zen master replies. “But a cup that is already full cannot take in anything else.”118

Great leaders stay open to new ideas and are willing to explore new ways of leading strategy. “Success in the knowledge economy comes to those who know themselves, their strengths, their values, and how they best perform”.119 It is accepted that greatness can only be achieved from personal strengths. Knowing our personal strengths and using them as a basis for our contributions is key. At the same time we need to be aware of our weaknesses to consciously collaborate with others to use their strengths.

Practical guideline

The following questions could stimulate us to think about our leadership strengths.

Table 1.15: Reflection on personal leadership strengths120

Insights about personal strengths

Reflective questions Content explanation Comments on personal preference

How do I learn? Some people learn by doing. Others learn by hearing themselves talk. Some people learn by taking copious notes.

How do I access information? Through reading or listening? Am I a reader or a listener?

Listeners get information by attentively listening to others and have a real interest and respect for the views of others. Readers like to study data and make conclusions based on material reviewed or written expert opinion.

Do I work well with people or am I a loner?

If you do work well with people? In what relationship? Some people work best as subordinates. Some people work best as team members. Others work best alone. Some are exceptionally talented as coaches and mentors; others are simply incompetent as mentors.

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Chapter 1: Strategic leadership

Insights about personal strengths

Reflective questions Content explanation Comments on personal preference

Do I produce results as a decision-maker or as an adviser?

Some people perform best as advisers but cannot take the burden and pressure of making the decision. Other people, by contrast, need an adviser to force themselves to think; then they can make decisions and act on them with speed, self-confidence, and courage.

Do I perform well under stress, or do I need a highly structured and predictable environment? Do I work best in a big organisation or a small one?

Few people work well in all kinds of environment.

What are my values? Are my values and that of the organisation I work in compatible?

This is not only a question of ethics. With respect to ethics, the rules are the same for everybody – see more about the ethical lenses in the next part of this chapter. Ethics are only part of the value system of an organisation. Organisations, like people, have values. To work in an organisation whose value system is unacceptable or incompatible with one’s own condemns a person to both frustration and nonperformance. To be effective in an organisation, a person’s values must be compatible with the organisation’s values. They do not need to be the same, but they must be close enough to coexist.

Where do I belong? Successful careers are not planned. They develop when people are prepared for opportunities because they know their strengths, their method of work, and their values. Knowing where one belongs can transform an ordinary person – hardworking and competent but otherwise mediocre – into an outstanding performer.

What should my contribution be?

What does the situation require? Given my strengths, my way of performing, and my values, how can I make the greatest contribution to what needs to be done? What results have to be achieved to make a difference? Where and how can I achieve results that will make a difference within the next year and a half ?

Practical guideline

Use the competency framework in Table 1.16 to evaluate your capacity to lead strategically in an integrated way.

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Navigating strategic possibilities

Table 1.16: Reflection on competencies for strategic leaders121

Competency framework for strategic leaders

Competency cluster

Competency description Personal evaluation: • Green is well

developed; • Yellow is partially

developed; • Red is poorly

developed.

Personal competencies

• Manage self, internally through reflecting and strategic thinking. • Manage self, external by focusing on time,

information, stress and career. • Do scheduling by applying chunking, prioritising,

agenda-setting, juggling and timing.

Interpersonal competencies

• Lead individuals by focusing on selecting, teaching/ mentoring/coaching, inspiring and dealing with experts.

• Lead groups through team-building, resolving conflicts/ mediation, facilitating progress and running meetings.

• Lead the organisation/unit by building culture. • Administer by organising, resource allocation, delegating, authorising,

systematising, goal setting and performance appraising. • Link the organisation/unit by networking, representing,

collaborating, promoting/lobbying, protecting/buffering.

Informational competencies

• Communicate verbally by listening, interviewing, speaking/presenting/ briefing, writing, information-gathering, information dissemination.

• Communicate nonverbally by seeing and sensing. • Analyse by data processing, modelling, measuring and evaluating.

Actionable competencies

• Design by planning, crafting and visioning. • Mobilise by fire-fighting, project management, negotiating/

dealing, politicking and managing change.

Next we explore the concept of strategic architecture as an integrating view of strategic management.

STRATEGIC ARCHITECTURE An important part of strategy and the strategic landscape is how organisations define or “construct” their own strategic architecture. Hamel and Prahalad122 describe a strategic architecture as the “road map of the future that identifies which core competencies to build”. They introduce the concept of a strategic architecture as a broad intent of where and how an organisation wants to define itself in a strategic landscape. A strategic landscape is the broad external and internal context of an organisation. The strategic landscape of a firm can be shaped by strategic actors, but the nature of the landscape also influences the strategic options and choices of players in the landscape. Landscaping activities by strategic actors vary and can, for example, include the development of new markets and influencing legislation to ensure freedom of access to information for stakeholders.

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Chapter 1: Strategic leadership

A strategic architecture is an organisation’s core logic for creating value on a sustainable basis, and therefore forms the foundation of an organisation’s competitive potential.123 It describes the context and the terrain that an organisation intentionally defines or constructs as a means to achieving a desired end. It also influences the current competitive behaviour of the enterprise and may, therefore, explain why an organisation seems not to be competitive in current terms. The departure point we take is that competitive behaviour and potential can be altered and influenced when an organisation redefines its strategic architecture. A strategic architecture view of an organisation creates a platform and enabler of strategic choices, hardwired into the organisation. It underlies the success or failure of any strategy, which as a result should be richly and concisely constructed and designed.

The strategic architecture of a firm is not equal to its business model (see chapter 3 for detail on the business model as part of strategy formulation). The strategic architecture view of a firm is a more extensive and comprehensive strategic description. One of the components of this description represents a view of the business model of a firm. A business model, therefore, is a subset of the strategic architecture.

Hamel and Prahalad124 acknowledge that organisations should create their own environments, rather than adapting to existing ones. They found that highly successful organisations are differentiated from the rest through the fact that they creatively innovate around and leverage off their core competencies or capabilities. It seems as if such organisations are less obsessed with their competition, and are rather more concerned with reinventing themselves internally. This is in contrast to organisations that attempt to fit or adapt to their environments, often by following their competition. In this book, we accept the premise that competitiveness is internally generated and an organisation has to construct or reconstruct its fundamental underlying strategic architecture in order to be competitive.

The core elements of a view of the strategic architecture of an organisation are reflected in Figure 1.7.

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Navigating strategic possibilities

Building block 2: Internal &

external strategic landscape and

context

Building block 2: Internal &

external strategic landscape and

context

Building block 2: Internal &

external strategic landscape and

context

Building block 2: Internal &

external strategic landscape and

context

Building block 2: Internal &

external strategic landscape and

context

Building block 2: Internal & external strategic landscape

and context

Building block 3: Strategy

formulation

Building block 5: Strategy execution

Building block 4: Multiple futures

Building block 6: Strategy renewal &

innovation

Building block 1: Strategic leadership

Building block 7: Entrepreneurial leadership

Figure 1.7: Inter-relatedness of strategic architecture building blocks

The building blocks of a strategic architecture view of an organisation can consist of the following key strategic aspects.

Building block 1: Strategic leadership as a key capacity as described in this chapter. This gives life, meaning and ongoing momentum to the strategy of an organisation.

Building block 2: The development of views on the external strategic landscape125 and context of an organisation, which can include the following elements:

• Global and macro-trends analysis: o global standards applicable to the organisation’s macro-external context:

 Sustainable Development Goals (SDGs)  UN Global Compact

o global risk analysis o analysis of national strategic priorities of a country to identify national development priorities o analysis of the macro-environment forces using a STEEP analysis approach o stakeholder analysis o sustainable value analysis

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Chapter 1: Strategic leadership

• Analysis of the competitive context of an organisation: o industry analysis o competitor analysis o cooperation with competitors analysis

• Analysis of customers of an organisation: o customer demands analysis o customer segment need gap analysis o customer empathy map analysis o customer need saturation analysis o customer channel phase analysis o customer relationship analysis

• Internal analysis practices for an organisation: o resource-based view of strategy:

 core and distinctive competence analysis  internal value chain analysis  organisation culture as source for competitive advantage

o financial analysis o internal risk analysis o governance analysis

Building block 3: Strategy formulation and development, which can include:

• a menu of strategic options and choices to consider (see chapter 2): o choices related to organisational identity and aspiration formulation o generic strategy choices – a variety of generic strategies for an organisation including high-level strategic

moves and positioning options o grand strategy choices – 15 grand strategy options to consider as part of the strategy development process

• business model formulation and development (see chapter 3) including value creation, efficiencies and engines of growth. The creation of a clear competitive strategy formulation perspective, which reflects aspects like core competitive strategic choices, value propositions, activity systems and control points and core and distinctive competency descriptions, is a key part of this building block

• normative assessment of competitive strategies (see chapter 3).

Building block 4: The development of multiple futures perspectives for an organisation using:

• scenario planning and foresight development (see chapter 4).

Building block 5: Strategy execution with the following key contributions (see chapter 5):

• change enablement • planning as strategic gap closing • making strategy a reality for all through:

o strategy translation practices o strategy mobilisation practices o strategic organisation performance monitoring

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Building block 6: Strategy renewal and innovation (see chapters 6, 7 and 8). This covers the ongoing refreshment of the strategy through:

• the application of a variety of strategy innovation tools and practices like: o blue ocean strategy o sources of e-value o new market space creation o breaking through stall-points and decline o managing a portfolio of experiments and prototypes

• the development of inorganic growth strategies through alliances and M&As. • the development of appropriate management practices through management innovation to ensure an align-

ment with a changing strategic context and management practices that support and are appropriate in a VUCA world. This is all about developing management practices that make organisations fit and friendly for human beings.

Building block 7: Entrepreneurial leadership and strategy practices (see chapter 9) to foster both entrepreneurship and intrapreneurship.

The seven building blocks of a strategic architecture of a firm are all inter-related as shown in Figure 1.7. From a systemic point of view the strategic architecture of a firm contains the key elements in a strategy system, but the system can only flourish if all the parts are connected in a virtuous way.

The virtuous cycle of strategic thinking we want to stimulate is reflected in Figure 1.8.

M Ungerer USB Strategic Management

9

The quality of our thinking

about where we are and where we want to be

Quality and quantity of options and

choices

Clarity about strategic

architecture

Robustness and sustainability of

the strategy

Quality of monitoring and feedback about

progress

Ease of execution of

strategy

Raise

Raise

Raise Raise

Raise

Raise

R

Figure 1.8: A virtuous cycle of strategic thinking

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Next we turn to the last and very important part of this chapter: business ethics through the lens of virtuous leadership to create the moral boundaries for strategic leadership.

BUSINESS ETHICS THROUGH VIRTUOUS LEADERSHIP PRACTICES

“If you’re a leader, authenticity is your most precious commodity, and you’ll lose it if you attempt techniques that don’t fit your strengths.” – Marcus Buckingham126

In this part of this chapter we introduce the concept of virtuous leadership as a springboard for ethical business practices. We argue that “ethical virtuosity is not something for the puritans”,127 but an empowering way of leading self and others in a world that is asking for moral guidance and exemplary examples. We first explore virtuous leadership128 as a distinctive leadership practice and then use this view to explore ethical issues and approaches in strategic management.

Virtuous leadership

Our collective memory and context are filled with stories of business, political and societal leaders who conducted themselves in questionable ways through deceptive decisions and practices that raised ethical concerns. The images of leaders who misuse power and who deploy corrupt practices are too often a feature of our daily news coverage. Clearly we live in a time of moral deficit if we evaluate the track-record of many leaders in business, society and politics.

In a business context the overriding effect of upper-level leadership as a predictor of lower-level leadership practices has been confirmed by research.129 Leaders have a substantial effect on followers, in positive and negative ways. Surveys130 show that the behaviours of C-level executives and senior management are the most highly-rated factor connected with unethical decision-making – an example of negative outcomes associated with the practices of leaders.

The term “virtue” originates from the Greek word arête, which means excellence.131 132 A virtue is defined as “moral excellence and righteousness; goodness; and a particular efficacious, good or beneficial quality; advantage”.133 Virtue is seen as a trait of character or intellect that is morally laudable and presents an ideal to which all good living aspires.134 Virtues (there are many) represent principles of moral character that motivate and guide behaviour towards positive ethical outcomes.135 Virtues are accepted as dispositions that are part (or not) of an individual that can be measured and cultivated. Virtues assist us to achieve our full potential by being ethical and represent the best human being we can be.136

Before we define virtuous leadership we first want to argue why virtues, as a managerial concept for individuals, organisations and societies, have largely been neglected. The main reasons why virtues did not receive the required attention are:137

• A Western mind-set of linear progress that emphasises values such as marketisation, interpersonal competition, personal achievement and material wealth where there is little space for “old” virtues.

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• In the past, virtues were frequently associated with religiosity. In a more secularised world religion has lost much of its social and cultural significance. This contributed to people ignoring virtues because they were seen as based on religious beliefs and practices.

• The growth in globalisation and widespread neo-economic liberalism has contributed to the destruction of the village as a place where transparency and moral consistency created natural limits for human communities. The village economy, with local community self-regulating virtue-based practices, has been replaced by an urban, globally connected economy where anonymity frees individuals from the village’s social and moral norms. This lack of a communal ethos that fosters virtuous business practices contributes to the recent increase in corporate, societal and political scandals.

We clearly need leadership with a strong moral base. It is however important to state that a focus on virtues as a guide for leadership practices does not represent a naïve way of dealing with our moral decay trajectory, rampant personal enrichment patterns and corporate scandals. It is interesting to note that Jeff Immelt, the CEO of GE, clearly stated that he wants GE to be known as a virtuous organisation because they want to attract and motivate the most talented people. This is because virtuousness and virtuous leaders like Nelson Mandela and Mahatma Ghandi build a brand image and evoke feelings of admiration that people aspire to.138 It is therefore clear that we are currently in need of substantially better leadership at all levels of management in all types of organisations, and virtuousness can no longer be ignored or neglected.

The construct of virtuous leadership is linked in the literature to related concepts such as moral, ethical, servant, spiritual, inclusive, authentic, transformative, transformational and responsible leadership.139 Virtuous leadership is described as a focus on the highest potentiality of human systems that is oriented toward being and doing good.140 A more pragmatic description states that virtuous leadership involves distinguishing right from wrong, taking steps to ensure justice and honesty, influencing and enabling the pursuit of righteous and moral goals and connecting to a higher purpose.141

A description of virtuous leadership that encompasses both the virtue ethics component and the behaviour aspects is as follows: Virtuous leadership represents a “leader–follower relationship wherein a leader’s situational appropriate expression of virtues triggers follower perceptions of leader virtuousness, worthy of emulation”.142

This description of virtuous leadership also emphasises the content, context and process elements of leadership.

The virtues that virtuous leaders exemplify have the following common content characteristics: they have a disposition towards “good” character traits; they are cross-cultural and reflect both Aristotelian (Western) and Confucian (Eastern) traditions; they are interrelated and manifest simultaneously where required; and they are seen as contributors to both ethical and effective leadership. The context-dependency in which virtuous leadership is embedded relates to the argument that holding and claiming a virtue consists of showing and expressing it across a broad spectrum of situations.143 The key processes through which leader virtue influences followers are perceptually driven attribution and modelling. Attribution theory144 states that people make judgments about the cause of a person’s behaviour based on perceived behaviour consistency over time. This suggests that a leader with virtue characteristics and competencies is expected to demonstrate these consistently, although followers only have restricted opportunities to observe them. The result is that some leaders might be perceived by followers as less or more virtuous than others, based on the array of virtues the leaders exemplify.145 By behaving in a virtuous manner, leaders are viewed by their subordinates as role models with a positive influence.146 Followers observe and imitate

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the virtuous behaviour of leaders and practise these behaviours until they become habitual. Compared to the vast array of virtue possibilities, the focus of virtuous leadership is on a smaller set of behaviour-based virtues that are specifically relevant to leadership147 (see the discussion on measurement).

Peterson and Seligman148 developed a classification framework in which they classified 24 individual strengths linked to six broad universal virtues. These virtues transcend national and cultural boundaries. Although they do not claim universality for this framework, it represents a claim of ubiquity – the identified virtues and associated individual strengths are commonly present in all people of the world. While not everyone will be aware of these virtues or will call them by different names, they are present (e.g. ubuntu consists of competencies like empathy, social awareness, recognition of the wisdom of elders and valuing interpersonal relationships).149 The six broad universal virtues consist of the following virtue strengths and competency areas:

• Wisdom and knowledge, which include the cognitive competencies of creativity, curiosity, open-mindedness, love of learning and perspective.

• Humanity, which includes the social competencies of kindness, love and social intelligence. • Justice, with the associated social competencies of fairness, leadership and teamwork. • Courage, which includes the personal and emotional competencies of authenticity, bravery, persistence and

zest. • Temperance, with personal competencies of forgiveness, modesty, prudence and self-regulation. • The sixth and final broad universal virtue is transcendence, which includes the personal competencies of

appreciation of beauty, gratitude, hope, humour and religiousness.

The concept competency is used in the following way: “As character traits are expressed in certain behavioural patterns they can also be called competencies.150

Practical guideline

Use the reflective prompts in Table 1.17 to develop a perspective on your own virtue strengths and competency areas. Also use the framework at http://www.thehappinessinstitute.com.au/freeproducts/docs/The%20VIA%20 Classification%20of%20Character%20Strengths.pdf to reflect on your current strengths. You will get a list of the six universal virtues with their associated strength descriptions and you are asked to identify your personal strengths.

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Table 1.17: Description of virtue strengths and competency areas151

Universal virtue theme

Virtue strength & competency areas

Short description Reflective prompts152

Wisdom and knowledge

1. Creativity thinking of novel and productive ways to do things

Thinking of new ways to do things is a crucial part of who you are. You are never content with doing something the conventional way if a better way is possible.

2. Curiosity taking an interest in all of ongoing experience

You are curious about everything. You are always asking questions, and you find all subjects and topics fascinating. You like exploration and discovery.

3. Open-mindedness thinking things through and examining them from all sides

Thinking things through and examining them from all sides are important aspects of who you are. You do not jump to conclusions, and you rely only on solid evidence to make your decisions. You are able to change your mind.

4. Love of learning mastering new skills, topics, and bodies of knowledge

You love learning new things, whether in a class or on your own. You have always loved school, reading, and museums – anywhere and everywhere there is an opportunity to learn.

5. Perspective being able to provide wise counsel to others

Although you may not think of yourself as wise, your friends hold this view of you. They value your perspective on matters and turn to you for advice. You have a way of looking at the world that makes sense to others and to yourself.

Humanity 6. Kindness doing favours and good deeds for others

You are kind and generous to others, and you are never too busy to do a favour. You enjoy doing good deeds for others, even if you do not know them well.

7. Love valuing close relations with others

You value close relations with others, in particular those in which sharing and caring are reciprocated. The people to whom you feel most close are the same people who feel most close to you.

8. Social intelligence being aware of the motives and feelings of self and others

You are aware of the motives and feelings of other people. You know what to do to fit in to different social situations, and you know what to do to put others at ease.

Justice 9. Fairness treating all people the same according to notions of fairness and justice

Treating all people fairly is one of your abiding principles. You do not let your personal feelings bias your decisions about other people. You give everyone a chance.

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To expand your insight about your personal virtue strengths, also use the 18 factor behaviour-based Virtuous Leadership Questionnaire (VLQ) as reflected in Table 1.18.

Table 1.18: Virtuous Leadership Questionnaire items153

Leadership virtue category

Definition Question items*

Likert-type response format (1=Never; 5=Always)

Humanity a character trait underlying leaders’ love, care, and respect of others

17. I show concern for subordinates’ needs. 7. I show concern and care for peers. 2. I express concern for the misfortunes of others.

Justice a character trait motivating respectful recognition and protection of the rights of others to be treated fairly, in accordance with uniform and objective standards

9. I allocate valued resources in a fair manner. 1. I respect individual interests and rights when allocating responsibilities. 12. I resolve conflicts in a fair and objective fashion.

Courage a character trait enabling leaders to do without fear what they believe is ‘‘right’’

3. I act with sustained initiative, even in the face of incurring personal risk. 4. I speak up on matters of injustice and personal conviction, despite risking ‘‘backlash”. 13. I initiate a long-term and worthwhile project despite risking my personal reputation. 16. I lead fundamental change though it may entail personal sacrifice and personal risk.

Temperance a character trait helping leaders control their emotional reactions and desires for self-gratification

15. I avoid indulging my desires at the expense of others. 6. I behave unselfishly even when there are opportunities to maximise self-gain. 18. I prioritise organisational interests over self-interests. 5. I downplay personal success to avoid discomforting others who are less successful.

Prudence a character trait enabling leaders to make ‘‘right’’ judgments and choose the ‘‘right’’ means to achieve the ‘‘right’’ goals

10. I exercise sound reasoning in deciding on the optimal courses of action. 14. I efficiently and effectively assess requirements demanded by any given situation. 11. I grasp the complexity of most situations when making judgments. 8. I use only the resources necessary in responding to the demands of any given situation.

*Numbers indicate the sequence in which questions should be asked in a questionnaire.

After completion of the above three reflective practices (Tables 1.17, 1.18 and results from thehappinessinstitute. com), answer the following reflective questions (Table 1.19):

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Table 1.19: Integration on Virtuous Leadership Reflection

Reflective questions Responses

What are your core virtue strengths and competency areas? How can you further enhance them?

What areas stand out as development areas that you should be sensitive to? How can you minimise the effects of these nonstrengths?

What can you do less of to be more of a virtuous leader?

What patterns are emerging from your evaluations of yourself ? Write down your insights and reflect on this over time to deepen your understanding about your virtue strengths and development areas.

How can you use these insights to be a more virtuous leader in your context? Virtuous practices are formed by repetitive practices.

What new leadership practices should you engage with to build your virtuous leadership capacity?

If we look at the description of the different virtue strength and competency areas in both Tables 1.17 and 1.18, it is clear that they represent universal and transcendent qualities that could assist leaders in their quest for a positive impact and influence. These competency areas span and infuse all other leadership competencies (such as the competency to read a balance sheet or run a meeting). These competency areas also represent the “best” virtues that humans can strive for. If we can develop a cadre and generations of leaders with these qualities, organisations, societies and the world will be a better place.154 Capitalism with a human face will become a lived reality. The answer to “What are the right things to do?” will include a variety of perspectives representing the interest of multiple stakeholders.

Leaders who role-model virtuous behaviour contribute to improving the general ethical climate in their work environments and at the same time add to the wellbeing of employees. This goes much further than promoting ethical behaviour only through ethical codes.155 This is all about modelling the way – showing others what to do, rather than just talking about it.

Barry Schwartz156 states that any work that involves people is moral work. Moral work is dependent on moral wisdom and moral wisdom is based on both moral skill and moral will. Moral wisdom is seen as a key ingredient in decision- making processes, and leaders should therefore develop this skill and embrace this will. Leadership based on virtues, as described above, culminates in practical wisdom as a core part of leading successfully in a complex world.

The message associated with virtuous leadership is a message of hope – the focus is on fostering an environment which emphasises the application of best practices to assist business to be great and good, without making moral compromises. The results and impact of leaders who practise a virtuous leadership approach strikes out against all injustice. Virtuous leaders can turn organisations into engines of economic and human progress and prosperity. The ideal of a wholly just worldwide community based on virtuous leadership practices is now a real possibility.

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Business ethics and strategic management

We know that leaders are always under constant scrutiny by stakeholders – the camera is always on. Leaders as representatives of the insiders in a system are under constant observation by “outsiders” of the system. This places a responsibility on leaders to be prepared to look at the “video footage” at any time and to defend the rationale for their decisions.

In general business ethics is about the application of general ethical principles and standards to the actions and decisions of organisations and the behaviour of their employees.157 Business ethics set norms of generally expected conduct to determine what is right or wrong. In organisations the values, as reflected in the strategic descriptions, the ethical code of conduct and governance guidelines, are all guiding principle and rules that set the moral boundaries. It is expected of leaders to set the example for moral excellence and employees are guided to work within these set boundaries.

Apart from internal organisational moral boundaries and expectations, there are also a variety of international codes to which organisations can subscribe to inform their expected business practices. Examples of these global citizen initiatives158 are:

• United Nations Global Compact: It is the world’s largest corporate and sustainability initiative. • Caux Round Table: It is an international network of principled business leaders to promote a more moral

capitalism. • Equator Principles: This is a voluntary set of social and environmental standards to identify risks in project

finance. • World Business Council on Sustainable Development: This is a CEO-led global association focusing on

sustainable development. • Global Business Oath – Young Global Leaders: The oath emerged as a response to the global financial crisis of

2008 and promotes societal and environmental sustainability. • CERES Principles: The principles encourage investments in environmental and social sustainable projects. • Global Sullivan Principles: It is a code of conduct on human rights and equal opportunities for companies

operating in South Africa. • Business Leaders’ Initiative on Human Rights: It is a space for business representatives to share human rights

best practices. • Global Responsible Leadership Initiative: It represents a community of action and learning on responsible

leadership.

Hard evidence in the form of the Global Corruption Report on the widespread occurrence of corruption in public institutions and businesses all over the world does not paint a positive picture.159 This report states the likelihood that organisations in large export-orientated economies are paying bribes to win business in countries such as Argentina, Brazil, Colombia, Hungary, India, Indonesia, Mexico, Morocco, Nigeria, the Philippines, Poland, Russia, South Africa, South Korea and Thailand. Corruption occurs mostly in the case of three types of contract: public works contracts and construction; arms and defence contracts; and oil, gas and energy contracts. Corruption takes many forms, including bribes, kickbacks, price-fixing, securities fraud, regulation skirting to avoid paying minimum wages, using child labour and bypassing environmental protection regulations and laws.

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A few key drivers that fuel unethical strategy practices are:160

• A lack of board oversight and leadership guidance that allows or creates opportunities for the feverish chase of personal gain, wealth and other self-interests by employees and leaders. An obsessive personal drive for wealth accumulation, power and status shoves ethical principles to the side to achieve self-centric goals that are not in line with generally accepted business practices.

• Extraordinary pressure on leaders and employees to achieve performance targets. This pressure might come from investment analysts, the board and senior leaders, who all push to maintain a high-growth track record for the organisation. In this chase and push to keep up the performance delivery reputation of the organisation, rules are stretched and ethical conduct is less of a priority. Linking performance bonuses to the achievement of targets further increases the pressure.

• An organisational culture that prioritises profitability and “good” performance, the bottom line, above ethical conduct and practices. A work climate that allows immoral behaviour becomes a recipe for scandal and failure. When corruption is systemically embedded in the operating practices of an organisation, it is very difficult for even honourable people not to be affected.

The case for an ethical strategy approach can be argued from both a moral and a business case perspective.161 The moral case is based on the departure point that strategies that are in total or in some parts unethical are morally wrong and will eventually paint a bad picture of the leadership and employees of an organisation. This is why ethically principled leaders consciously choose strategic and operational actions that will pass the moral scrutiny test (see Table: 1.21) and will show no tolerance for strategies with ethically questionable or controversial elements. The business case for an ethical strategy approach is based on the premise that an ethical strategy is good business and in the best interest of stakeholders. It is also accepted that unethical strategies damage and ruin the brand or reputation of an organisation and have costly consequences in the form of fines, administrative clean-up costs, reputational damage and turnaround costs. We also know that high-potential talent is only attracted to organisations with a positive reputation and ethical track record. Creditors and investors also think twice if the reputation and ethical record of an organisation is questionable.

Organisations can implement the following practices to promote a culture of business ethics.162

• Describe and communicate the ethical standards of the organisation to all stakeholders. • Continuously update the code of conduct based on feedback from stakeholders. • Audit compliance to ethical standards and practices by internal and external agents to create feedback and

improvement cycles. • Implement whistle-blower channels independent of the organisation. • Create a work environment where all people are treated with dignity.

Next we look deeper at five practical ways in which an organisation can choose to manage ethical practices based on modes of morality.

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Practical guideline

The development road map for an organisation that wishes to develop its ethical capacity is displayed in Table 1.20. This approach is specifically designed to explain the changes in mode of managing ethics within medium to large business enterprises.163

Task: Use the dimensions of comparison to evaluate an organisation’s current ethical practices approach and to indicate development areas for the organisation.

Table 1.20: Five approaches to managing business ethics164

Dimensions of comparison

Immoral mode: Unconcerned or nonissue approach

Reactive mode: Damage control approach

Compliance mode: Meeting minimum standards approach

Integrity mode: Ethical culture approach

Totally Aligned Organisation (TAO) Mode

Nature and underlying beliefs

• The business of business is business, not ethics.

• Need to make a token gesture in the direction of ethical standards in the form of a code of ethics.

• Organisations should be committed to apply ethical standards and monitor performance.

• The basis of ethics in an organisation is the culture.

• Seamless integration of ethics in organisation’s purpose, strategy and operations.

Nature and underlying beliefs (continued)

• Ethics has no place in the conduct of business.

• Companies should not be morally accountable for their actions.

• Sceptics and critics need to be silenced at least temporarily through the existence of an ethical code.

• Unethical behaviour should be prevented and punished when discovered.

• It is important to have a reputation for high ethical standards.

• The behaviour associated with good ethics is based on the values of the organisation.

• Applying good ethical practices represents the way we work around here.

• We interact with stakeholders in a morally responsible way and this is not negotiable.

• Ethics is entrenched in organisation dialogues and decision-making.

Ethics management strategy

• There is no need to make decisions concerning business ethics – if it is legal, it is fine.

• No need for specific actions on ethics management.

• Laissez- faire ethics management.

• No real moral will or skill to manage ethical practices.

• Ethical code is just a piece of paper.

• Unethical behaviour will only be punished in extreme situations.

• Rules-based and transactional approach to ethics management to prevent and punish unethical behaviour.

• A comprehensive code of ethics exists and training on it is provided to all staff.

• Formal function and resources for managing ethics exist, like an ethics compliance office and a chief ethics officer.

• Values-based and transformational approach to ethics management.

• Well-established ethical management function and systems.

• Ethical management embedded and reinforced in culture of the organisation.

• Managers have an ethics competency.

• Integrated approach to ethics management.

• Everybody is responsible for ethics management and everyone is an ethics watchdog as whistle-blowers.

• Peer pressure used – “that’s not how we do things here”.

• Ethics function serves as “rudder.”

• Ethical heroes are celebrated and ethical stories are told.

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Dimensions of comparison

Immoral mode: Unconcerned or nonissue approach

Reactive mode: Damage control approach

Compliance mode: Meeting minimum standards approach

Integrity mode: Ethical culture approach

Totally Aligned Organisation (TAO) Mode

Challenges • Financial consequences can become unaffordable.

• Some stakeholders are alienated.

• Increased dissonance between personal and corporate values.

• Credibility problems with stakeholders are a real possibility.

• The organisation is exposed to ethical scandals.

• The organisation’s reputation on ethics is below par.

• Proliferation of rules and guidelines.

• Rules guide ethical actions which foster an attitude of “what is not forbidden is allowed”.

• The locus of moral control is the ethics system and code, not an individual’s own moral compass and responsibility.

• Ongoing ethics orientation training for new employees.

• Misuse of discretion granted where moral autonomy leads to moral nonconformity.

• Powerful leaders undermine ethical drive.

• Relying on peer pressure and cultural norms to enforce ethical standards can result in eliminating some or many of the compliance regimes and, over time, induce moral laxness.

• Lack of coordination in managing ethics.

In the next practical guideline we showcase 10 ethical compass tests which we as individual leaders can use to evaluate our own track record on past decisions.

Practical guideline

Think about ethical dilemmas you have encountered at work and in personal situations. Use the ethical compass tests in Table 1.21 to evaluate your choices.

Table 1.21: Ten tests of the ethical compass165

Different ethical lenses Core question Did your decision pass the test? Yes or No and explain

The family perspective Am I proud to inform my family members and friends about my decision or action?

The congruency perspective Is this aligned and consistent with my personal values?

The cost–benefit perspective Are the benefits equal for all? Does a benefit for some cause harm to others?

The dignity perspective Are the dignity and humanity of others preserved?

The equal treatment perspective

Are the rights of the disadvantaged given consideration?

The front-page perspective Would I be comfortable if this decision or action is reported on the front pages of newspapers?

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Different ethical lenses Core question Did your decision pass the test? Yes or No and explain

The golden rule perspective Would I be willing to be treated in the same way?

The personal gain test Does personal gain cloud my judgement? Is there a conflict of interest?

The procedural fairness perspective

Do the procedures pass the scrutiny test by those affected by the decision or action?

The sleep perspective Am I comfortable that I will sleep after this decision?

To lead in a virtuous way is challenging and is not a guarantee of success or good results. However, the corporate scandals (Enron, WorldCom, Lehman Brothers, FIFA, Saambou, African Bank etc.) of recent years have shown that ignoring the role of virtues and ethical business practices is a slide to unsustainable competitive advantage, the degradation of the reputation of business in society, the destruction of profits and the tarnishing of the personal honour and reputation of individuals.166

We are reminded of the wisdom of Peter Drucker,167 who said:

“Asking “What is right for the enterprise?” does not guarantee that the right decision will be made. Even the most brilliant executive is human and thus prone to mistakes and prejudices. But failure to ask the question virtually guarantees the wrong decision.”

We conclude this chapter with a case study on Howard Schulz, the legendary CEO of Starbucks, as an example of a virtuous leader who takes up his stewardship role to make both Starbucks and the world a better place. He is an exemplar of demonstrating business ethics through virtuous leadership practices.

Case study of Howard Schultz, CEO of Starbucks

Early life and career

Howard D. Schultz168 was born in Brooklyn, New York, on 19 July 1953. He comes from a working-class family with neither of his parents completing high school. He was the first family member to graduate from Northern Michigan University. After graduating from the university with a Bachelor of Science degree in communication in 1975, Schultz found work as an appliance salesman for Hammarplast, a company that sold European coffee

makers in the United States. Rising through the ranks to become director of sales, in the early 1980s Schultz noticed that he was selling more coffee makers to a small operation in Seattle, Washington, known then as the Starbucks Coffee Tea and Spice Company, than to Macy’s. “Every month, every quarter, these numbers were going up, even though Starbucks just had a few stores,” Schultz later remembered. “And I said, ‘I gotta go up to Seattle.’”

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Howard Schultz still distinctly remembers the first time he walked into the original Starbucks in 1981. At that time, Starbucks had only been around for 10 years and didn’t exist outside Seattle. The company’s original owners, old college buddies Jerry Baldwin and Gordon Bowker and their neighbor, Zev Siegl, had founded Starbucks in 1971. The three friends also came up with the coffee company’s ubiquitous mermaid logo. “When I walked in this store for the first time – I know this sounds really hokey – I knew I was home,” Schultz later remembered. “I can’t explain it. But I knew I was in a special place, and the product kind of spoke to me.” At that time, he added, “I had never had a good cup of coffee. I met the founders of the company, and really heard for the first time the story of great coffee ... I just said … this is something I’ve been looking for my whole professional life.” Little did Schultz know then how fortuitous his introduction to the company would truly be, or that he would play an integral part in creating the modern Starbucks.

A year after meeting Starbucks’ founders, in 1982, Howard Schultz was hired as director of retail operations and marketing for the growing coffee company, which, at the time only sold coffee beans, not coffee drinks.

Schultz’s enthusiasm for opening coffee bars in Starbucks stores, however, wasn’t shared by the company’s creators. “We said, ‘Oh no, that’s not for us,’” Siegl remembered. “Throughout the 70s, we served coffee in our store. We even, at one point, had a nice, big espresso machine behind the counter. But we were in the bean business.” Nevertheless, Schultz was persistent until finally the owners let him establish a coffee bar in a new store that was opening in Seattle. It was an instant success, bringing in hundreds of people per day and introducing a whole new language – the language of the coffeehouse – to Seattle in 1984.

But the success of the coffee bar demonstrated to the original founders that they didn’t want to go in the direction Schultz wanted to take them. They didn’t want to get big. Disappointed, Schultz left Starbucks in 1985 to open a coffee bar chain of his own, Il Giornale, which quickly garnered success. Two years later, with the help of investors, Schultz purchased Starbucks, merging Il Giornale with the Seattle company. Subsequently, he became CEO and chairman of Starbucks.

In 2000, Schultz publicly announced that he was resigning as Starbucks’ CEO. Eight years later, however, he returned to head the company. In a 2009 interview with CBS, Schultz said of Starbucks’ mission, “We’re not in the business of filling bellies; we’re in the business of filling souls.”

Starbucks in 2008

By the time Howard Schultz169 stepped down as chief executive of Starbucks, in 2000, the coffee chain was one of the world’s most recognisable brands and on a steady trajectory of growth. Eight years later Starbucks was suffering from a rough economy and its own strategic missteps, and Schultz felt compelled to return to the CEO seat. His previous tenure had seen promising growth, but now he faced a challenging mission: to lead a turnaround of the company he had built.

In an interview170 Howard Schultz admitted that in 2008 he had to acknowledge to the entire company that: “… the leadership had failed the 180 000 Starbucks people and their families. And even though I wasn’t the CEO, I had been around as chairman; I should have known more. I am responsible. We had to admit to ourselves and to the people of this company that we owned the mistakes that were made. Once we did, it was a powerful turning point. It’s like when you have a secret and get it out: the burden is off your shoulders.

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The issues of social media, digital media, and getting smart about the rules of engagement emerged as a tremendous weakness for the company. Ultimately our reputation didn’t suffer, but we spent countless hours defending ourselves when in fact we have a very strong track record in environmental stewardship. We became more open and vulnerable, listened to people, and as a result started creating a new methodology, a new language, and new tools and tactics that enabled us to become best of class. We’re the number-one brand on Facebook. It means that 7 million people are very interested in what we are doing and what we have to say. It has changed our go-to- market strategy – how we communicate, unveil, and innovate, and ultimately how we arrive in the marketplace. The success of the things we have done this year is directly linked to the fact that the cost of customer acquisition and communicating to the outside world is significantly lower for us than it is for people who are spending money on traditional advertising.

The challenge was how to preserve and enhance the integrity of the only assets we have as a company: our values, our culture and guiding principles, and the reservoir of trust with our people. There was unbelievable pressure from multiple constituents.

Success is not sustainable if it is defined by how big you become or by growth for growth’s sake. Success is very shallow if it doesn’t have emotional meaning. I think there was a herd mentality – a reason for being that somehow became linked to PE, the stock price, and a group of people who felt they were invincible. Starbucks isn’t the first company that has happened to, and thankfully we caught it in time.

I think the tension is about can you be big and stay “small”? Can you maintain intimacy with your customers and your people? We understand our business very well, and we understand our customers. And to a person, we understand that we are only as good as yesterday and we have to come to work every day and try to exceed the expectations of our people and customers.

You have to have a 100% belief in your core reason for being. There was tremendous pressure in the first three or four months after my return to dramatically change the strategy and the business model of the company. The marketplace was saying, “Starbucks needs to undo all these company-owned stores and franchise the system.” That would have given us a war chest of cash and significantly increased return on capital. It’s a good argument economically. It’s a good argument for shareholder value. But it would have fractured the culture of the company. You can’t get out of this by trying to navigate with a different road map, one that isn’t true to yourself. You have to be authentic, you have to be true, and you have to believe in your heart that this is going to work. Someone said to me, “You are roasting 400 million pounds of coffee a year. If you reduce the quality 5%, no one would know. That’s a few hundred million dollars!” We would never do that. For example, I shut our stores for three and a half hours of retraining. People said, ‘How much is that going to cost?’ I had shareholders calling me and saying, ‘Are you out of your mind?’ I said, ‘I’m doing the right thing. We are retraining our people because we have forgotten what we stand for, and that is the pursuit of an unequivocal, absolute commitment to quality.’ We reinvested in our people, we reinvested in innovation, and we reinvested in the values of the company. I think the leader today has to demonstrate both transparency and vulnerability, and with that comes truthfulness and humility and obviously the ability to instil confidence in people, and not through some top-down hierarchical approach. Our differentiated model – added to the culture and values that define our company – gives us the nimbleness and flexibility to offer our products to customers through multiple channels.

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Navigating strategic possibilities

Being the CEO of a public company over the past couple of years has been difficult. And lonely. The tension you describe assumes that one can’t be values-driven or values-based and achieve success or the respect of the street. I don’t think that is true. But the only ingredient that works in this environment is performance – so we have to perform. If we don’t perform, either we have the wrong strategy or we don’t deserve to be here. I think we’ve demonstrated that the strategy is right and the balance between profitability and having a social conscience and being a benevolent company will lead to significant long-term value for shareholders.”

On the question of decisions he has made that Wall Street didn’t like, he says: “Health care. Our health care costs over the past 12 months were approximately $300 million. [Starbucks offers health care benefits to any eligible employee who works at least 20 hours a week.] The thought that we would cut that benefit – I couldn’t do it. Within this past year I got a call from one of our institutional shareholders. He said, ‘You’ve never had more cover to cut health care than you do now. No one will criticize you.’ And I just said, ‘I could cut $300 million out of a lot of things, but do you want to kill the company, and kill the trust in what this company stands for? There is no way I will do it, and if that is what you want us to do, you should sell your stock.’ What I stand for is not just to make money; it’s to preserve the integrity of what we have built for 39 years – to look in the mirror and feel like I’ve done something that has meaning and relevancy and is something people are going to respect. You have to be willing to fight for what you believe in.

I do not believe that shareholder value is sustainable if you are not creating value for the people who are doing the work and then value for customers. Quintessentially we are a people-based company. You couldn’t find another consumer brand that is as dependent on human behaviour as we are. We built Starbucks not through traditional marketing or advertising but through the experience. And that experience can come to life only if people are proud, if they respect and trust the green apron and the people they are representing. The equity of the brand is defined by the quality of the coffee but also, most importantly, by the relationship that the barista has with the customer and whether or not the customer feels valued, appreciated, and respected. That is our aspiration every day. The only way we can succeed and sustain growth and innovation is linked to the basic elements of one cup of coffee, one customer, and one barista at a time. Not innovation for innovation’s sake but innovation that is relevant, usable, and, in our case, core to the culture.”

On the legacy he wants to create, Schultz indicated: “Our role as leaders is to celebrate the human connection that we have been able to create as a company, and to make sure people realize the deep level of respect we have for the work they do and how they act. That is the legacy of the company. It’s not to get bigger or to make more money. Here’s a true example: A woman barista in Tacoma, Washington, sees a customer every day, and they become friendly as a result of her work. She begins to see that the woman looks ill. Finally she gets up the courage to say, ‘You just don’t look well–what’s wrong?’ The woman says, ‘If I don’t get a kidney transplant, I am going to die.’ A miracle occurs: the barista is a match for the customer, and she gives her a kidney. It’s incredible. I drove to Tacoma to see her, and I said, ‘Who are you? I’ve never heard a story like this.’ There are a lot of really great companies out there, and wonderful cultures, but something like this doesn’t happen very often.”

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OUR MISSION To inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time.

OUR VALUES With our partners, our coffee and our customers at our core, we live these values:

• Creating a culture of warmth and belonging, where everyone is welcome. • Acting with courage, challenging the status quo and finding new ways to grow our company and each other. • Being present, connecting with transparency, dignity and respect. • Delivering our very best in all we do, holding ourselves accountable for results. • We are performance driven, through the lens of humanity.

Figure 1.9: Starbucks mission and values171

“We have always believed building a great, enduring company requires being performance-driven through the lens of humanity. I am proud that Starbucks not only achieved another year of record financial performance in 2014, but we did so while doing more for our people and the communities we serve than at any time in our history. By staying true to our mission, values and guiding principles, I believe we’ve proven it is possible to build a world- class company with a conscience.

Over the next few years, our efforts will increasingly focus on three areas where we think we can have the biggest impact – building a future with farmers, pioneering green retail on a global scale, and creating pathways to opportunity for young people. With your input, we want to set ambitious goals, some of which we may not achieve. But I strongly believe that today, more than ever, companies such as Starbucks must lead, using their platforms and resources to create opportunities for their people, as well as for the communities they serve. We believe this is our role and responsibility.”172

Environment: Pioneering sustainable solutions

As a company that relies on agricultural products, we have long been aware that the planet is our most important business partner. Our comprehensive approach to reducing our environmental impact means looking at all aspects of our business, how they intersect and how we can integrate new solutions to create meaningful and sustained change.

• LEED® certified stores: We are working to bring all of our stores to LEED® building standards and ensure that our approach to designing, building, and maintaining our stores is inclusive of a range of environmental goals.

• Recycling & reducing waste: We’re working to shrink our environmental footprint and meet the expectations of our customers by increasing recycling, promoting reusable cups and reducing the waste associated with our cups and other packaging.

• Water & energy conservation: By conserving the energy and water we use and purchasing renewable energy credits, we’re pushing ourselves to reduce the environmental footprint of our operations and help ensure access to clean water in coffee-growing communities.

• Climate change: Since 2004, we’ve been pursuing strategies to address this challenge and help farmers mitigate the impact of climate change on their farms.

Figure 1.10: Starbucks Environment focus-areas173

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Navigating strategic possibilities

To be a partner Being a Starbucks partner means having the opportunity to be something more than an employee. Gigantic possibilities lie ahead – to grow as a person, in your career and in your community. To live the Starbucks mission and to be a leader. It’s the opportunity to become your personal best. To be connected to something bigger. To be meaningful to the world. And to be recognized for all of it. It’s all here for you.

Connect to something bigger Connecting with each other, with our customers and the communities we are a part of fosters a deep sense of purpose at Starbucks. We believe we can all become a part of something bigger and inspire positive change in the world around us. That’s why we go out to do community service as a team throughout the year, partnering up with organisations to revitalize and enhance the neighborhoods we serve.

Benefits At Starbucks, our Total Pay package is called “Your Special Blend”. It’s a benefits package that is tailored to the needs of our partners. And it’s designed just for you.

Benefits-eligible partners (those working 20 or more hours a week) can get a wide range of perks, benefits and assistance. Your Special Blend might include bonuses, 401(k) matching and discounted stock purchase options. We offer adoption assistance and health coverage for you and your dependents, including domestic partners.

Starbucks College Achievement Plan is an opportunity for all benefits eligible U.S. partners (all brands) to complete a bachelor’s degree with full tuition reimbursement for every year of college through Arizona State University’s top-ranked degree programs, delivered online. In addition, to show our gratitude for our partners who are military service members and veterans, they may extend an additional SCAP benefit to their spouse or child.

Partners also appreciate our recognition programs, career sabbaticals and other time-off programs. Plus, you can take advantage of partner perks such as 30% in-store and online discounts, one free pound of coffee, box of K-Cup® Packs or tea a week.

Diversity and inclusion At Starbucks, we strive to create a culture that values and respects diversity and inclusion. Our goal is to build a diverse workforce, increase competencies, shape a culture of inclusion and develop a diverse network of suppliers. Our welcoming work environment encourages partners to engage with one another and make Starbucks a place they look forward to working each day.

Figure 1.11: Working at Starbucks174

 Case questions: Based on the above information:

• What principles relevant to strategic leadership can you describe? • What virtuous leadership practices did Howard Schultz display? • How do you build a performance- and values-based culture?

CONCLUSIONS From this chapter it becomes clear that strategic leadership is a multi-dimensional concept that can be viewed from various perspectives. One constant, however, is that organisations cannot excel without strategic leaders who set the expectations of and mobilise people towards a sustainable and prosperous future.

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This chapter discussed strategic leadership in the context of the strategic architecture, and positioned it as the foundation for launching strategic management processes such as external and internal analysis and synthesis, strategy formulation, exploring multiple futures, strategy execution, and strategy renewal and innovation. Next this chapter discussed the VUCA environment as the new world business context, the necessity for agility to thrive in an ever-changing context, and other general leadership practices that are conducive to successfully competing in a VUCA world. From the Vedanta case study it became clear, however, that we still have a long journey to make business a truly mutually beneficial partner of societies and Mother Earth.

This chapter also discussed five inter-related thinking stances that enable strategic leaders to gift themselves a winning departure point for strategic thinking. These stances included (1) possibility thinking, (2) collaborative thinking, (3) abundance thinking, (4) new economy values thinking, and (5) paradox thinking.

Related to strategy-making, it was mentioned that (1) strategy is the collective, emerging pattern based on strategic choices an organisation consciously exhibits and executes over time to ensure its sustainability; (2) that sustainability is enhanced by differentiating the business in unique ways to create value for stakeholders; (3) that strategy is about explaining how an organisation wants to move forward and how it wants to advance the interest of stakeholders; (4) that strategy-making is an organic emergent learning process executed in a specific context in which the maker has influence; (5) that strategy-making aims to create a shared future; (6) and that strategy is dynamic and consists of both a plan and an emerging pattern. Further, a primarily micro-economic view and an abundance view of organisational strategy was discussed, together with a case that reflects both virtuous and vicious strategy cycles bases on strategic actors enabling or disabling praxis.

We continued by elaborating on key features of strategic leadership and by providing practical guidelines for reflection on personal leadership strengths and competencies. The inter-relatedness of the strategic architecture building blocks and a virtuous cycle of strategic thinking were also discussed in detail. Finally, business ethics through virtuous leadership practices were discussed in the form of (1) reflective prompts that assist in developing a perspective on one’s own virtue strengths and competency areas; (2) an 18-factor behaviour-based Virtuous Leadership Questionnaire (VLQ) that expands one’s insights about one’s personal virtue strengths; (3) five approaches for managing business ethics which can be used to diagnose ethical praxis in an organisation; and (4) 10 ethical compass tests that can be used to evaluate past ethical decisions and to guide future ethical challenges and decisions.

In conclusion, the strategic leadership constructs and practical guidelines presented in this chapter develop our ability to step into our role as a strategic leader in an organisation. It also becomes apparent that virtuous leadership is the future and excellent businesses will embrace it, not because they are advised to live it, but because it is part of their moral fibre in any case.

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