Achieving and Maintaining Competition

8/13/2019 Achieving and Maintaining Competition

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AcademyolManagement Executive.2005, Vol. 19, No.4 Reprinted Irom 1999 Vol 13

Achievingandm aintainingstrategic competitiveness in the century:Theroleofstrategic leadership

R. Duane Ireland and Michael A.Hitt

Executive OverviewCompetition in the 2r century s global economy will be complex, challenging, andfilled with competitive opportunities and threats.Effectivestrategic leadership practicescan help firms enhance performance while competing in turbulent and unpredictableenvironments.Thepurpose of this paper is to describe six components of effectivestrategic leadership. When the activities called for by these components are completedsuccessfully, thefirm sstrategic leadership practices can become asourceof competitiveadvantage. nturn, use of this advantage can contribute significantly to achievingstrategic competitiveness and earning above-average returnsin the next century.

It is possibleand fruitfulto identify majorevents that have already happened irrevoca-bly and that will have predictable effects inthe next decade or two. Itis possible in otherwords toidentify and prepare for thefuturethathas already happened.

Peter Drucker 1997.Grounded in the insights and understanding thatexperience provides, conventional wisdom holdsthat it is very difficult to predict the future withhigh degrees of accuracy. In fact, Peter Druckergoes so far as to suggest that In human affairspolitical, social, economic, or businessit is point-less to try to predict the future, let alone attempt tolook ahead 75 years. ' Notwithstanding this diffi-culty, the capability implied by Drucker's commentabove is encouraging. It is both possible and pro-ductive for firms to identify and prepare for a fu-ture that has already happened. Thus, although itis difficult for organizations to predict their futureaccurately, examining events that have alreadytaken place allows them to know how to preparefor a future whose state has been influenced.Based on this approach, we present a descrip-tion of the strategic leadership practices that will

economy is a major irrevocable event whose etence has already had a major influence on todastrategic leadership practices and offers insigabout practices that should be used in the futuBy examining appropriate and often innovatstrategic leadership practices currently being usuccessfully by visionary organizations, it is psible to identify and understand practices that wbe effective in the next century. This analysisimportant, because strategic leadership may proto be one of the most critical issues facing orgazations. Without effective strategic leadership, probability that a firm can achieve superioreven satisfactory performance when confrontthe challenges of the global economy will greatly reduced.^

Strategic leadership is defined as a persoability to anticipate, envision, maintain flexibithink strategically, and work with others to initchanges that will create a viable future for organization.^ When strategic leadership pcesses are difficult for competitors to understand, hence, to imitate, the firm has created a copetitive advantage.'* Because the creation of stainable competitive advantage is the unive


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Academ y of Manage ment Executive Novem

l economies a nd industries to global ones.^

ing the dominant force shapin g relation-s amo ng natio ns. The fact that .. .the propor-as in crea sed from 7 percent to2 percent

instant; and new product introductions

The incredible breadth and depth of the globalP ' century, nation-states will lose their

t the firm's unique resources, capabilities, and

re resulting in economies and com-

be reduc ed to ethnic un its du ring th e 21^* Chan ges such as these may culminate inld citizens toda y. The

The global economy may create a needfor individual citizens to maintainseparate loyaltiesone to their ownunique traditions and institutions theother to the characteristics of a rapidlyevolving international culture.

The New omp etitive Land scapeThe global economy has created a new competive landscapeone in which events change costantly and unpredictably.'2 por the most pathese changes are revolutionary, not evolutionain nature. Revolutionary changes happen swiftare constant, even relentless in their frequenand affect virtually all parts of an organizatisimultaneously.'3 The uncertainty, ambiguity, adiscontinuity resulting from revolutionary changchallenge firms and their strategic leadership increase the speed of the decision-making prcesses through which strategies are formulatand implemented.''* In the global economy, knowedge work and knowledge w orkers are the primasources of economic growthfor individual firan d for nati ons . Thus, in the21^*century, the abito build, share and leverage knowledge will place the ownership and/or control of assets asprimary source of competitive advantage.'^However, certain conditions of the new compitive landscape, including the expectation that tworld's economy will grow substantially durithe first 20 years of the next century, also creaoppo rtunities for com pan ies to improve their finacial performance.'^ Organizations in which stragic lead ers adopt a new com petitive m indset oin which mental agility, firm flexibility, speed, novation, and globalized strategic thinking avalued highlywill be able to identify and copetitively exploit opportunities that emerge in tnew competitive landscape. These opportunitsurface primarily because of the disequilibriuthat is created by continuous changes (especiatechnological changes) in the states of knowledthat are a part of a competitive environment. Mospecifically, although uncertainty and disequilrium often result in seemingly hostile and tensely rivalrous conditions, these conditions msimultaneously yield significant product-drivgrowth opportunities.'' ' Through effective strate


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5 Ireland ndHittStrategic eadershipIn the 1960s and early 1970s, situations facing thefirm were thought to be the primary determinant ofmanagerial behaviors and organizational out-comes. Compared with the influence of conditionsin the firm's external environment, managers werebelieved to have little ability to make decisionsthat would affect the firm's performance.

The reat Leader Viewo Strategic LeadershipIn 1972, John Child, a prominent organization the-orist, argued persuasively that an organization'stop-level managers had the discretion or latitudeto make choices that would, indeed, affect theirfirm's outcomes.'^ In particular, because top man-agers have the responsibility for the overall per-formance of their firms, these individuals have thestrongest effect on the firm's strategic manage-ment process. In Child's view, strategic leaders,armed with substantial decision-making responsi-bilities, had the ability to influence significantlythe direction of the firm and how it was to bemanaged in that pursuit. Strategic leadership the-ory holds that companies are reflections of theirtop managers, and, in particular, of the chief exec-utive officers, and that .. .the specific knowledge,experience, values, and preferences of top manag-ers are reflected not only in their decisions, but intheir assessments of decision situations. ^o

Substantial numbers of CEOs have adopted thenotion that strategic leadership responsibilitiesare theirs alone. One of their primary tasks is tochoose a vision for the firm and create the condi-tions to achieve *hat vision. Thus, as a result of thesignificant choice options available to the CEO asthe firm's key strategic leader, this individual oftenworked as a Lone Ranger when shaping the firm.Isolated from those being led, the firm's key stra-tegic leader commanded his/her organizationprimarily through use of top-down directives.2'Particularly when these choices resulted in finan-cial success for the company, the key strategicleader was recognized widely as the corporateHercules. 2^

Appropriate for its time, the theory of strategicleadership contributed to organizational success.But the environmental conditions in which thistheory was used have changed dramatically be-cause of the global economy. In the past fewdecades, environmental conditions were relativelystable and predictable compared with the currentand predicted states of these conditions in the 21^

past few decades resulted in manageable amouof uncertainty and ambiguity. Change was oftreated as linear in many industries; major copetitors were largely domestic, not global comnies;organizations were structured in hierarchconfigurations that were supported by selectand promotion practices. However, conditions sociated with the global economy's new comptive landscapeshorter product life cycles, evaccelerating rates and types of change, explosion of data and the need to convert ituseable informationprevent single individufrom having all of the insights necessary to chafirm's direction. Moreover, some believe that hing strategic leadership centered on a single pson or a few people at the top of a hierarchipyramid is increasingly counterproductive.^3 Cstrained by their abilities to deal with rapidly creasing amounts of data and the general coplexity of the global economy, top managers now challenged to discharge their strategic leership responsibilities differently.^* Insightful managers recognize that it is impossible for thto have all of the answers, are willing to lealong with others, and understand that the unctainty created by the global economy affects pple at the top as well as those lower down in organization.

Insightful topmana gers recognize thatis impossible forthem tohave ll of thanswers rewilling tolearn along witothers ndunderstand thattheuncertainty createdby the globaleconomy affects people t the top s was those lower downin the organizatioThe Great roups View o Strategic LeadershipIn the 2r* century, the nature of the organizationwhich effective strategic leadership practices cur will be different. In the view of noted businthinker Charles Handy, a public corporatshould and will be regarded not as a piece property owned by the current holders of shares, but as a community. More properly thouof as citizens than as employees, people involvwith an organizational community remain togetto pursue a common purpose. A communitysomething to which a person belongs and tbelongs to no one individual. The community's izens have both responsibilities to pursue the co


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Academy of Manag ement xecutive NovemIn an organizational community, strategic lead-hip is distributed among (diverse intdividuals

for their firm. Handy argues that many citi-ill need to serve their communities as lead-

will need to be dispersed throughout therm.26 When allowed to flourish as involved lead- people spark greatness in each other. As Ital-n author Luciano De Crescenzo noted, We are

angels with only one wing, we can only flyCombinations or collaborations of organiza-

onal citizens functioning successfully have beened great groups. These collaborations usually

agers with significant profit and lossponsibilities, internal networkers who move

anization spreading and fosteringmitment to new ideas and practices, and com-

ates the development and/or leveraging ofledge.28 Members of great groups rely on oneer to create an environment in which innova-

Consistent leadershipand among all of the firm's great groups

ifficult, are required to enhance firm per-. Top managers who facilitate the de-

people with different talentshave shifted thef responsibility to form adaptive solutions to

sues from themselves to the organization's fullAs knowledge sharing and developing entities,

ibility for firm outcomes. Involved and com-itted, these people understand the significance

f their work and their responsibility to each oth-r.31 Second, great groups seek to learn from mul- and customers. Group members aremitted to the position that No matter where

is (for the group) to leverage that knowledgereplicating it throughout the company so that

The third great group characteristic concerns in-ation and knowledge. Increasingly, the infor-t groups gather to form knowledge and

primarily information from outside that allowbusiness to decide .. .how to allocate its knoedge resources in order to produce the highyield. Only with such information can a businalso prepare for new changes and challenges aring from sudden shifts in the world economy andthe nature and content of knowledge. The develoment of rigorous methods for gathering and anlyzing outside information will increasingly come a major challenge for businesses and information experts. ^ Great groups respond pitively to Drucker's challenge and are learnihow to interpret external information in competively relevant terms. In the 21^ century, it will increasingly vital for the firm's strategic leadship processes to adopt this perspective regardithe acquisition and use of information flows.

Another characteristic of great groups is thmaintenance of records of individuals' knowledstocks. With these records, people can quickly fothers who possess the knowledge required solve problems as they arise. Maintaining and uing these records demonstrates these groups' abity to work smarter through their collective insighand the skills resulting from them. Finalgreat groups understand that the firm's methof strategic leadership results in a constanchanging configuration of responsibilities. Acrtasks, every member of a great group serves,different times, as a leader, peer, or subordinaThe operationalization of this understanding sults in mutual influence relationships amothe firm's top managers and all organizational cizens, including those with formal managerresponsibilities. ^

Perhaps the most important great group in organization is the top management team (TMformed by the CEO. The top management team irelatively small group of executives, usually btween three and ten people. These individuals aat the apex of the organization and provide stragic leadership.3^

Because of the complexity of the new competive landscape, both in its structure and dynmism, the collective intellect generated by a management team is necessary for effective sttegic leadership to occur in the firm. A philopher's view demonstrates this point: None of usas smart as all of us. ^ The large numberorganizational stakeholders alone makes it nessary to depend on a team of top executives fstrategic leadership. The global economy, m


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5 Ireland ndHitt

The global economy more than nyother factor h screated theneed /orthetop mana gemen t team to effectivelyexercise strategic leadership inorganizations.needed to understand and operate in many globalmarkets is substantial, thereby requiring a teameffort In fact, global firms such as Asea BrownBoveri (ABB) believe that it is necessary to have aculturally diverse TMT to successfully operate insuch markets. This is particularly important be-cause of the emphasis on gaining the externalknowledge necessary to develop a collective vi-sion for the organization and to gain the multipleconstituencies' commitment to pursuit of the vision.

Because of multiple stakeholders with compet-ing interests, there is need for a heterogeneousTMT, one with members having different knowl-edge sets and skills.^^ The CEO remains the topleader, but must use these different knowledgesets and skills to successfully manage the organi-zation. Viewing the other members of the TMT aspartners allows the CEO to do this effectively. Be-yond this, top managers should treat all employ-ees as partners, especially in flatter, matrix typeorganizationsan organizational form that will beused increasingly in 21 ' century firms. In suchorganizations, top managers manage across tradi-tional boundaries (e.g., functions), building thehorizontal organization in the process.^^

Even though the operational details of effectivestrategic leadership are continuing to change asthe global economy evolves, the CEO remains ac-countable for the entire firm's performance. Theboard of directors will hold the CEO accountablefor guiding the firm in ways that best serve theinterests of owners (e.g., shareholders) and otherstakeholders. Tomorrow's organizations will stillrequire a great leader to be successful. Great lead-ers are able to share responsibility for leading andmanaging business units, sharing information andideas widely with others and seeking mutual in-fluence among all who have accepted the respon-sibility to contribute to the formation and achieve-mentof the firm's direction.

Six omponents o Strategic LeadershipWhat will be different in 21^* century companies ishow top managers discharge their strategic lead-ership responsibilities. They will no longer view

sibility to a range of stakeholders. Instead of seeing to provide all the right answers, they will strito ask the right questions of community citizens thhave empowered to work as partners with theThey can choose to form a community of cleagues rather than a company of employees costrained by traditional hierarchical configurationThetop managers must affect the behaviors

many stakeholders, especially those of organiztional citizens, working often as a coach. The orgnizational community is one in which citizens' crative energy is released, and their self-confidenenhanced, when they are inspired to assume rsponsibility for leading themselves through twork of great groups.-'o Sharing among inspirand committed citizens facilitates the emergenof the collective magic that creates intellectucapital and knowledge. An effective strategleader "finds glory in the whole team reaching tsummit together.""*

John Browne, CEO of British Petroleum Company, believes that the top manager must stimlate the organization rather than control it. The tmanager provides strategic directives, encouraglearning that results in the formation of intelletual capital, and verifies that mechanisms exist transfer intellectual capital across all of the firmparts. Browne believes that "the role of leaders all levels is to demonstrate to people that they acapable of achieving more than they think thcan achieve and that they should never be satfied with where they are now."* Heinrch vPierer, president and CEO of Siemens AG, sathat "As we move into what will be a century unprecedented challenges, successful leaders wrely even more intensely on strengths that habecome crucial in recent yearsspeed of desions, flexibility, capable delegation, teamworthe ability to build for the long term while meetishort-term needsand vision. Increasingly, nworked and globalized thinking will be essentfor coping with the accelerating pace of change."

Based on the evidence discussed above, we blieve that 21^ century strategic leadership shoube executed through interactions that are based a sharing of insights, knowledge, and responsibities for achieved outcomes. These interactioshould occur between the firm's great leadersttop managersand its citizens. These interactiotake place as the firm satisfies the requiremenassociated with six key effective strategic leadship practices. Although considered individualit is through the configuration of all six activiti


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Academy of Manag ement xecutive NoveDetermining the Firm s Purpose or VisionThe task of determining the direction of the firmrests squarely on the CEO's shoulders. Joe Gor-man, TRW's CEO, believes that the top manager,often working in concert with the TMT, must pro-vide general guidelines as to where the firm in-tends to go and the key steps to be taken to reachthat end.44 J. Tracy O'Rourke, CEO of Varian Asso-ciates, Inc., end orse s Go rma n's view: Clearly, ifyou're going to do well over time, you ha ve to havesome abilityyourself or in combination with oth-ers to come up with a vision . . . an d then follow itup with believable and implementable actionpla ns. In most corporate structures, the only personwho can do that is the CEO. ''^ A recent survey of1,450 ex ecu tives from 12 glo bal corp oration s foundt t the ability to articulate a tang ible vision,valu es, an d strategy for their firm w as the mostimpo rtant of 21 com petencies consid ered to becrucial skills for global leaders to possess in thefuture.Various definitions of purpose or vision havebeen offered. However, the one advanced recentlyby John Browne, British Petroleum's CEO, capturesthe attributes of an effective organizational pur-pose for21^'century firms. Browne argu es th at a s adescription of who the firm is and what makes itdistinctive, purpose indicates what a company ex-ists to achieve and what it is willing and not will-ing to do to achieve it. Browne also b elieves that aclear purp ose .. .allows a company to focus itslearning efforts in order to increase its competitiveadvantage. ^^ Visions that facilitate developmentof this type of focus make sense to all organiza-tional citizens, stretch citizens' imaginations butare still within the bounds of possibility, are un-derstood easily, and create a cultural glue thatallows units to share knowledge sets.'*^Once the CEO and the TMT have set the generalorganizational purpose, all other citizens, includ-ing the TMT, will be empowered to design andexecute strategies and courses of action to accom-plish that end.*^ Empowered organizational citi-zens working individually or as members of greatgrou ps in pursuit of the firm's p urpo se will be ab leto provide valuable feedback to the CEO and theTMT. This feedback will help the top executivesdevelop the type of insights required to revisit thepurpose regularly to verify its authenticity.Rockwell International's new vision is for thecom pany to becom e the world's best diversifiedhigh-technolog y compan y. The CEO and TMT be-

practices, and the manufacture and distributionproducts that will allow the firm's customers tothe most successful in the world in their businoperations.Critical to efforts to achieve the firm's visiothe active involvement of Rockwell employees ganizational citizens). At locations throughoutworld, employees a re to be challenge d to taketermined actions that will help the firm achievepurpose. To select appropriate actions, employcitizens are formed into 23 imp lemen tation tea(or great groups) that are asked to idenstrengths an d w eakn esses . Each unit is to deverecomm endations that when accomplished willlow it to become the best in the world at comping a particular task or set of activities.^ Tpatternwherein organizational citizens workmembers of a community that is seeking to sethe common goodwill be linked with effecstrategic leadership practices in the 21^*centuThe blurring of industry boundaries stimulathe emergence of new and sometimes aggresscompetitors with significant resource bases creates interesting challenges for firms' strateleadership processes.The announced entrance in early 1998 of the rean giant, Samsung Group, into the world's aumobile manufacturing industry demonstrates challenge. Although as of mid-1997 Samsung never built and delivered to a customer a passger car, it was in the midst of a $13 billion invement to manuf acture 1.5 million cars ann ually . vision driving these commitments and actions wfor Samsung to rank among the world's top auto ma kers by 2010. dem onstratio n of this visis the billboard outside Samsung's new autombile man ufacturing facility in Pus an: Our dreand Korea's future.Sam sung Group's amb itious auto m anufacturgoal surprised at least some industry analy sts wnoted that the global auto industry was awashexcess production capacitya problem not pected to abate in the foreseeable future. Onoted industry observer said the world is not wing breathlessly for a Samsung car . . . There 'slogical opening in the marketplace where Sasung can step in and fill a vacuum. Its sales whave to come out of someone else's hide. ^i Edence was also emerging in mid-1997 that at lesome of South Korea's conglomerates were countering difficult performance challenges cause of too much diversification at too rapipace. Although Samsung's future competitive tentions could be affected by these general pr


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5 Ireland andHittits vision a reality. In the words of Richard Pyo ofCredit Suisse First Boston in Seoul, Many peo-ple say that Samsung's plans are crazy and toorisky, but the Korean economy has developed ongambles. ^3

As this example suggests, every automobilemanufacturing company's strategic leadership ischallenged to analyze carefully Samsung Group'sability to achieve its vision in the world's automarketplace. To respond successfully to this chal-lenge, both the top managers (strategic leaders)and organizational citizens (through their work ingreat groups) in companies competing againstSamsung Group's auto unit should use significantamounts of external information to select appropri-ate competitive responses.

Exploiting ndMaintaining ore ompetenciesCore competencies are the resources and capabil-ities that give a firm a competitive advantage overits rivals. The relatively unstable market condi-tions resulting from innovations, diversity of com-petitors, and the array of revolutionary technolog-ical changes occurring in the new competitivelandscape have caused core competencies ratherthan served markets to become . . .the basis uponwhich firms establish their long-term strategies. ^In the21^*century, an ability to develop and exploitcore competencies will be linked even more posi-tively and significantly with the firm's success.

Only the combinations of a firm's resources andcapabilities that are valuable, rare, costly to imi-tate,and for which there are no equivalent strate-gic substitutes can be rightly identified as corecompetencies.^ Only when uniform agreement ex-ists within the organizational community aboutwhich resources and capabilities are indeed corecompetencies can appropriate actions be designedto exploit them in the marketplace.^ The largeretailer Nordstrom Inc., for example, is thought tohave core competencies in its customer serviceand ability to package merchandise in ways thatprovide unique value to customers. Dell ComputerCorporation's distribution system is a key compet-itive advantage. Competencies in the general areaof marketing and specific applications of specialskills in advertising campaigns and its globalbrand name are recognized as core competenciesfor Philip Morris. In each of these cases, followingagreement about their identification as core com-petencies, strategic leaders work tirelessly to ap-ply the competencies in ways that will improvecompany performance.

influence significantly the choices strategic leaers make when seeking to use core competencin novel, yet competitive ways. Through the recrocal sharing of knowledge and the learning thresults from it are a firm's core competencies ntured effectively.

Knowledge is shared and learning occthrough superior execution of the human taskssensing, judging, creating, and building relatioships. ' The importance of knowledge for firseeking competitive advantage in the global ecoomy is shown by the following comment aboOwens Coming's positive financial performan In the past year a series of moves in sales amarketing, information systems, and manufacting and distribution have come together in a herent strategy that is transforming this Midweern maker of humdrum materials into a glocompetitor whose real business is knowledge. Indeed, with rare exceptions, in the21*centuryfirm's productivity will lie more in its collectintellectthat is, in its collective capacity to gand use knowledgerather than in its hard asssuch as land, plant, and equipment.^^

The competitive value of core competencies creases through their use and continuing develoment.^ A firm's privately held knowledge is foundation of its competitively valuable core copetencies and is increasing in importance asdriver of strategic decisions and actions. The meffective strategic leadership practices in the 2century will be ones through which strategic leers find ways for knowledge to breed still mknowledge. While physical assets such as lamachinery, and capital may be relatively scaon a global basis, ideas and knowledge are abdant, they build on each other, and they can reproduced cheaply or at no cost at all. In otwords, ideas don't obey the law of diminishreturns, where adding more labor, machinerymoney eventually delivers less and less additiooutput. ^

Johnson Johnson's CEO is a strategic leawho believes in developing and nurturing

The most effective strategic leadershippractices in the r century willbe onethrough which strategic leaders findways for knowledge tobreed still moreknowledgefirm's knowledge base. Asked to describe fac


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cademy o Management Executive Novemsiness. (It) is in the knowledge business. ^ How-

ctively in the global marketplace without ap-

v loping Human apitaluman capital is the knowledge and skills of afirm's entire workforce or citizenry. Strategic lead-ers are those who view organizational citizens as acritical resource on which many core competenciesare built and through which competitive advan-tages are exploited successfully. In the globaleconomy, significant investments will be requiredfor the firm to derive full competitive benefit fromits human capital. Some economists argue that

these investments are essential to robust long-term growth in modern economies that depend onknowledge, skills, and information. ^ Continual,systematic work on the productivity of knowledgeand knowledge workers enhances the firm's abilityto perform successfully. Citizens appreciate theopportunity to learn continuously and feel greaterinvolvement with their community when encour-aged to expand their knowledge base. Ongoinginvestments in organizational citizens result in acreative, well-educated workforcethe type ofworkforce capable of forming highly effectivegreat groups.

The importance of educational investments incitizens is being supported in a growing numberofcorporations. Andersen Consulting, for example,allocates six percent of its annual revenue to edu-cation and requires each professional employee tocomplete a minimum of 130 hours of training an-nually. Intel Corp. spends $3,500 per year per per-son on education. General Motors Corp. and Gen-eral Electric have appointed chief knowledgeofficers. Warren Bennis suggests that this institu-tionalization of education is not some fringe, feel-good benefit. It is tangible recognition that edu-cation gives the biggest bang for the corporatebuck. A recent study showed that companiesthat invest 10percent more in education receive an8.5 percent increase in productivity. In contrast,companies boosted their productivity by only threepercent as a result of a 10 percent increase incapital expenditures. ^The global economy allows firms to earn a finan-ial premium by using competitively superior

ractices in the location, selection, and subse-uent development of human capital. One key rea-

will be created over the next decade with almno increase in the supply of human resources to these jobs.A survey of human resource managers cducted by the American Management Associatrevealed that 47percent of the respondents worin firms that faced skilled labor shortages. Intestingly, 54.7 percent of the same group of respodents also believe that the shortages in skilpersonnel will be worse in 2000 and beyond. Asmid-1997,at least 190,000 information technolojobs were vacant in U.S. companies. A 43 percdecline in the number of college graduates eaing undergraduate degrees in computer scienbetween 1988and 1997suggests more serious lashortages ahead.^^Skilled labor shortages have unintended neg

tive consequences. Talented, dedicated, and movated employees often become frustrated and dsatisfied when asked to work continuously wthose without equivalent skills and commitmenAs a successful financial analyst explained:could not fathom, let alone accept, the extrevariations in work ethic, attention to detail, acommitment to job and company. All my prior wand school experience had been with creative, ergized self-starters. It took me months, if years,to value the diverse work styles and varymotivators of the work force I encountered. ^ Tha challenge for tomorrow's strategic leaders isfind ways to encourage each employee to fulher or his potential. Especially when faced wlabor shortages, the organizational communitcommon good can be reached only when eamember of the great group is committed to fparticipation.

Greater workforce diversity is another issue twill confront 21^*century strategic leaders. Ornizational communities will comprise individufrom multiple countries and cultures that mhave unique and idiosyncratic value structurCEOs and TMTs should learn to appreciate beliefs,values, behaviors, and business practiof companies competing in a variety of regions acultures. Organizational citizens can then betunderstand the realities and preferences that arpart of the region and culture in which they working.Peter Brabeck-Letmathe, CEO of Nestle SA, lieves that it is increasingly important for top magers to speak at least two to three languages

Cross-border and culture transfers among orgazational citizens will be used prominently in


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5 Ireland andHittSuccess will depend on the ability of a firm's topmanagers to form a community of citizens ratherthan a band of employees working for a firm.

Sustaining an Effective Organizational ultureOrganizational culture refers to the complex set ofideologies, symbols, and core values sharedthroughout the firm. Several business writers be-lieve that the challenges to firms in the21^ centurywill be not so much technical or rational as cultur-al how to lead the organizations that create andnurture knowledge; how to know w^hen to set ourmachines aside and rely on instinct and judgment;how to live in a world in which companies haveever increasing visibility; and how to maintain, asindividuals and organizations, our ability to

Culture provides the context within which strat-egies are formulated and implemented. Organiza-tional culture is concerned with decisions, actions,communication patterns, and communication net-works. Formed over the life of a company, culturereflects what the firm has learned across timethrough its responses to the continuous challengesof survival and growth. Culture is rooted in history,held collectively, and is of sufficient complexity toresist many attempts at direct manipulation. Be-cause it influences how the firm conducts its busi-ness,as well as the methods used to regulate andcontrol the behavior of organizational citizens, cul-ture can be a competitive advantage.

In the global economy, strategic leaders capableof learning how to shape a firm's culture in com-petitively relevant ways will become a valuedsource of competitive advantage. Chrysler's CEORobert Eaton and President Robert Lutz are strate-gic leaders thought to be sources of competitiveadvantage for their firm. The secret to his compa-ny's recognition as Detroit's profitability cham-pion, Eaton suggested, is the Chrysler difference;a corporate culture that rejects Motown's hide-bound bureaucratic traditions. Some analystssupport this suggestion, noting that no group ofmanagers has stirred up Detroit more since Ford'sfabled Whiz Kids of the 1950s. In one writer's view,the firm's tone is set by Eaton, whose low-keydemeanor belies a fierce competitive streak, andLutz, the swashbuckling ex-Marine with a flair forproduct creation. But behind Eaton and Lutz,Chrysler boasts a little-known cast of managerswho've become the envy of the industry. ^ Inte-grating this culture with Daimler-Benz's may proveto be challenging. On the other hand, a successful

The social energy that drives Southwest Airlinis largely a product of CEO Herb Kelleher and tmanagers who surround him. The firm's cultureresponsible for the company's steady growabove-average profitability, and the avoidance employee layoffs for more than 25 years. Actiothat exemplify Southwest's culture include: Pilhold barbecues to thank mechanics; flight attedants sing safety instructions on board; agenhang mirrors on their computers to make suthey're smiling when taking reservations; Kellehis generous with hugs and kisses. Employees acommitted to treating coworkers and customewith respect and dignity, having fun, and workihard. An indication of the culture's desirability that 137,000 people applied in 1996 for only 5,0Southwest Airlines' job openings.''

Effective cultures are ones in which organiztional citizens understand that competitive advatages do not last forever and that the firm mumove forward continuously. When citizens acomfortable with the reality of constant chanand the need for a never-ending stream of innovtions, patterns and practices are in place that cenhance global competitiveness.

mphasizing thical PracticesEthical practices serve as a moral filter throuwhich potential courses of action are evaluatedThe influence of top managers on the firm's ethicpractices and outcomes is accepted by businepractitioners, academics, and society. In the 21century, effective strategic leaders will use hoesty, trust, and integrity as the foundations ftheir decisions. Strategic leaders displaying thequalities are capable of inspiring their employeand developing an organizational culture in whiethical practices are the behavioral norm. AcCEO Stan Shih notes that for his employees theis simply no alternative to dealing honestly wall of the firm's stakeholders. Shih's belief thhuman nature is basically positive and good coube the force driving his forthright and ethical buness practices.''

The challenge for strategic leaders is how instill normative values that guide corporate tion and individuals' behaviors.' * In the final anysis, ethical decision-making processes resultthe use of organizational resources to obtain befits desired by legitimate stakeholders. A stragic leader's commitment to pursuits in which legethical, and social concerns have been taken i


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cademy ofManagem ent Executive NovemStrategic leaders in the 21^ century's global econ-omy because of the significant diversity of the cul-tures and economic structures within which firmswill compete. An understanding of the interests ofall legitimate stakeholders will come only throughanalysis of and sensitivity to cultural diversity. Astrategic leader's commitment to serve stakehold-ers legitimate claims will contribute to the estab-lishment and continuation of an ethical organiza-tional culture. Employee practices that take placein such a culture become the set of accepted andexpected commitments, decisions, and actions thatshould be taken when dealing with the firm'sstakeholders.

Establishing alanced Organizational ControlsOrganizational controls are the formal, informa-tion-based procedures that strategic leaders andmanagers use to frame, maintain, and alter pat-terns of organizational activities.''^ The new com-petitive landscape makes it difficult to establishsuch controls, which, by their nature, limit employ-ees behaviors. Controls influence and guide workin ways necessary to achieve performance objec-tives. The new competitive landscape is repletewith opportunities that are addressed most effec-tively through innovation and creativity. Strategicleaders able to establish controls that facilitateflexible, innovative employee behaviors will earna competitive premium for their firm.

Top managers are responsible for the develop-ment and effective use of two types of internalcontrolsstrategic controls and financial con-trols.'' Strategic controls require information-based exchanges among the CEO, top manage-ment team members, and organizational citizens.To exercise effective strategic control, top manag-ers must acquire deep understandings of the com-petitive conditions and dynamics of each of theunits or divisions for which they are responsible.Exchanges of information occur through both infor-mal, unplanned meetings and interactions sched-uled on a routine, formal basis. The effectivenessof strategic controls is increased substantiallywhen strategic leaders are able to integrate dis-parate sets of information to yield competitivelyrelevant insights. Because their emphasis is onactions rather than outcomes, strategic controlsencourage lower-level managers to make deci-sions that incorporate moderate and acceptablelevels of risk. Moreover, a focus on the content ofstrategic actions provides the flexibility managers

Financial controls entail objective criteria (evarious accounting-based measures) that strateleaders use to evaluate returns earned by copany units and those responsible for their pformance. By focusing on performance-induoutcomes, financial controls encourage the accoplishment of short-term performance goals. An phasis on financial rather than strategic contrmakes managerial rewards contingent on achiement of financial outcomes. Therefore, an empsis on short-term financial performance goals courages risk-adverse managerial decisions behaviors.

Effective top managers seek to develop and a balanced set of strategic and financial contrTypically, this outcome is achieved by using stegic controls to focus on positive long-term reswhile pursuing simultaneously the requiremenexecute corporate actions in a financially prudand appropriate manner. In this fashion, strateleaders are able to use strategic controls to crease the probability that their firm will gain benefits of carefully formulated strategies, but at the expense of the type of financial performathat is critical to successful strategy implemention processes and to the firm's ability to satselected stakeholders. Nonetheless, the diverof the global economy, coupled with the dynamchallenges embedded within the new competilandscape, highlight the increasing importancstrategic controls. Providing the leadership quired for the firm to compete successfully in mtiple countries and cultures demands strateleadership practices that are oriented largelythe integration of disparate competitive informtion and the use of broad-based strategic contr

Recommendations or ffective Stra tegicLeadership PracticesCompetition in the 21^*century's global econowill occur in postindustrial societies that didramatically from the industrial societies they replacing.

Industrial societies and the commercial enprises operating within them have been focuprimarily on activities intended to create weaTechnological and scientific advances were principal means through which wealth was cated in such sectors as medicine, agriculture, comunications, energy, transportation, and electrics. In the postindustrial era, information-batechnology and internationalization are the '


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5 Ireland and Hitt

markets, (3) economic growth is confrontedcal limits, and (4) there is a movement

democratization of markets and politics inmany of the world's countries.'''

The attributes of the postindustrial era createmore risk for firms that attempt to create wealth bycompeting in multiple marketplaces. Strategicleaders face challenges that may become perva-sive as more market democratization processes oc-cur throughout the world. These leaders are of-fered the following recommendations.

Growth OrientationThe realities of competition in the global economydemand a corporate focus on growth rather than ondownsizing and cost reductions. A variety of stra-

The realities of compe tition in theglobaleconomy demand a corporate focusongrowth rather than on downsizing andcost reductionstegic approaches can be used in the pursuit ofgrowth, including acquisition, innovation andproduct development, extreme decentralization,and concentration on product line extensions toprovide customers with additional value. Themeans are less critical than the desired outcome.The most effective strategic leaders will be capa-ble of working with all organizational citizens tofind ways to match the firm's resources, capabili-ties,and core competencies with relevant growth-oriented opportunities.

Knowledge ManagementStrategic leaders must enable their organiza-tions to develop, exploit, and protect the intellec-tual capital contained in their citizens' knowl-edge bases. They are challenged to developpathways through which knowledge can be trans-ferred to people and units where it can be furtherdeveloped and used to pursue strategic competi-tiveness. Managing knowledge in this mannerchallenges conventional thinking and increasesthe likelihood that the firm will be able to createnew competitive space in its markets. In thewords of Warren Bennis, the key to competitiveadvantage in the 1990s and beyond will be the

within their organizations and find ways to keeit there. ''

Through voluntary arrangements such as stratgic alliances, joint ventures, technology echanges, and licensing agreements, firms potheir resources to create goods and services wieconomic value. They create knowledge that, turn, facilitates the development of competitivevaluable goods or services.'' Strategic leaders whlearn how to manage such collaborations will bcome a source of competitive advantage for theorganizations. The most effective strategic leadewill develop the skills required to engage simultneously in competitive and cooperative behaiors. Companies that both effectively cooperaand compete with other enterprises will eaabove-average financial returns. The creativity great groups will be instrumental in isolating coperative projects from those for which competitibehaviors are more appropriate.

Mobilization of Human CapitalImplied throughout is the need for companies adapt to the significant changes in the globeconomy. To cope with changes in the world's scieties, technologies, and markets, 21 * centustrategic leaders will be challenged to mobilicitizens in ways that increase their adaptive abities. Leaders should refrain from providing aswers; instead, their focus should be on askichallenging questions. They should request thcitizens working as members of great groups cosider relevant information to determine how tfirm can use its knowledge base to achieve stragic competitiveness. Asking citizens to accept throles as leaders and colleagues while working great groups can be expected to mobilize their effoaround key strategic issues. Facilitating citizens' forts to challenge the historical conduct of businein the firm also can galvanize them as they seekaccomplish relevant goals. The development amobilization of human capital is vital if the firm isachieve the strategic flexibility that is linked wsuccess in the new competitive landscape. '

eveioping an ffectiveOrganizational CultuAs the social energy that drives the firm, cultuexerts a vital influence on performance. To factate the development of values oriented to growand success, 21^ century strategic leaders shoucommit to being open, honest, and forthright their interactions with all stakeholders, includ


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Academy ofManagem ent Executive NoveTableStrategic Leadership Practices

20 Century Pract ices 21' Century PracticesOutcome focusedStoicand confidentSought to acquire knowledgeGuide d p eople s creat ivi tyWork flows determined by h ierarchyArticulated the importance of integrityDemanded respectTolerated diversityReacted toenvi ronmental c hangeServedas the great leaderViews employeesas a resourceOperated primari ly through a domest ic mindsetInvested inemployees development

Outcomeand process focusedConfident, butwi thout h ubrisSeeks toacqui re and l everage knowledgeSeeks tore lease and nurture peop le s creat ivi tyWork flows influenced by relat ionshipsDemons t ra tes the importance of integrity by act ionsWilling toearn respectSeeks diversityActs to an t ic ipate envi ronmental changeServesas the l eader and as a g reat group memberViews organizat ional ci t izensas a critical resourceOperates primari ly through a g lobal mindsetInvests significantly inci t izens continuous developm

work as the manager of Chrysler Corp. s big-vanplant in Windsor, Ontario. At the young age of 33and with limited manufacturing experience, Bo-nini needed the support of the plant s84 managers,1,800 workers, and officials of the local Canadianautoworkers union. In a display of candor andhonesty, Bonini acknowledged his youth and inex-perience to those he was to lead and solicited helpfrom everyone involved with the plant. He sched-uled town hall meetings to hear workers ideas andcomplaints, met with union officials, and madecertain that each employee knew him. He madefrequent visits to the plant floor to verify that workwas proceeding as intended and to request work-ers insights regarding improvements. Employeesresponded positively to Bonini s candor, honesty,and integrity. 2

Remaining ocused on th utureThe significant differences between effectivestrategic leadership practices in the20** and the21^* centuries are presented in Table 1. CEOswho apply practices associated with 21^* centurystrategic leadership can create sources of com-petitive advantage for their organizations. Thecompetitive advantages resulting from the workof CEOs as chief leaders and the contributions ofgreat groups as members of organizational com-munities will allow firms to improve their globalcompetitiveness.

Strategic leaders must use some of their timeand energies to predict future competitive condi-tions and challenges. Companies in the UnitedStates, Europe, and Japan have intensified their

competitive frontier. However, high levels of are associated with these significant opportties. Major reversals in the trend toward demotization of countries markets and their accomnying political structures could have signifiimplications for strategic leaders and their firmEffective strategies leaders should seek infortion that will allow them to predict accurachanges in various global markets. Strategic laborations, with host governments and other cpanies, are a valuable means of dealing wchanging conditions in emerging economic sttures.By aligning their strategies with an emeing country s best interests, firms increase tchance of competitive success in volatile sitions. Failure to develop these understandings inhibit strategic leaders efforts to lead their feffectively in the 21^* century.

Endnotes F ive business thinkers, Peter F. Drucke r, Esthe r DCharles Handy, Paul Saffo, and Peter M. Senge were arecently byHarvard Business Review to describe the chal lethey seea l ready tak ing sh ape for executives as they mov ethe next c entury. See P. F, Drucker, E. Dyson,C.Handy, P, and P. M.Senge, Looking Ahead: Implicat ions of the PreHarvard Business Review 75(5), 1997, 18-32. The importanceof s t ra teg ic l ead ersh ip for 21 centuryis described in: M. Davids, Where Style Meets Su bstance,na lofBusiness Strategy 16(1), 1995, 48 -60 ; R. P. W hite , P. Hson,and S. Crainer.TheFutureofLeadership (London: PiPublishing, 1997). Additional definitional information about strategic lship can be found in:C.M. Christensen, Making Stra

Learning byDoing, Harvard Business Review 75(6), 1997156;M. A. Hitt, R. D. I reland, and R. E. Hoskisson, StraManagement: Competitiveness andG lobalization Third Ed


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5 Ireland and Hitt

Harvard Business Review,^The univ ersa l nee d for each firm to deve lop a com petitive

, Cam pbe ll and M. Alexan der, Harvard Business Review, 75(6),42-51.^ Mr. Gorman's viewpoint is included in an article in whichtial rea son s for the rece nt suc cess of U.S. firms in they are e xam ined . For further information se e: G. P.tocks' Surge is a n Economy in Which Big U.S. Wall Street Journal, Nov emb er 22, 1995, Al, A3.' Based on an argument that globalization is a reality of our

Wall Street Journal, April 28,997, A18.^ In light of the global economy, an interesting set of predic-ons about the nature of busin ess fi rms an d their leade rs in the

P ' Century, Long Range Planning, 22, April, 1989,37-53.^The director of the Institute for In ternatio nal Economics

The Economist, Sep tem ber 11, 1993, 57-58.' Peter Drucker made these observat ions in an ad dre ss tohe Knowledge Adva ntage Conference sponsored by the Ernstoung Cen ter for Business In novation. See Peter D rucker on Theext 20 Years, Executive Upside,M arch , 1997, 3. To bet ter understa nd the possible nature of the globalmarketplace in the future, a senior writer reviewed severalbooks. His rev iew s ca n b e found in: F. R. Bleakle y, The Fu ture ofthe Global Marketplace, Wall Street Journal, March 15, 1996,A13.

'^ Unp redictable eve nts affect firms of all sizes. An a na lys isof the effects of the new competitive landscape on high-growthentrep reneu rial firms, is prese nted in: R. D. Ireland and M. A.Hitt, Performance Strategies for High-Growth EntrepreneurialFirms, Frontiers of Entrepreneurship Research, 1997, 90-1 04.'^ In a recent article, two prom inent re sea rch ers a rgu e con-vincingly that the complexity of political, regulato ry, and tech-nological changes confronting most organizat ions has maderadical organizat ional change and adaptat ion a central re-search issue . To further explore this central issu e see: R.Greenwood an d C. R. Hinings, Unde rstanding Radical Organi-zational Change: Bringing Together the Old and the New Insti-tutionalism. Academy of Management Review, 21 , 1996, 1022 -1054.' '' Rapidly chan ging b usine ss condit ions resul t in a premiumbeing placed on the firm's ability to speed up its operations.Recent research suggests that this ability is especially impor-tant to develop a competi t ive advantage in fi rms in industrieswith shortened product life cycles. Arguments supporting thisposition are presented in: E. H. Kessler and A. K. Chakrabarti,Innovation Speed: A Conceptual Model of Context, Antecedents,and O utcome s, Ac adem y of Man age me nt fieview, 21,1996, 1143-1191.' Both Drucker and Seng e em pha size this point in their de-script ions of events that have already happened that are shap-

ing the future for 2P' century firms. For more information, see:Drucker, Dyson, Han dy, Saffo, and Sen ge, Looking Ah ead : Im-plications of the Present, 18-32.

part of the 21' century is presented in: Dallas Morning NeFutu rists See B right 2 P ' Centu ry, June 11, 1997, D2. An insightful treatment of the link between corporate etrepreneurship and the pursuit of organizational growth firms facing challenging competitive environments is psented in: S. A. Zahra, Environment, Corporate Entrepreneuship, and F inanc ial Performance: A Taxonomic Approach,Jonal of Business Venturing,8, 1993, 319-340.'For add itiona l information about how firms can m obilizeada pt their be havio rs for competitive reas ons, s ee: R. A. Heifeand D. L. Laurie, The Work of Leadership, Harvard BusinReview, 75(1), 1997, 124-134,'^ Further argu me nts reg ardin g the choices firms can m athrough the work of their strategic leaders and other key desion makers can be found in the following classic: J, ChilOrganizational Structure, Environment and Performance: TRole of Strategic Choice, Socioiogy 6, 1972, 1-22. In a recent article, two researchers present a detailed anysis of different perspectives of strategic leadership that apea r in the aca dem ic literature. This work is intended to presewha t the authors consider to be a more realistic view of tma nag ers ' work. To examine the researchers ' perspect iv

see:A. A, Cann ella, Jr. and M. J. Monroe, Contrasting Perspetives on Strategic Leaders: Toward a More Realistic View of TManagers , Journal of Management, 23, 1997, 213-237 (the q uoin our article appe ars on page 213 of the Can nella and Monrpublication).^' The historical isolation betw een stra tegic le ade rs athose they led is described in: P. M. Senge, Communities Leaders and Learners , Harvard Business Review, 75(5), 1930-32.^ W. Bennis, Cultivating Crea tive G enius, Industry WeAu gus t 18, 1997, 84 -88 .^ This point is described in greater detail in Bennis, Cuvating Creat ive Genius. Some believe that understanding how to gather and in

pret da ta is the organ izational challe nge of the next century. evaluate this possibility, see: J. Teresko, Too Much Data, TLittle Inform ation, Industry Week, August 19, 1996, 66-70.^ For a discussion of how unce rtainty affects people a t buppe r an d lower org anizationa l leve ls, see: R. P. White, Seekeand Sealers: The Future Leaders, Training Deveiopmenf, Juary, 1997, 21-24.^ BCnown widely as a preem inent b usin ess thinker, Cha rHandy explains his thoughts about organizational communitiin: C. Handy, The Age of Unreason (Boston: Harvard BusinSchool Press, 1989).^' This quotation a pp ea rs in: Bennis, Cultivating Crea tiGenius, 88.^^To explore the concept of great groups further, see Bennis, Organizing Genius; The Secrets of Creative Collabotion (Reading, MA.: Addison-Wesley P ublishing Com pa1997).^ To lea m how effective lea ders allow all organ izatioemployees to play an active role in helping firms become adative, see: Heifetz and Laurie, The Work of Leadership.3To learn the views of British Petroleum's CEO abo ut value and nature of teams (or great groups) in the global ecoomy, see: Prokesch, Unleashing the Power of Learning: An terview With British Petroleum 's John Browne.^ The importance of group members accepting the respobility to support one another in their work is discussed another one of Charles Handy's books: C. Handy, The Age

Paradox (Boston: Harvard Business School Press, 1994).^ Among many points discussed by John Browne, the imptance of learning how to leverage knowledge is given the m


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Academy of Manage ment Executive Nove^^The criticality of exter nal information for firms seek inghigh pe rforma nce in the globa l economy is describ ed in: P. F.Drucker, The Future That Has Already Happened, Harvard Busi-ness Review 75(5), 1997, 20-24.^ The importance of collective work, and how such work canbe stimu lated, is discu ssed in: P. B. Vaill, Managing As a Per-forming Art: New Ideas for a World of Chaotic Change (SanFrancisco: Jossey-Bass, 1989).^ The inclusive roles of organizational leaders is noted in: G.Dutton, Leadership In a Post-Heroic Age,Management ReviewOctober, 1996, 7.^^An excellent , comprehensive ana lysis of s trategic leader-ship and the role of the top management team as part of stra-tegic lead ers hip , app ea rs in: S. Finkelstein a nd D. C, Hambrick,Strategic Leadership: T op Executives and Their Effects on Orga-nizations (St. Pau l: We st Pub lishin g, 1996).^ This quote is taken from: Bennis, Cultivating Creative Or-ganizat ions.^^ Research resul ts regard ing the value of heterogeneou s topmanagement teams is explored careful ly and in a detai ledmanner in: Finkelstein and Hambrick, Strategic Leadership.^^D. F. Abell, Ma stering M anage men tP art 16, Fina nciai

Times February 23, 1996, 13, The important link betw een self-confidence and the suc-cessful com pletion of significant types of orga niza tional w ork isdiscussed in: R. D. Ireland, M. A. Hitt, and J. C. Williams,SelfConfidence and Decisiveness: Prerequisites for Effective Man-agement in the 1990s, Business Horizons 35(1), 1992,36-43.^ B. A. Nagle, W anted: A Leade r for the 21= C entury, IndustryWeek November 20, 1995, 29.^ This quote, and the im portan ce of letting orga nizatio nalcitizens know that their strategic leaders want them to trydifferent methods to satisfy the demands of new challenges,ap pe ar s on pa ge 158 of Prokesch, op, cit. Viewpoints of other leaders, in addition to von Pierer, canbe found in: W. H. Miller, Leadership at a Crossroads, Industry

Week August 19, 1996, 43-57. Other aspe cts of Mr. Gorman s perspect ives about thevalue of a corporate purpose are included in: Miller, Leadershipat a Crossroads. Mr. O Rourke offered this viewpoint as part of his desc rip-tion of what a leader must do to lead effectively. His perspec-tives ca n be studie d fully by re adin g: W. H. Miller, Lea dersh ip sCommon Denominator, Industry Week August 19, 1997, 97-100. A full list of the 21com peten cies identified by the survey s1,450 participants can be viewed by reading: Davids, WhereStyle Meets Substance.^ This view is exp laine d more fully in Prokesch, op. cit. Cha rles H andy considers these points in two books: The

Age of Paradox and The Age of Unreason. This point is articulated in: The Economist The ChangingNa ture of Lead ers hip , June 10, 1995, 57.Full deta ils reg ard ing action s framed by Rockw ell s stra-tegic lea de rs to ach ieve the firm s vision ca n be found in: ItsTime to Ch an ge Your Perception of Rockwell, Rockwell In terna-tional Corporation Annual Report, 1995.^ An intriguing ana lysis of decisions made by Sam sungGroup s s trategic leade rs r egard ing the fi rm s entry into theworld s autom obile m anufa cturing industry is featured in: L.Kraar, Behind S ams ung s H igh-Stakes Push Into Cars, FortuneMay 12, 1997, 119-120.

^ Large conglom erates, cal led chaebols , have p layed impor-tant roles in th e grow th of South Korea s economy. However,some evidence suggests that these huge fi rms may encounteraddit ion al com peti t ive cha l lenge s in the future. Detai ls of the se

Conglomerates Intensify, Signaling End of an Era, Wall SJournal April 25, 1997, All.^ Kraar, Behind Sa ms ung s High-Stake s Push Into Cars^ Some research proposes that knowledge is the most tegica lly significant source of core com peten ce an d thucompetitive advantage for firms competing in the comglobal economy. In a recent publication, this issue is expthrough the developme nt of a know ledge-ba sed theory of nizational capability. To examine this theory see: R. M. GProspering in Dynamical ly-Competi t ive Environments: Orzat ional Capabil i ty as Knowledge Integrat ion, OrganizScience 7 1996, 375-38 7.^ Jay Barney s work informs our understanding of the crof sustainab il i ty. Two publicat ion s in which Barney s ments are detai led are: J.B. Barney, Looking Inside for Comit ive Advantage, Academ y of Manage ment Executive.1995, 49-61; J. B. Bam ey, Firm Resourc es an d Susta ined Cpeti t ive Advantage, Journal of Management 17, 1991, 99-The valu e of und ers tan din g the n atu re of a firm scompe tencies is accepted w idely. However, one research ergests that l i t t le guidance is avai lable to help strategic leaan d their co-workers to define carefully their firm s c apa bi

and core competencies. The experienc es of three top-level agement teams are described in: K. E. Marino, Developing sensus on Firm Competencies and Capabil i t ies , AcademManagement Executive X(3), 1996,40-51.* T. A. Stewart, Intellectual Capital (New York: DoublCurrency, 1997).^ T. A. Stewart, O we ns Back From the D ead, Fortune M1997, 118-126.*Three resea rch ers ha ve identified actio ns effective sgic leaders and their firms take to maximize the value ofcri t ical organizat ional resource. These guidel ines are offin: J. B. Ouin n, P. Anderson, an d S. Finkelstein , LeveraIntellect, Academ y of Manag ement Executive X(3), 1996, 7Based on organizat ional me ta-lea min g proc esses, are able to continue gaining competi t ive advantages byploi t ing dyna mic core com petencies. How this is accompliis described in: D. Lei, M. A. Hitt, and R. Bettis, Dynamic Competences Through Meta-Learning and Strategic ConJournal of Management 22, 1996, 549-569.^ Economist Pau l M. Romer s work is thought by some controversial . Romer s analy ses sugge st that idea s and teclogical discovery a re the m ain d rivers of a natio n s econgrowth. An introduction of these arg um ent s is offered iWysocki, Jr., For This Economist, Long-Term Prosperity Hon Good Ideas, Wall Street Journal Jan ua ry 21, 1997, Al, A^ H. Rudnitsky, One Hundred Sixty Companies For the

of One, Forbes, February 26, 1996, 56-62.^ The potent ial value of addit iona l na t ional expendibeing al located to educat ion and training ini t iat ives isplored by a p romin ent econom ist in: G. S. Becker, Why the Plan Will Work, Business Week August 26, 1996, 16.^ These points are discu ssed in Bennis , Cult ivat ing Orgzat ional Genius.^ J.Katkin, Close the Talent G ap, Houston Chronicle Nober 9, 1997, Cl, C5.^ These statistics are drawn from the following two souS. Baker, A. Barrett, and L. Himelstein, Calling All Nerds, Bne ss Weeic, March 10,-1997, 36-37; D. Kunke, In Se arc h of Et ise, Dallas Morning News.April 16, 1997, Dl, DIO. A bus ines s pract i t ioner who part icipate d in a debatpressed this view. The focus of the debate was the extewhich th e traditio nal m odel of the MBA deg ree is outdated


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5 Ireland and Hitt For more information about Mr. Brabeck-Letmathe's views, Miller, Leadership's Common Denominator.

These quest ions appear at the beginning of the interviewsB.Vlasic, Can Chrysler keep it Up? Business Week, Novem-' ' Southwest Airlines' culture has been cited frequently as a

tants a nd U.S. competitors) is welcom e to atte nd theut the firm's culture ses sion s are offered in: W. Week,ril 28, 1997, 124,

'^ To explore in greater detai l how ethical prac t ices ca n beA Contro versial Issue, Journal of Business Ethics, 15, 1996,J. Milton-Smith, Ethics as Excellence: A Strategic Man- Journal of Business Ethics, 14, 1995, 683-

'^ L. Kraar, A cer's E dge: PC s to Go , Fortune , O ctobe r 30, 1995,'* The developing relat ionship betwe en corporate social re-

of Management To exam ine the spe cial issu e's topics, consult the in- Special Topic Forum on Shifting Paradigms: Societal Academy of Manage- 20, 1995, 18-21.

R. Simons, How New Top Managers Use Control SystemsLevers of Strategic Rene wal, Stra tegic Manag ement Journal,1994, 169-189.'^ Extensive conside ration s of the differences be twe en stra-lica tion s inclu ding : M. A. Hitt, R. E. Hos kisson, R. A. Johnson ,D. D. Moesel, The Market for Corpora te C ontrol and Firm

Academy of Managem ent Journal, 39, 1996, 1084-M. A. Hitt, R. E. Hos kisson, an d R. D. Irela nd, Me rgers an d Journal, 11 (Special Issue),29-47.

P. Shrivastava, Ecocentric Management for a Risk Society,Management Review, 20, 1995, 119.'^ Bennis, Cultivating Creative Genius, 87.'^ Three researc hers e xplain theoret ical ly the value fi rms c an

c R ents: A Syncretic Model,Academy of Management 22, 1997, 110-141. See a lso K. M. Eisen hard t and C. B.

Science, 1,1996, 136-150. Lado, Boyd, and Han lon argu e that Success in toda y's

ve and cooperat ive strategies s imultaneously. They define

syncretic rent-seeking behavior as actions firms can take tearn economic rents while engaging jointly in competitive ancooperat ive behaviors .^' This poin t is d isc uss ed in som e d eta il in: M. A. Hitt, B. WKeats and S. DeMarie, Navigating in the New CompetitivLandscape: Building Strategic Flexibility and Competitive Adva nta ge in the 21^' Century. Academy of Management Executive, 12(4), 22-42. A compre hensive description of Jame s Bonini 's experences as a young, inexperienced manager at a Chrysler Corpplant is offered in: G. Stern, How a Young Manager Shook Uthe Culture At Old Chrysler Plant,Wall Street Journal,A pril 21997,Al, A6. These possibilities, and their accompanying competitiimplications for firms committed to achieving success in thglobal marketplace are examined in: J. E. Garten, TroubleAhead in Emerging Markets, Harvard Business Review, 19975(3),38-49.

R.Duane Ireland holds the Curtis Hankamer Chair in Entreprneurship at Baylor University and is the director of the Entrepreneurship Studies Program at Baylor's Hankamer School oBusiness. He received his PhD from Texas Tech University. Hhas been an associate editor of the Academy of ManagemenExecutive and aconsulting editor for Entrepreneurship; Theoan d Practice. He is now serving as a member of the editorireview bo ards forAcademy of Management Review and ournof Management. His research examines quest ions related corporate-level strategy, innovation, and core competencieCurrent ly, he is s tudying issues related to the intersect iobetween the en t repreneursh ip and s t ra teg ic management l ieratures and factors that different iate success from fai lure imergers and acquisitions. He is the coauthor of Strategic Management: Com petitiveness and Globalization and is working othree books. He has been selected as Baylor University's oustan din g rese arch er (1998) and a s the distinguished professor the Hankamer School of Business (1986).Michael A Hitt holds the Paul M. and Rosalie Robertson Chain Business Administration at Texas A&M University, He rceived his PhD from the University of Colorado and has beeselected to receive an honorary doctorate from the UniversidaCarlos ni de Madrid for his contributions to the field. He is former editor of the Academy of Management Journal andpast president of the Academy of Management. A frequecontributor to the literature, he focuses on international straegy, corporate governance, innovation, importance of intangble resources and the new competitive landscape. He is thcoauthor or coeditor of several recent books, including Dowscoping; How to Tame the Diversified F irm; Strategic Managment: Compe titiveness and Globalization; Manag ing Strategcally in an Interconnected World; and New ManageriMindsets. He is a fellow of the Academy of Management anreceived the 1996 Award for Outstan ding Academ ic Contribtions to Competitiveness from the American Society for Competi t iveness.


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Achieving and Maintaining Competition