Management 101: The Marriage of Strategy and Leadership

we're joined today at knowledge award by Harvey arcing and also Mike you seem they're both management professors here at Wharton and they're going to discuss their new book which is about management and strategy and it's actually called the strategic leaders roadmap six steps for integrating leadership and strategy thanks for coming in today thank you good leadership or good strategy I think one of the main points of the book is that some companies have really good leadership they fell on their strategy and vice versa somehow great strategy and fail and leadership and it's the integration of the two that you talked about in this book as being so important could you each give me a sort of nutshell view of why that's so important and and why companies aren't doing it today so there's been a lot of emphasis on leadership over the past few years is an evergreen topic but if you look at Microsoft and Steve Ballmer in his term Microsoft was dominant Steve Ballmer was seen as a visionary leader and inspired the troops in fact his meetings were legendary you know the passion and the inspiration and so on but in his tenure also they missed the boat on the mobile applications of Microsoft and actually opened the door for many other players in the industry and it has taken some time to try to respond to that so that's an example of very very good leadership but really not having enough strategic sort of inspiration and discipline and in fact what we seem to what we've learned is that the ideas coming in on the mobile side will actually set aside in favor of the desktop so sometimes a strategic choice can limit the benefits of very effective vision leadership and vision and Steve to pick up a net and going back a little bit in time our beer and I have often taught almost back-to-back and in mid-career programs strategy first as it should come first and in leadership second and we've often cross talked a bit but a year and a half ago we sat down with the chief executive of Nissan also the CEO of Renault and came to know quite a bit about the Nissan turnaround which is one of the great turnarounds of the modern era Japanese auto producer was pretty much going off a cliff back in 1999 not because it did not have a good turnaround strategy it actually had one but the incumbent top team at the time just couldn't seem to make it work so good strategy but the thinness of the leadership at the top in terms of making things happen driving change through the organization ultimately crippled the organization and that is when Nissan turned to Renault for a big cash infusion four billion dollars Counting and Nissan brought in Carlos Cohn became his new became Nissan's new chief executive officer his strategy was more than what he had when he came in there but his leadership was very different and from that experience looking at that case in some depth came to really appreciate that you've got to have a great strategy you got to have a great leadership to go with it if you're a little bit short of one you're going to be in trouble so starting about a decade and a half ago or so there was a lot of talk about strategy and execution strategies very very important but the idea was it's not that hard to come by meaning that not that it's easy lots of companies have good strategies and companies with good strategies many of them weren't doing that well because they couldn't execute how does your idea of the marriage between strategy and leadership differ or complement that whole idea so execution was was the rage you know ten years ago and particularly the financial crisis even more so let's squeeze out cost let's become more efficient and so on and clearly very important but what we are arguing is that you need inspirational from the leader but you also need a very clear value proposition for the customer and then execution is sort of the way you can deliver value create value and so in some sense if we look at again the Nissan case what you see is we call it executable initiatives so the value proposition that you decide to have how are you going to actually navigate through your organization and get the best possible execution and we also realize that strategy is owned by everyone so we have a concept in the book called layering and leadership and in the Nissan case layering leadership was they had cross-functional teams which were largely people in their 40s and late 30s and even people reporting to them who kind of brought up ideas that fitted with the architecture that Carlos Vaughn had created along with a senior team so the idea is execution is not just following orders it's actually creating and enhancing the value proposition to the client and getting the ideas from people throughout the organization so you want you want you want staff to have a strategy on how to implement the strategy implement the strategy and but then there's a very kind of lean set of initiatives that you pursue so there's not it doesn't get frittered away or lost in the confusion so the or people also know what they are contributing to and that's important another example actually is when P&G bought Gillette they bought Gillette at a very very high price because it was an auction most people thought there was not much value left Gillette was already dominant but what PNG ended up doing with Gillette was actually creating a whole new set of you know shaving creams and other sort of assorted products that go along with shaving equipment but also a better supply chain so it's really how you link the value proposition with execution within the organization and then leadership that can kind of summarize what the key direction is so people are not kind of you know going in opposite directions or frittering away their energy you know her fear Procter & Gamble offers a really nice example of why we need to think about execution plus so in the case of the acquisition of Gillette as I recall it was a more than forty billion dollar deal was a huge decision the then chief executive AG Lafley he needed a lot of thinking through we needed good counseling and smart people that would work with him and in that particular case he turned to his own board of directors and you wouldn't think of a board normally as getting into the the mechanics of an acquisition how the pricing how they were going to keep the CEO and Gillette if Gillette did come into Procter and Gamble but the board of AG Lafley at the time had six former CEOs on it and their leadership experience their leadership background their leadership instincts proved vital for AG Lafley decision to go through with the acquisition to generalize that out I think we were all most of our readers and certainly our viewers recall the book by Larry paucity and ROM Sharon execution a best-seller deservedly so because it was really about taking your vision and your strategy and bringing it into reality and they were quite critical of several companies that they named in the book for having failed to do that her beer and I were very influenced by that line of thinking of course what we've in a sense added here is I call to take a look at people in the firm on the board below the chief executive below the division heads not just for whether they can quote execute but whether they have a range of leadership capacities like inspiring people you wouldn't think of that as part of execution but if you move into then a broader terrain of leadership good decisions timely actions listening to the customer in all kinds of ways leadership in our view is a more encompassing concept that has to be matched up with strategy if you got both I think you're gonna go in the right direction you you need someone that can get that employee engagement yeah exactly and also a decision process we kind of talk about deciding deliberate deliberatively in the is that the quality of discourse matters in a company you know and there has to be sort of enough openness to new ideas but also a sense of selection and then proceeding forward many companies struggle with this either you have kind of a top-down sort of flow of decisions where people execute with a listen for direction or perhaps bottom-up but I think to allow for kind of healthy debate and discourse but then choosing a direction and moving we talked about deliberatively deciding I think that's an important piece so it's it's always good to learn from companies that have done it well and been successful it's also interesting to get lessons from companies that haven't done it well so what would be an example of a company that had a good strategy but failed because of leadership and then also the opposite what would be an example of company that had good leadership but their strategy just fell short Steve to pick a contemporary example a Wells Fargo much in the news for apparently a number of the staff members creating fictional accounts for customers actually using a customer's names and in some cases even signing their signature inappropriately on these accounts that were being created and human nature being human nature we know a lot about the human condition behavioral economists and psychologists can look at it for a long time would tell you in advance if you're a leader who is listening that if you put forward a very tough set of objectives and by the way all companies do that all companies have a strategy that are strict with stretch goals we got to increase return on equity by 5% in the next 12 months that's a pretty modest one right there but many companies go well beyond that and then in our view leadership at the top in the case of Wells Fargo just think of what leadership means it means you set the tone create the mindset absolutely especially in financial services but every company really create a climate of integrity and then within those call them boundary conditions then push people to get the job done of bandung the number of accounts at the bank but it would appear let's just say good strategy and aggressive strategy all companies financial services beyond our growing want to grow and set tough targets as they should but then we got to think about as a leader what's going to happen when people translate the demand upon them for the end of month their end a quarter results if we don't have an ethical climate a code of ethics a policy of integrity first and predictably with a bit of a shortcoming there in the leadership people did what you can almost anticipate without having to be inside the company they would do and do so a good strategy take existing customers sell them additional products just like with the with the razor blades take men's grooming products and add them on so strategy good but execution or rather leadership young big big big failure uh-huh which was costly too we're now finding and probably more than we know right now is guys got a ways to play out okay and on the other side so we have the example of besides of course Microsoft that I talked about earlier with Steve bombers inspirational leadership but not necessarily the best strategic choices in the new products very good in the existing products I think there is if you look at Daimler and its acquisition of Chrysler you can shrimp was a celebrated CEO he had gained a lot of momentum selling as a selling assets that were not related to automobiles and then he tried to answer the question of the analysts as to watch the US presence and where's your mid-sized product and Daimler had tried for years and he decided to go you know being sort of a strong leader let's go and make a big statement and against perhaps a lot of internal debate bought Chrysler and that turned out to be a leader who was very strong had you know a good track record kind of committing to a transaction that ended up losing a lot of value it was bought for 37 billion dollars and sold nine years later for 7.5 billion dollars it was for a company as successful as Daimler with a high quality management it's a very good example of you know just not pursuing not surfacing the right strategy it'll not being able to execute our beer I think it's a great example on this terrain of strategy + leadership when the announcement was made that Chrysler would be acquired or actually I think technically it was just simply a merger but it was acquired by Daimler Jurgen Schrempf at one point publicly said for the first time in my life looking at the pay of the CEO of Chrysler at the time I'm feeling poor and that was a statement that the the the pay structure for European executives much lower much more modest compared to American that was the tip of an iceberg sailors beware now because that should have told you something that the the way of life not just compensation but the way orders are given the way people convene a meeting all in this terrain of leading and acting they were very different different cultures different different corporate cultures different imitation of natural cultures and harbors is often citing statistics on the amazing rate of failure of even friendly acquisitions yes so even though it can look to a strategist at a company this is going to be a good merger right that failure to look at the leadership pieces I think often behind the high rate of failure the parts are are not going to lead to a greater whole without the right leadership and I think the the important point there if we look at the dialogue that has taken place in the world of published books on strategy and leadership they are very segmented you have books on strategy that are very kind of analytic and conceptual and you know the beautiful strategies that you can get from them books on leadership very much on inspiration and you know engagement being part of something larger than yourself and I think the actual integration of the two is extremely important and we discovered that really you're not teaching as Mike was saying we had an audience that wanted to know about both and we wrote the book really based on the teaching materials we develop for that so would it be correct to say that better than having consciously having some managers who were really good leaders and another group that we're really good at strategizing and having them on a team it's better to have all sort of trained in in both things I assume you would say that and then and that's that that leads to my next question which I think is so interesting is a premise of the book is that these skills can be taught right because we're talking about these legendary leaders it's easy to think well yeah yes all you have to do is be Steve Jobs to be successful you know now go to it you know it's like buy low sell high okay it's very very easy advice but how do you do it but but you're saying that you can actually teach these skills in both strategy and leadership which I think is is really interesting for companies that that want to think this through and do something about it you know if you think about a starting career in business or really at any organization some people are on a strategy team or they're in strategy consulting or that company other people might be running an office or a division later if not sooner and early on you might be more focused on strategy and all the issues they're over here but then over here you may be more concerned how do you get people to show up at work and not quit and now do you pay them and how do you motivate them to get the job done but as people move up into the middle ranks and certainly above unequivocally you've got to be strategic and thought and you've got a lead well because all those functions now are are in effect coming together and with that we've come to feel that we are not fully servicing or we're doing a disservice if people are leaving from our many many different forms where we work with people if we don't really make the argument later on if not sooner whatever you begin and it might be more strategy it might be more managing you're really going to have to become great at both and we all a couple avenues for doing that you want to talk about those avenues a little bit yeah I think just to and I'll turn it over to Mike on learning how to be a good leader but I just wanted to elaborate on the earlier point which is that depending on your career choice you're not going to be in both you're going to start maybe typically in operations in some way maybe you join a consulting firm but I think what people have to recognize is that they have to build a larger skill set and then but then what is that skill set and I think that's what this book is about so for example if you are typically in operations you should be thinking about what's the value proposition to the client because that's part of your responsibility and you're becoming a better strategic leader that way but also you need to think about a very crisp statement of strategy that's what we talked about in the book that often strategy statements are 1015 PowerPoint pages and what Carlos gon had was essentially a half page version which was these are the for-profit drivers and I think we're trying to what we're trying to suggest is if you're in operations you need to understand that you really have to have a crisp view of what drives profit in your business and what's your value proposition on the other side different strategy or finance or a staff function you need to think about executable decisions you know and look ahead to execution what are the initiatives that best represent these strategies and I think that's how people can learn because you're only in one part but you're trying to prepare for a larger role and be good at both inspiring people strategizing and executing so how do you do all those so stretch yourself all along yeah during your career early in your career learn from peers learn from people who you who you can learn from as mentors and Steve here are the three avenues that we emphasize that are pretty obvious as soon as I say them but to get to them we do describe a young manager named John Chambers in the book who had worked with a company that a lot of people don't even remember weighing instruments which was they're sort of in the early days of the digital revolution huge success but I did a total belly flop and went out of business after a couple years of extraordinary growth and John Chambers from that experience looking back on it and he was he lost his job he was on the street he said you know I've got a better appreciation now for why a company really has to know where it's going where the markets changing where all the value-added propositions are going to be when especially all these disruptive technologies are coming along and I've got to have a workforce that's ready to in that case change quickly agile a Wang apparently had neither of those capacities so John Chambers hired by Cisco soon after he was in there became chief executive and ran Cisco for 20 years and he has said we talked to him as well that really three avenues are critical not only for him but and we have picked this up from others as well for combining those two functions that Harbor just described one is just think about it study it pick up the book by execution a called execution by basa T and ROM Charan Larry bas 13 ROM Charan take a course online course maybe a mid-career course that has strategy and leadership somehow combined or at least as part of the general program read about it think about it watch people come and go number two really good to find coaches and mentors people who know a lot about that so famously John Chambers when Cisco with the digital collapse back and oh one when the internet had a big hiccup and seemed to get itself into a lot of trouble the famous GE chief executive Jack Wells called John up and John Chambers is that John did you learn anything and chambers said well it's been a hellish experience and chambers Welsh said well think what's going through and I'm coaching you right now think what you're going through and don't let that happen again and because you went through it you're probably not gonna let that happen again and then finally John Chambers as that market changed hugely over 20 years making connectors and switches and all the hardware that drives the internet he has repeatedly had to learn how to lead by literally doing it so he concluded for example it's in our book at one point a lot of ideas were down there in the engineering ranks and they just weren't getting up to those who made the final sign-off and whether to go with them so he radically restructured how decisions were made in Cisco because he just he looked around him looked around and said look we got a better way to do it let's go with it and thus think about it read about it number one get coaches and mentors number two and number three just get out there put up your hand take a job that requires both a leadership skill set and an ability to think strategically what happened I asked you that's important to know about your book I'll give you each a shot in the book actually has a very global perspective so we also talked about Jack Ma from Alibaba and the growth of Alibaba and in that we he is very much a strategic leader and he is what he creates is a agility in the organization adaptability but that's because he's empowered his leaders to address particular strategic problems so what is the global part I think the other part is just that there is a protocol and even in the case of Carlos go and we go back in his history and he was running Michelin in North America where he developed a template which he then brought with him it was not conscious but he actually used it when he was deployed but he was sent to Nissan from Renault so over time you build your sort of repertoire of ways of managing and linking them to strategy and see if I think I would add coming from an interview we conduct you with the chief executive of India's largest non state-owned Bank it's a bank called ICICI Chanda Kochhar is the chief executive today recently named by Fortune as the fifth most powerful women in business in the world and and our interviews several interviews with her she did make I think just a fundamentally important point which is as you reach the upper tiers of a company like ICICI or a big hospital or a community organization you want people below you to think strategically and to exercise leadership and so she in recent years she's been CEO now for several years has put a huge emphasis she understands the combination of the two on making certain the next generation and a generation behind them can think strategically and act like a leader well thank you very much for thank you for joining us and and look forward to hearing more about this in the future thank you you

Channel: KnowledgeAtWharton

Views: 11,221

Rating: 4.8504672 out of 5

Keywords: The Strategic Leaders' Road Map: Six Steps for Integrating Leadership and Strategy, Mike Useem, Harbir Singh, Leadership, Book, Management, Knowledge@Wharton, Wharton

Id: EJcjzQ-3NL8

Length: 25min 26sec (1526 seconds)

Published: Tue Oct 11 2016