Leadership P. 9

Schools have to emphasize information, innovation and integration.

How do managers at firms that compete primarily in local markets stay abreast of broader industry trends and innovations? In this article, the authors highlight an interesting way in which managers at some smaller regional firms in the United States seek to combat forces of inertia and myopia in their businesses: by networking with managers of noncompeting firms that operate in the same industry but in other geographic regions. The authors call these networks “industry peer networks” (IPNs) and have conducted research into how common such networks are and how they function. In the United States, industry peer networks apparently originated in the auto-retailing industry in 1947, when an owner of several auto dealerships began bringing managers from those dealerships together to exchange ideas. The concept spread both geographically and into a number of other industries, and industry peer networks now exist in businesses ranging from advertising agencies to office furniture distributors. A typical industry peer network consists of a number of small groups, each containing no more than 20 managers from noncompeting companies. These groups usually have face-to-face meetings two to four times a year to discuss management issues; they often share confidential financial data with each other as well.

Big strategic shifts are risky, but the constantly changing business environment periodically forces corporate leaders to reposition their businesses in fundamental ways. With case studies from the telecom equipment, auto, computer and beverage industries, the authors examine why some companies have been successful in making smart big moves while others have failed. Some of their findings were, by their own admission, predictable: for example, companies that initiated successful big moves exploited and in some instances enhanced their distinctiveness relative to their competitors. However, the authors identified a more surprising factor, which they refer to as "complementarity." The more successful companies followed a consistent learning logic both internally and externally, and they made big moves that were complementary over time. Complementarity plays out in three ways: (1) It builds on a successful business model; (2) it relies on periodic shifts in the balance between innovation, efficiency and customer intimacy when the business model is not working; and (3) it promotes a sequenced development of capabilities when the balance shifts.

Achieving a state of clarity is a necessary but not sufficient condition for making good decisions.

For boards dealing with an embattled CEO, doing nothing may pay off in the long run.

Organizations must return to cultivating strategic thinking, not just functional achievements.

Most managers see strategy development as serious business. It is ironic, then, that some of the most remarkable strategic breakthroughs in organizations emerge not from well-ordered processes but from messy, ambiguous and sometimes irrational activities -- pursuits that can best be described as play. Referring to research in the fields of developmental psychology and anthropology, the authors argue that play can stimulate the development of cognitive, interpretive skills and engender an emotional sense of fulfillment. It can help establish a safe environment for introducing new ideas about market opportunities, generating debate about important strategic issues, challenging old assumptions and building a sense of common purpose. The authors draw on their own experiences working with managers at the Imagination Lab Foundation and Templeton College, Oxford University, and they make sure to point out that play is no substitute for rational, conventional strategy development. Indeed, after the creative sessions are over, plenty of hard work remains to translate the ideas and insights into processes and actions. However, the authors argue that organizations seeking to differentiate themselves from competitors and overcome strategic obstacles can benefit by making time for managers to interact creatively with follow-up on the insights that emerge.

To succeed, executives must manage a myriad of relationships.

There are three reasons why companies have trouble finding and hiring top-notch executives. First, even organizations that are adept at selecting winners will have considerable difficulty because of the way in which managerial talent is distributed across a population. Second, assessing people for senior positions is inherently tricky for a number of reasons. For one thing, the differentiating competencies for top leaders are usually in “soft” areas & #8212; such as the ability to develop people or manage change efforts & #8212; each of which is very difficult to measure in any reliable way. Finally, powerful psychological biases impair the quality of the hiring decision. Nevertheless, organizations can overcome those obstacles by deploying a set of basic practices: Define before looking, cast a wide net, compare apples with apples, evaluate thoroughly, filter biases, limit the number of people involved, close the deal and facilitate the integration. Although some of those practices might seem obvious, many companies fail to follow them. All too often, for instance, organizations make the mistake of commencing an executive search before they know what they’re really looking for. Or they unnecessarily restrict the search to certain markets, industries or geographic regions. Because of such mistakes, contends the author, the problem of poor appointments for top positions is serious and pervasive at many companies, even blue-chip corporations.

A new report reveals that companies with significant levels of employee control systematically underperform.