Academy ol Management Executive. 2005, Vol. 19, No. 4 Reprinted Irom 1999, Vol, 13. No. 1

Achieving and maintainingstrategic competitiveness in the

* century: The role ofstrategic leadership

R. Duane Ireland and Michael A. Hitt

Executive OverviewCompetition in the 2r' century's global economy will be complex, challenging, and

filled with competitive opportunities and threats. Effective strategic leadership practicescan help firms enhance performance while competing in turbulent and unpredictableenvironments. The purpose of this paper is to describe six components of effectivestrategic leadership. When the activities called for by these components are completedsuccessfully, the firm's strategic leadership practices can become a source of competitiveadvantage. In turn, use of this advantage can contribute significantly to achievingstrategic competitiveness and earning above-average returns in the next century.

It is possible—and fruitful—to identify majorevents that have already happened, irrevoca-bly, and that will have predictable effects inthe next decade or two. It is possible, in otherwords, to identify and prepare for the futurethat has 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 affairs—political, social, economic, or business—it 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 willcontribute to corporate success during the 21 * cen-tury. More precisely, our position is that the global

economy is a major irrevocable event whose exis-tence has already had a major influence on today'sstrategic leadership practices and offers insightsabout practices that should be used in the future.By examining appropriate and often innovativestrategic leadership practices currently being usedsuccessfully by visionary organizations, it is pos-sible to identify and understand practices that willbe effective in the next century. This analysis isimportant, because strategic leadership may proveto be one of the most critical issues facing organi-zations. Without effective strategic leadership, theprobability that a firm can achieve superior oreven satisfactory performance when confrontingthe challenges of the global economy will begreatly reduced.^

Strategic leadership is defined as a person'sability to anticipate, envision, maintain flexibility,think strategically, and work with others to initiatechanges that will create a viable future for theorganization.^ When strategic leadership pro-cesses are difficult for competitors to understandand, hence, to imitate, the firm has created a com-petitive advantage.'* Because the creation of sus-tainable competitive advantage is the universalobjective of all companies,^ being able to exercisestrategic leadership in a competitively superior

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manner facilitates the firm's efforts to earn supe-rior returns on its investments.

The Global Economy

There is virtually uniform agreement that the com-plexity, turbulence, and extraordinary changesduring the 1980s and 1990s are contributing to therapid development of an ultracompetitive globaleconomy. Joseph Gorman, TRW's CEO, suggeststhat a transformational change is occurring, fromregional economies and industries to global ones.^A key reality of our time, the commercial interac-tions that are taking place in the global economyare becoming the dominant force shaping relation-ships among nations. The fact that ".. .the propor-tion of trade among nations as a share of globalincome has increased from 7 percent to 21 percentsince the end of World War II demonstrates whythe globalization of commercial markets has animportant effect on individual countries.'"^ Thus, inthe global economy, products are shipped any-where in the world in a matter of days; communi-cations are instant; and new product introductionsand their life cycles have never been shorter, withsix months the norm in some high-tech industries.^

The incredible breadth and depth of the globaleconomy's effects are shown by the suggestionthat in the 2P' century, nation-states will lose theirsovereignty, technology may replace labor, andcorporations may come to resemble amoebas—collections of workers that are subdivided into dy-namic, ever-changing teams to competitively ex-ploit the firm's unique resources, capabilities, andcore competencies. Thus, some analysts arguewith conviction that the large number of structuralchanges occurring simultaneously in the interna-tional system are resulting in economies and com-munication systems that are more integrated. Forexample, it has been predicted that by 2150, all ormost of the global economy will be part of a".. .single market, perhaps complete with a singlecurrency and monetary authority."^ However, oth-ers believe that the political structures supportingvarious economies and their communication sys-tems will remain somewhat fragmented and mayeven be reduced to ethnic units during the 21 *century.'° Changes such as these may culminate incorporations that would be unrecognizable tomany employees and world citizens today." Theglobal economy may create a need for individualcitizens to maintain separate loyalties—one totheir own unique traditions and institutions, theother to the characteristics of a rapidly evolvinginternational culture.

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

The New Competitive Landscape

The global economy has created a new competi-tive landscape—one in which events change con-stantly and unpredictably.'2 por the most part,these changes are revolutionary, not evolutionaryin nature. Revolutionary changes happen swiftly,are constant, even relentless in their frequency,and affect virtually all parts of an organizationsimultaneously.'3 The uncertainty, ambiguity, anddiscontinuity resulting from revolutionary changeschallenge firms and their strategic leadership toincrease the speed of the decision-making pro-cesses through which strategies are formulatedand implemented.''* In the global economy, knowl-edge work and knowledge workers are the primarysources of economic growth—for individual firmsand for nations. Thus, in the 21 * century, the abilityto build, share and leverage knowledge will re-place the ownership and/or control of assets as aprimary source of competitive advantage.'^

However, certain conditions of the new compet-itive landscape, including the expectation that theworld's economy will grow substantially duringthe first 20 years of the next century, also createopportunities for companies to improve their finan-cial performance.'^ Organizations in which strate-gic leaders adopt a new competitive mindset—onein which mental agility, firm flexibility, speed, in-novation, and globalized strategic thinking arevalued highly—will be able to identify and com-petitively exploit opportunities that emerge in thenew competitive landscape. These opportunitiessurface primarily because of the disequilibriumthat is created by continuous changes (especiallytechnological changes) in the states of knowledgethat are a part of a competitive environment. Morespecifically, although uncertainty and disequilib-rium often result in seemingly hostile and in-tensely rivalrous conditions, these conditions maysimultaneously yield significant product-drivengrowth opportunities.''' Through effective strategicleadership, an organization can be mobilized sothat it can adapt its behaviors and exploit differentgrowth opportunities.'^

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Strategic Leadership

In 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 Great Leader View of Strategic Leadership

In 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 'century.

The relative stability and predictability of the

past few decades resulted in manageable amountsof uncertainty and ambiguity. Change was oftentreated as linear in many industries; major com-petitors were largely domestic, not global compa-nies; organizations were structured in hierarchicalconfigurations that were supported by selectionand promotion practices. However, conditions as-sociated with the global economy's new competi-tive landscape—shorter product life cycles, ever-accelerating rates and types of change, theexplosion of data and the need to convert it touseable information—prevent single individualsfrom having all of the insights necessary to chart afirm's direction. Moreover, some believe that hav-ing strategic leadership centered on a single per-son or a few people at the top of a hierarchicalpyramid is increasingly counterproductive.^3 Con-strained by their abilities to deal with rapidly in-creasing amounts of data and the general com-plexity of the global economy, top managers arenow challenged to discharge their strategic lead-ership responsibilities differently. * Insightful topmanagers recognize that it is impossible for themto have all of the answers, are willing to leamalong with others, and understand that the uncer-tainty created by the global economy affects peo-ple at the top as well as those lower down in theorganization."

Insightful top managers recognize that itis impossible for them to have all of theanswers, are willing to learn along withothers, and understand that theuncertainty created by the globaleconomy affects people at the top as wellas those lower down in the organization.

The Great Groups View of Strategic Leadership

In the 2r* century, the nature of the organization inwhich effective strategic leadership practices oc-cur will be different. In the view of noted businessthinker Charles Handy, a public corporationshould and will be regarded not as a piece ofproperty owned by the current holders of itsshares, but as a community. More properly thoughtof as citizens than as employees, people involvedwith an organizational community remain togetherto pursue a common purpose. A community issomething to which a person belongs and thatbelongs to no one individual. The community's cit-izens have both responsibilities to pursue the com-mon good and rights to receive benefits earnedthrough its attainment.

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In an organizational community, strategic lead-ership is distributed among (diverse intdividualswho share the responsibility to create a viablefuture for their firm. Handy argues that many citi-zens will need to serve their communities as lead-ers and will need to be dispersed throughout thefirm.26 When allowed to flourish as involved lead-ers, people spark greatness in each other. As Ital-ian author Luciano De Crescenzo noted, "We areall angels with only one wing, we can only flywhile embracing each other."^^

Combinations or collaborations of organiza-tional citizens functioning successfully have beenlabeled great groups. These collaborations usuallyfeature managers with significant profit and lossresponsibilities, internal networkers "who moveabout the organization spreading and fosteringcommitment to new ideas and practices," and com-munity citizens with intellectual capital that stim-ulates the development and/or leveraging ofknowledge.28 Members of great groups rely on oneanother to create an environment in which innova-tions occur regularly and knowledge is generatedand dispersed constantly. Consistent leadershipbetween and among all of the firm's great groupsresults in innovative strategic thinking and rapidacceptance of organizational changes that, evenwhen difficult, are required to enhance firm per-formance. Top managers who facilitate the de-velopment of great groups—groups in whichstrategic leadership takes place among a rangeor people with different talents—have shifted thelocus of responsibility to form adaptive solutions toissues from themselves to the organization's fullcitizenry.29

As knowledge sharing and developing entities,great groups have several characteristics.3° First,members of great groups have accepted their re-sponsibility for firm outcomes. Involved and com-mitted, these people understand the significanceof their work and their responsibility to each oth-er.31 Second, great groups seek to learn from mul-tiple parties, including contractors, suppliers, part-ners, and customers. Group members arecommitted to the position that "No matter whereknowledge comes from, the key to reaping a bigreturn is (for the group) to leverage that knowledgeby replicating it throughout the company so thateach unit is not learning in isolation and reinvent-ing the wheel again and again."^2

The third great group characteristic concerns in-formation and knowledge. Increasingly, the infor-mation great groups gather to form knowledge andto understand how to use knowledge already pos-sessed must come from events and conditions out-side the organization. In Peter Drucker's view, it is

primarily information from outside that allows abusiness to decide ". . .how to allocate its knowl-edge resources in order to produce the highestyield. Only with such information can a businessalso prepare for new changes and challenges aris-ing from sudden shifts in the world economy and inthe nature and content of knowledge. The develop-ment of rigorous methods for gathering and ana-lyzing outside information will increasingly be-come a major challenge for businesses and forinformation experts."^^ Great groups respond pos-itively to Drucker's challenge and are learninghow to interpret external information in competi-tively relevant terms. In the 21 ' century, it will beincreasingly vital for the firm's strategic leader-ship processes to adopt this perspective regardingthe acquisition and use of information flows.

Another characteristic of great groups is theirmaintenance of records of individuals' knowledgestocks. With these records, people can quickly findothers who possess the knowledge required tosolve problems as they arise. Maintaining and us-ing these records demonstrates these groups' abil-ity to work smarter through their collective insightsand the skills resulting from them. ^ Finally,great groups understand that the firm's methodof strategic leadership results in a constantlychanging configuration of responsibilities. Acrosstasks, every member of a great group serves, atdifferent times, as a leader, peer, or subordinate.The operationalization of this understanding re-sults in mutual influence relationships amongthe firm's top managers and all organizational cit-izens, including those with formal managerialresponsibilities.^^

Perhaps the most important "great group" in anorganization is the top management team (TMT)formed by the CEO. The top management team is arelatively small group of executives, usually be-tween three and ten people. These individuals areat the apex of the organization and provide strate-gic leadership.3^

Because of the complexity of the new competi-tive landscape, both in its structure and dyna-mism, the collective intellect generated by a topmanagement team is necessary for effective stra-tegic leadership to occur in the firm. A philoso-pher's view demonstrates this point: "None of us isas smart as all of us."^^ The large number oforganizational stakeholders alone makes it nec-essary to depend on a team of top executives forstrategic leadership. The global economy, morethan any other factor, has created the need for thetop management team to effectively exercise stra-tegic leadership in organizations. The knowledge

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The global economy, more than anyother factor, has created the need /or thetop management 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 typeorganizations—an 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-ment of the firm's direction.

Six Components of Strategic Leadership

What will be different in 21 * century companies ishow top managers discharge their strategic lead-ership responsibilities. They will no longer viewtheir leadership position as one with rank andtitle, but rather as a position of significant respon-

sibility to a range of stakeholders. Instead of seek-ing to provide all the right answers, they will striveto ask the right questions of community citizens theyhave empowered to work as partners with them.They can choose to form a community of col-leagues rather than a company of employees con-strained by traditional hierarchical configurations.

The top managers must affect the behaviors ofmany stakeholders, especially those of organiza-tional citizens, working often as a coach. The orga-nizational community is one in which citizens' cre-ative energy is released, and their self-confidenceenhanced, when they are inspired to assume re-sponsibility for leading themselves through thework of great groups.-'o Sharing among inspiredand committed citizens facilitates the emergenceof the collective magic that creates intellectualcapital and knowledge. An effective strategicleader "finds glory in the whole team reaching thesummit together.""*!

John Browne, CEO of British Petroleum Com-pany, believes that the top manager must stimu-late the organization rather than control it. The topmanager provides strategic directives, encourageslearning that results in the formation of intellec-tual capital, and verifies that mechanisms exist totransfer intellectual capital across all of the firm'sparts. Browne believes that "the role of leaders atall levels is to demonstrate to people that they arecapable of achieving more than they think theycan achieve and that they should never be satis-fied with where they are now."* Heinrch vonPierer, president and CEO of Siemens AG, saysthat "As we move into what will be a century ofunprecedented challenges, successful leaders willrely even more intensely on strengths that havebecome crucial in recent years—speed of deci-sions, flexibility, capable delegation, teamwork,the ability to build for the long term while meetingshort-term needs—and vision. Increasingly, net-worked and globalized thinking will be essentialfor coping with the accelerating pace of change."''^

Based on the evidence discussed above, we be-lieve that 21 ' century strategic leadership shouldbe executed through interactions that are based ona sharing of insights, knowledge, and responsibil-ities for achieved outcomes. These interactionsshould occur between the firm's great leaders—thetop managers—and its citizens. These interactionstake place as the firm satisfies the requirementsassociated with six key effective strategic leader-ship practices. Although considered individually,it is through the configuration of all six activitiesthat strategic leadership can be effective in the 21 *century organization.

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Determining the Firm's Purpose or Vision

The 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., endorses Gorman's view: "Clearly, ifyou're going to do well over time, you have to havesome ability—yourself or in combination with oth-ers—to come up with a vision . . . and then follow itup with believable and implementable actionplans. In most corporate structures, the only personwho can do that is the CEO."'' A recent survey of1,450 executives from 12 global corporations foundthat the ability to "articulate a tangible vision,values, and strategy" for their firm was the mostimportant of 21 competencies considered 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 for 21^' century firms. Browne argues that as 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 believes that aclear purpose ".. .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 greatgroups in pursuit of the firm's purpose will be ableto 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 thecompany to become "the world's best diversifiedhigh-technology company." The CEO and TMT be-lieve that the actions necessary for this vision to bereached are the aggressive pursuit of globalgrowth, the execution of leading-edge business

practices, and the manufacture and distribution ofproducts that will allow the firm's customers to bethe most successful in the world in their businessoperations.

Critical to efforts to achieve the firm's vision isthe active involvement of Rockwell employees (or-ganizational citizens). At locations throughout theworld, employees are to be challenged to take de-termined actions that will help the firm achieve itspurpose. To select appropriate actions, employees/citizens are formed into 23 implementation teams(or great groups) that are asked to identifystrengths and weaknesses. Each unit is to developrecommendations that when accomplished will al-low it to become the best in the world at complet-ing a particular task or set of activities.^° Thispattern—wherein organizational citizens work asmembers of a community that is seeking to servethe common good—will be linked with effectivestrategic leadership practices in the 21 * century.

The blurring of industry boundaries stimulatesthe emergence of new and sometimes aggressivecompetitors with significant resource bases andcreates interesting challenges for firms' strategicleadership processes.

The announced entrance in early 1998 of the Ko-rean giant, Samsung Group, into the world's auto-mobile manufacturing industry demonstrates thischallenge. Although as of mid-1997 Samsung hadnever built and delivered to a customer a passen-ger car, it was in the midst of a $13 billion invest-ment to manufacture 1.5 million cars annually. Thevision driving these commitments and actions wasfor Samsung to rank among the world's top tenautomakers by 2010. A demonstration of this visionis the billboard outside Samsung's new automo-bile manufacturing facility in Pusan: "Our dreamand Korea's future."

Samsung Group's ambitious auto manufacturinggoal surprised at least some industry analysts whonoted that the global auto industry was awash inexcess production capacity—a problem not ex-pected to abate in the foreseeable future. Onenoted industry observer said "the world is not wait-ing breathlessly for a Samsung car . . . There's nological opening in the marketplace where Sam-sung can step in and fill a vacuum. Its sales willhave to come out of someone else's hide."^i Evi-dence was also emerging in mid-1997 that at leastsome of South Korea's conglomerates were en-countering difficult performance challenges be-cause of too much diversification at too rapid apace. Although Samsung's future competitive in-tentions could be affected by these general prob-lems,^2 some believe it would be a serious mis-take to underestimate Samsung's ability to make

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its 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 and Maintaining Core Competencies

Core 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 the 21 * 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.

The sharing of knowledge or intellectual capitalthat is unique to a particular organization will

influence significantly the choices strategic lead-ers make when seeking to use core competenciesin novel, yet competitive ways. Through the recip-rocal sharing of knowledge and the learning thatresults from it are a firm's core competencies nur-tured effectively.

Knowledge is shared and learning occursthrough superior execution of the human tasks ofsensing, judging, creating, and building relation-ships. ' The importance of knowledge for firmsseeking competitive advantage in the global econ-omy is shown by the following comment aboutOwens Coming's positive financial performance."In the past year a series of moves in sales andmarketing, information systems, and manufactur-ing and distribution have come together in a co-herent strategy that is transforming this Midwest-ern maker of humdrum materials into a globalcompetitor whose real business is knowledge."^^Indeed, with rare exceptions, in the 21®* century, afirm's productivity will lie more in its collectiveintellect—that is, in its collective capacity to gainand use knowledge—rather than in its hard assetssuch as land, plant, and equipment.^^

The competitive value of core competencies in-creases through their use and continuing develop-ment. ° A firm's privately held knowledge is thefoundation of its competitively valuable core com-petencies and is increasing in importance as adriver of strategic decisions and actions. The mosteffective strategic leadership practices in the 21 'century will be ones through which strategic lead-ers find ways for knowledge to breed still moreknowledge. While physical assets such as land,machinery, and capital may be relatively scarceon a global basis, ideas and knowledge "are abun-dant, they build on each other, and they can bereproduced cheaply or at no cost at all. In otherwords, ideas don't obey the law of diminishingreturns, where adding more labor, machinery ormoney eventually delivers less and less additionaloutput."^^

Johnson & Johnson's CEO is a strategic leaderwho believes in developing and nurturing his

The most effective strategic leadershippractices in the 2r^ century will be onesthrough which strategic leaders findways for knowledge to breed still moreknowledge.

firm's knowledge base. Asked to describe factorsthat account for his company's success, he sug-gested that his company is "not in the product

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business. (It) is in the knowledge business."^^ How-ever, knowledge cannot breed knowledge and corecompetencies cannot be emphasized and exploitedeffectively in the global marketplace without ap-propriate human capital.

Developing Human Capital

Human 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 thatthese 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 workforce—the type ofworkforce capable of forming highly effectivegreat groups.

The importance of educational investments incitizens is being supported in a growing number ofcorporations. 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 10 percent 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-cial premium by using competitively superiorpractices in the location, selection, and subse-quent development of human capital. One key rea-son is that skilled labor is expected to be in shortsupply during the first part of the 21 * century. Forexample, a million new jobs in high technology

will be created over the next decade with almostno increase in the supply of human resources to fillthese jobs."

A survey of human resource managers con-ducted by the American Management Associationrevealed that 47 percent of the respondents workedin firms that faced skilled labor shortages. Inter-estingly, 54.7 percent of the same group of respon-dents also believe that the shortages in skilledpersonnel will be worse in 2000 and beyond. As ofmid-1997, at least 190,000 information technologyjobs were vacant in U.S. companies. A 43 percentdecline in the number of college graduates earn-ing undergraduate degrees in computer sciencebetween 1988 and 1997 suggests more serious laborshortages ahead.^^

Skilled labor shortages have unintended nega-tive consequences. Talented, dedicated, and moti-vated employees often become frustrated and dis-satisfied when asked to work continuously withthose without equivalent skills and commitments.As a successful financial analyst explained: "Icould not fathom, let alone accept, the extremevariations in work ethic, attention to detail, andcommitment to job and company. All my prior workand school experience had been with creative, en-ergized self-starters. It took me months, if notyears, to value the diverse work styles and varyingmotivators of the work force I encountered."^^ Thus,a challenge for tomorrow's strategic leaders is tofind ways to encourage each employee to fulfillher or his potential. Especially when faced withlabor shortages, the organizational community'scommon good can be reached only when eachmember of the great group is committed to fullparticipation.

Greater workforce diversity is another issue thatwill confront 21 * century strategic leaders. Orga-nizational communities will comprise individualsfrom multiple countries and cultures that mayhave unique and idiosyncratic value structures.CEOs and TMTs should learn to appreciate thebeliefs, values, behaviors, and business practicesof companies competing in a variety of regions andcultures. Organizational citizens can then betterunderstand the realities and preferences that are apart of the region and culture in which they areworking.

Peter Brabeck-Letmathe, CEO of Nestle SA, be-lieves that it is increasingly important for top man-agers to speak at least two to three languages.^^Cross-border and culture transfers among organi-zational citizens will be used prominently in the21^' century, as will experts who help people un-derstand the nuances of other cultures. As at ABBtoday, many firms' TMTs will be culturally diverse.

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Success 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 Culture

Organizational 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 the 21 * 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 successfulintegration of these cultures could result in a com-petitive advantage for the new firm.

The social energy that drives Southwest Airlinesis largely a product of CEO Herb Kelleher and themanagers who surround him. The firm's culture isresponsible for the company's steady growth,above-average profitability, and the avoidance ofemployee layoffs for more than 25 years. Actionsthat exemplify Southwest's culture include: "Pilotshold barbecues to thank mechanics; flight atten-dants sing safety instructions on board; agentshang mirrors on their computers to make surethey're smiling when taking reservations; Kelleheris generous with hugs and kisses." Employees arecommitted to treating coworkers and customerswith respect and dignity, having fun, and workinghard. An indication of the culture's desirability isthat 137,000 people applied in 1996 for only 5,000Southwest Airlines' job openings.''^

Effective cultures are ones in which organiza-tional citizens understand that competitive advan-tages do not last forever and that the firm mustmove forward continuously. When citizens arecomfortable with the reality of constant changeand the need for a never-ending stream of innova-tions, patterns and practices are in place that canenhance global competitiveness.

Emphasizing Ethical Practices

Ethical practices serve as a moral filter throughwhich potential courses of action are evaluated.''^The influence of top managers on the firm's ethicalpractices and outcomes is accepted by businesspractitioners, academics, and society. In the 21 *century, effective strategic leaders will use hon-esty, trust, and integrity as the foundations fortheir decisions. Strategic leaders displaying thesequalities are capable of inspiring their employeesand developing an organizational culture in whichethical practices are the behavioral norm. AcerCEO Stan Shih notes that for his employees thereis simply no alternative to dealing honestly withall of the firm's stakeholders. Shih's belief thathuman nature is basically positive and good couldbe the force driving his forthright and ethical busi-ness practices.''^

The challenge for strategic leaders is how toinstill normative values that guide corporate ac-tion and individuals' behaviors.' * In the final anal-ysis, ethical decision-making processes result inthe use of organizational resources to obtain ben-efits desired by legitimate stakeholders. A strate-gic leader's commitment to pursuits in which legal,ethical, and social concerns have been taken intoaccount is thought to be both morally right andeconomically efficient.

Establishing ethical practices will be difficult for

72 Academy of Management Executive November

Strategic 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 Balanced Organizational Controls

Organizational 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 internalcontrols—strategic 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 managersand other great group members require to takeadvantage of competitive opportunities that de-velop rapidly in the new competitive landscape.

Financial controls entail objective criteria (e.g.,various accounting-based measures) that strategicleaders use to evaluate returns earned by com-pany units and those responsible for their per-formance. By focusing on performance-inducedoutcomes, financial controls encourage the accom-plishment of short-term performance goals. An em-phasis on financial rather than strategic controlsmakes managerial rewards contingent on achieve-ment of financial outcomes. Therefore, an empha-sis on short-term financial performance goals en-courages risk-adverse managerial decisions andbehaviors.

Effective top managers seek to develop and usea balanced set of strategic and financial controls.Typically, this outcome is achieved by using stra-tegic controls to focus on positive long-term resultswhile pursuing simultaneously the requirement toexecute corporate actions in a financially prudentand appropriate manner. In this fashion, strategicleaders are able to use strategic controls to in-crease the probability that their firm will gain thebenefits of carefully formulated strategies, but notat the expense of the type of financial performancethat is critical to successful strategy implementa-tion processes and to the firm's ability to satisfyselected stakeholders. Nonetheless, the diversityof the global economy, coupled with the dynamicchallenges embedded within the new competitivelandscape, highlight the increasing importance ofstrategic controls. Providing the leadership re-quired for the firm to compete successfully in mul-tiple countries and cultures demands strategicleadership practices that are oriented largely tothe integration of disparate competitive informa-tion and the use of broad-based strategic controls.

Recommendations for Effective StrategicLeadership Practices

Competition in the 21 * century's global economywill occur in postindustrial societies that differdramatically from the industrial societies they arereplacing.

Industrial societies and the commercial enter-prises operating within them have been focusedprimarily on activities intended to create wealth.Technological and scientific advances were theprincipal means through which wealth was cre-ated in such sectors as medicine, agriculture, com-munications, energy, transportation, and electron-ics. In the postindustrial era, information-basedtechnology and internationalization are the 'pri-mary wealth-creation activities. In this era, "(1)much of the economic production occurs in serviceand high-technology sectors; (2) there is increasing

2005 Ireland and Hitt 73

globalization of finance, production, labor, andproduct markets, (3) economic growth is confrontedwith ecological limits, and (4) there is a movementtoward 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.

A Growth Orientation

The 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 competition in the globaleconomy demand a corporate focus ongrowth rather than on downsizing andcost reductions.

tegic 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 Management

Strategic 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 thecapacity of leadership to create the social archi-tecture that generates intellectual capital. Suc-cess will belong to those who unfetter greatness

within their organizations and find ways to keepit there."''^

Through voluntary arrangements such as strate-gic alliances, joint ventures, technology ex-changes, and licensing agreements, firms pooltheir resources to create goods and services witheconomic value. They create knowledge that, inturn, facilitates the development of competitivelyvaluable goods or services.''^ Strategic leaders wholearn how to manage such collaborations will be-come a source of competitive advantage for theirorganizations. The most effective strategic leaderswill develop the skills required to engage simulta-neously in competitive and cooperative behav-iors. ° Companies that both effectively cooperateand compete with other enterprises will earnabove-average financial returns. The creativity ofgreat groups will be instrumental in isolating co-operative projects from those for which competitivebehaviors are more appropriate.

Mobilization of Human Capital

Implied throughout is the need for companies toadapt to the significant changes in the globaleconomy. To cope with changes in the world's so-cieties, technologies, and markets, 21 * centurystrategic leaders will be challenged to mobilizecitizens in ways that increase their adaptive abil-ities. Leaders should refrain from providing an-swers; instead, their focus should be on askingchallenging questions. They should request thatcitizens working as members of great groups con-sider relevant information to determine how thefirm can use its knowledge base to achieve strate-gic competitiveness. Asking citizens to accept theirroles as leaders and colleagues while working ingreat groups can be expected to mobilize their effortsaround key strategic issues. Facilitating citizens' ef-forts to challenge the historical conduct of businessin the firm also can galvanize them as they seek toaccomplish relevant goals. The development andmobilization of human capital is vital if the firm is toachieve the strategic flexibility that is linked withsuccess in the new competitive landscape.^'

Deveioping an Effective Organizational Culture

As the social energy that drives the firm, cultureexerts a vital influence on performance. To facili-tate the development of values oriented to growthand success, 21 * century strategic leaders shouldcommit to being open, honest, and forthright intheir interactions with all stakeholders, includingorganizational citizens.

Such a commitment supported James Bonini's

74 Academy of Management Executive November

Table 1Strategic Leadership Practices

20"" Century Practices 21°' Century Practices

Outcome focusedStoic and confidentSought to acquire knowledgeGuided people's creativityWork flows determined by hierarchyArticulated the importance of integrityDemanded respectTolerated diversityReacted to environmental changeServed as the great leaderViews employees as a resourceOperated primarily through a domestic mindsetInvested in employees' development

Outcome and process focusedConfident, but without hubrisSeeks to acquire and leverage knowledgeSeeks to release and nurture people's creativityWork flows influenced by relationshipsDemonstrates the importance of integrity by actionsWilling to earn respectSeeks diversityActs to anticipate environmental changeServes as the leader and as a great group memberViews organizational citizens as a critical resourceOperates primarily through a global mindsetInvests significantly in citizens' continuous development

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's 84 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 Focused on the Future

The significant differences between effectivestrategic leadership practices in the 20** 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 theircompetitive actions in the world's emerging mar-kets. This emphasis is understandable, given thatemerging markets constitute a new and important

competitive frontier. However, high levels of riskare associated with these significant opportuni-ties. Major reversals in the trend toward democra-tization of countries' markets and their accompa-nying political structures could have significantimplications for strategic leaders and their firms. ^Effective strategies leaders should seek informa-tion that will allow them to predict accuratelychanges in various global markets. Strategic col-laborations, with host governments and other com-panies, are a valuable means of dealing withchanging conditions in emerging economic struc-tures. By aligning their strategies with an emerg-ing country's best interests, firms increase theirchance of competitive success in volatile situa-tions. Failure to develop these understandings willinhibit strategic leaders' efforts to lead their firmseffectively in the 21 * century.

Endnotes

' Five business thinkers, Peter F. Drucker, Esther Dyson,Charles Handy, Paul Saffo, and Peter M. Senge were askedrecently by Harvard Business Review to describe the challengesthey see already taking shape for executives as they move intothe next century. See P. F, Drucker, E. Dyson, C. Handy, P, Saffoand P. M. Senge, Looking Ahead: Implications of the Present,Harvard Business Review, 75(5), 1997, 18-32.

^ The importance of strategic leadership for 21°' century firmsis described in: M. Davids, Where Style Meets Substance, Jour-nal of Business Strategy, 16(1), 1995, 48-60; R. P. White, P. Hodg-son, and S. Crainer. The Future of Leadership (London: PitmanPublishing, 1997).

^ Additional definitional information about strategic leader-ship can be found in: C. M. Christensen, Making Strategy:Learning by Doing, Harvard Business Review, 75(6), 1997, 141-156; M. A. Hitt, R. D. Ireland, and R. E. Hoskisson, StrategicManagement: Competitiveness and Globalization, Third Edition(Cincinnati: South-Western College Publishing Company, 1999).

^ John Browne, CEO of British Petroleum, describes a widerange of competitive approaches being used at BP. See S. E.

2005 Ireland and Hitt 75

Prokesch, Unleashing the Power of Learning: An Interview withBritish Petroleum's John Browne, Harvard Business Review,75(5). 1997, 147-168.

^ The universal need for each firm to develop a competitiveadvantage serves as a foundation for two authors' analysis ofhow strategic management can be improved. For additionalinformation on this subject, see: A, Campbell and M. Alexander,What's Wrong with Strategy? Harvard Business Review, 75(6),1997, 42-51.

^ Mr. Gorman's viewpoint is included in an article in whichpotential reasons for the recent success of U.S. firms in theglobal economy are examined. For further information see: G. P.Zachary, Behind Stocks' Surge is an Economy in Which Big U.S.Firms Thrive, Wall Street Journal, November 22, 1995, Al, A3.

' Based on an argument that globalization is a reality of ourtime, one business writer offers intriguing perspectives regard-ing the level and degree of economic interdependence of theworld's nations. To explore his views further, see: R. Ruggiero,The High Stakes of World Trade, Wall Street Journal, April 28,1997, A18.

^ In light of the global economy, an interesting set of predic-tions about the nature of business firms and their leaders in the21st century can be found in: S. Makridakis, Management in the2P' Century, Long Range Planning, 22, April, 1989, 37-53.

^ The director of the Institute for International Economicsoffers his optimistic perspective about the characteristics of aglobal economy in: C. F. Bergsten, The Rationale For a RosyView, The Economist, September 11, 1993, 57-58.

'° Peter Drucker made these observations in an address tothe Knowledge Advantage Conference sponsored by the Ernst &Young Center for Business Innovation. See Peter Drucker on TheNext 20 Years, Executive Upside, March, 1997, 3.

" To better understand the possible nature of the globalmarketplace in the future, a senior writer reviewed severalbooks. His reviews can be found in: F. R. Bleakley, The Future ofthe Global Marketplace, Wall Street Journal, March 15, 1996,A13.

' Unpredictable events affect firms of all sizes. An analysisof the effects of the new competitive landscape on high-growthentrepreneurial firms, is presented in: R. D. Ireland and M. A.Hitt, Performance Strategies for High-Growth EntrepreneurialFirms, Frontiers of Entrepreneurship Research, 1997, 90-104.

' In a recent article, two prominent researchers argue con-vincingly that "the complexity of political, regulatory, and tech-nological changes confronting most organizations has maderadical organizational change and adaptation a central re-search issue." To further explore this central issue see: R.Greenwood and C. R. Hinings, Understanding Radical Organi-zational Change: Bringing Together the Old and the New Insti-tutionalism. Academy of Management Review, 21, 1996, 1022-1054.

''' Rapidly changing business conditions result 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 competitive advantage in firms 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 Outcomes, Academy of Management fieview, 21,1996, 1143-1191.

' Both Drucker and Senge emphasize this point in their de-scriptions of events that have already happened that are shap-ing the future for 2P' century firms. For more information, see:Drucker, Dyson, Handy, Saffo, and Senge, "Looking Ahead: Im-plications of the Present," 18-32.

' This positive projection of growth for at least the beginning

part of the 21'" century is presented in: Dallas Morning News,Futurists See Bright 2P' Century, June 11, 1997, D2.

" An insightful treatment of the link between corporate en-trepreneurship and the pursuit of organizational growth infirms facing challenging competitive environments is pre-sented in: S. A. Zahra, Environment, Corporate Entrepreneur-ship, and Financial Performance: A Taxonomic Approach, Jour-nal of Business Venturing, 8, 1993, 319-340.

'® For additional information about how firms can mobilize toadapt their behaviors for competitive reasons, see: R. A. Heifetzand D. L. Laurie, The Work of Leadership, Harvard BusinessReview, 75(1), 1997, 124-134,

' Further arguments regarding the choices firms can makethrough the work of their strategic leaders and other key deci-sion makers can be found in the following classic: J, Child,Organizational Structure, Environment and Performance: TheRole of Strategic Choice, Socioiogy 6, 1972, 1-22.

° In a recent article, two researchers present a detailed anal-ysis of different perspectives of strategic leadership that ap-pear in the academic literature. This work is intended to presentwhat the authors consider to be a "more realistic view of topmanagers' work." To examine the researchers' perspectives,see: A. A, Cannella, Jr. and M. J. Monroe, Contrasting Perspec-tives on Strategic Leaders: Toward a More Realistic View of TopManagers, Journal of Management, 23, 1997, 213-237 (the quotein our article appears on page 213 of the Cannella and Monroepublication).

' The historical isolation between strategic leaders andthose they led is described in: P. M. Senge, Communities ofLeaders and Learners, Harvard Business Review, 75(5), 1997,30-32.

^ W. Bennis, Cultivating Creative Genius, Industry Week,August 18, 1997, 84-88.

^ This point is described in greater detail in Bennis, Culti-vating Creative Genius.

• Some believe that understanding how to gather and inter-pret data is the organizational challenge of the next century. Toevaluate this possibility, see: J. Teresko, Too Much Data, TooLittle Information, Industry Week, August 19, 1996, 66-70.

^ For a discussion of how uncertainty affects people at bothupper and lower organizational levels, see: R. P. White, Seekersand Sealers: The Future Leaders, Training & Deveiopmenf, Jan-uary, 1997, 21-24.

^ BCnown widely as a preeminent business thinker, CharlesHandy explains his thoughts about organizational communitiesin: C. Handy, The Age of Unreason (Boston: Harvard BusinessSchool Press, 1989).

^' This quotation appears in: Bennis, Cultivating CreativeGenius, 88.

^^To explore the concept of great groups further, see W.Bennis, Organizing Genius; The Secrets of Creative Collabora-tion (Reading, MA.: Addison-Wesley Publishing Company,1997).

^ To leam how effective leaders allow all organizationalemployees to play an active role in helping firms become adap-tive, see: Heifetz and Laurie, The Work of Leadership.

3° To learn the views of British Petroleum's CEO about thevalue and nature of teams (or great groups) in the global econ-omy, see: Prokesch, Unleashing the Power of Learning: An In-terview With British Petroleum's John Browne.

^ The importance of group members accepting the responsi-bility to support one another in their work is discussed inanother one of Charles Handy's books: C. Handy, The Age ofParadox (Boston: Harvard Business School Press, 1994).

^ Among many points discussed by John Browne, the impor-tance of learning how to leverage knowledge is given the mostattention. See Prokesch, op. cit.

76 Academy of Management Executive November

^^ The criticality of external information for firms seekinghigh performance in the global economy is described 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 stimulated, is discussed 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 Review,October, 1996, 7.

^^ An excellent, comprehensive analysis of strategic leader-ship and the role of the top management team as part of stra-tegic leadership, appears in: S. Finkelstein and D. C, Hambrick,Strategic Leadership: Top Executives and Their Effects on Orga-nizations (St. Paul: West Publishing, 1996).

^ This quote is taken from: Bennis, Cultivating Creative Or-ganizations.

^^ Research results regarding the value of heterogeneous topmanagement teams is explored carefully and in a detailedmanner in: Finkelstein and Hambrick, Strategic Leadership.

^^D. F. Abell, Mastering Management—Part 16, FinanciaiTimes, February 23, 1996, 13,

*° The important link between self-confidence and the suc-cessful completion of significant types of organizational work isdiscussed in: R. D. Ireland, M. A. Hitt, and J. C. Williams, Self-Confidence and Decisiveness: Prerequisites for Effective Man-agement in the 1990s, Business Horizons, 35(1), 1992, 36-43.

^' B. A. Nagle, Wanted: A Leader for the 21=' Century, IndustryWeek, November 20, 1995, 29.

'' This quote, and the importance of letting organizationalcitizens know that their strategic leaders want them to trydifferent methods to satisfy the demands of new challenges,appears on page 158 of Prokesch, op, cit.

*^ Viewpoints of other leaders, in addition to von Pierer, canbe found in: W. H. Miller, Leadership at a Crossroads, IndustryWeek, August 19, 1996, 43-57.

*'^ Other aspects of Mr. Gorman's perspectives about thevalue of a corporate purpose are included in: Miller, Leadershipat a Crossroads.

"" Mr. O'Rourke offered this viewpoint as part of his descrip-tion of what a leader must do to lead effectively. His perspec-tives can be studied fully by reading: W. H. Miller, Leadership'sCommon Denominator, Industry Week, August 19, 1997, 97-100.

•• A full list of the 21 competencies identified by the survey's1,450 participants can be viewed by reading: Davids, WhereStyle Meets Substance.

'' This view is explained more fully in Prokesch, op. cit.•" Charles Handy considers these points in two books: The

Age of Paradox and The Age of Unreason.*^ This point is articulated in: The Economist, The Changing

Nature of Leadership, June 10, 1995, 57.° Full details regarding actions framed by Rockwell's stra-

tegic leaders to achieve the firm's vision can be found in: ItsTime to Change Your Perception of Rockwell, Rockwell Interna-tional Corporation Annual Report, 1995.

^' An intriguing analysis of decisions made by SamsungGroup's strategic leaders regarding the firm's entry into theworld's automobile manufacturing industry is featured in: L.Kraar, Behind Samsung's High-Stakes Push Into Cars, Fortune,May 12, 1997, 119-120.

^ Large conglomerates, called chaebols, have played impor-tant roles in the growth of South Korea's economy. However,some evidence suggests that these huge firms may encounteradditional competitive challenges in the future. Details of thesechallenges, and some of the chaebols' responses to them, arepresented in: M. Schuman and N. Cho, Troubles of Korean

Conglomerates Intensify, Signaling End of an Era, Wall StreetJournal, April 25, 1997, All.

^ Kraar, Behind Samsung's High-Stakes Push Into Cars, 119.'' Some research proposes that knowledge is the most stra-

tegically significant source of core competence and thus, ofcompetitive advantage for firms competing in the complexglobal economy. In a recent publication, this issue is exploredthrough the development of a knowledge-based theory of orga-nizational capability. To examine this theory see: R. M. Grant,Prospering in Dynamically-Competitive Environments: Organi-zational Capability as Knowledge Integration, OrganizationScience, 7, 1996, 375-387.

^ Jay Barney's work informs our understanding of the criteriaof sustainability. Two publications in which Barney's argu-ments are detailed are: J. B. Barney, Looking Inside for Compet-itive Advantage, Academy of Management Executive. IX(4),1995, 49-61; J. B. Bamey, Firm Resources and Sustained Com-petitive Advantage, Journal of Management, 17, 1991, 99-120.

® The value of understanding the nature of a firm's corecompetencies is accepted widely. However, one researcher sug-gests that little guidance is available to help strategic leadersand their co-workers to define carefully their firm's capabilitiesand core competencies. The experiences of three top-level man-agement teams are described in: K. E. Marino, Developing Con-sensus on Firm Competencies and Capabilities, Academy ofManagement Executive, X(3), 1996, 40-51.

* T. A. Stewart, Intellectual Capital (New York: Doubleday/Currency, 1997).

^ T. A. Stewart, Owens Back From the Dead, Fortune, May 26,1997, 118-126.

*® Three researchers have identified actions effective strate-gic leaders and their firms take to maximize the value of thiscritical organizational resource. These guidelines are offeredin: J. B. Ouinn, P. Anderson, and S. Finkelstein, LeveragingIntellect, Academy of Management Executive, X(3), 1996, 7-27.

®° Based on organizational meta-leaming processes, firmsare able to continue gaining competitive advantages by ex-ploiting dynamic core competencies. How this is accomplishedis described in: D. Lei, M. A. Hitt, and R. Bettis, Dynamic CoreCompetences Through Meta-Learning and Strategic Context,Journal of Management, 22, 1996, 549-569.

^' Economist Paul M. Romer's work is thought by some to becontroversial. Romer's analyses suggest that ideas and techno-logical discovery are the main drivers of a nation's economicgrowth. An introduction of these arguments is offered in: B.Wysocki, Jr., For This Economist, Long-Term Prosperity Hangson Good Ideas, Wall Street Journal, January 21, 1997, Al, A8.

^ H. Rudnitsky, One Hundred Sixty Companies For the Priceof One, Forbes, February 26, 1996, 56-62.

^ The potential value of additional national expendituresbeing allocated to education and training initiatives is ex-plored by a prominent economist in: G. S. Becker, Why the DolePlan Will Work, Business Week, August 26, 1996, 16.

'' These points are discussed in Bennis, Cultivating Organi-zational Genius.

^ J. Katkin, Close the Talent Gap, Houston Chronicle, Novem-ber 9, 1997, Cl, C5.

^ These statistics are drawn from the following two sources:S. Baker, A. Barrett, and L. Himelstein, Calling All Nerds, Busi-ness Weeic, March 10,-1997, 36-37; D. Kunke, In Search of Exper-tise, Dallas Morning News. April 16, 1997, Dl, DIO.

® A business practitioner who participated in a debate ex-pressed this view. The focus of the debate was the extent towhich the traditional model of the MBA degree is outdated. Thefull text of this debate appears in: MBA: Is the Traditional ModelDoomed? Harvard Business Review, 70(6), 1992, 128-140.

2005 Ireland and Hitt 11

^ For more information about Mr. Brabeck-Letmathe's views,see: Miller, Leadership's Common Denominator.

® These questions appear at the beginning of the interviewswith Drucker, et al., op. cit.

° B. Vlasic, Can Chrysler keep it Up? Business Week, Novem-ber 25, 1996, 108-120.

' ' Southwest Airlines' culture has been cited frequently as acompetitive advantage for the firm. Interestingly, everyone (ex-cept consultants and U.S. competitors) is welcome to attend thesessions in which the company's culture is discussed. Addi-tional details about the firm's culture sessions are offered in: W.Zellner, Southwest's Love Fest at Love Field, Business Week,April 28, 1997, 124,

'^ To explore in greater detail how ethical practices can beused as decision filters, see: J. M. Lozano, Ethics and Manage-ment: A Controversial Issue, Journal of Business Ethics, 15, 1996,221-22.Z\ J. Milton-Smith, Ethics as Excellence: A Strategic Man-agement Perspective, Journal of Business Ethics, 14, 1995, 683-693.

'^ L. Kraar, Acer's Edge: PCs to Go, Fortune, October 30, 1995,187-204.

'* The developing relationship between corporate social re-sponsibility and society's expectations of corporations was con-sidered through a special issue of Academy of ManagementReview. To examine the special issue's topics, consult the in-troductory comments included in: S. P. Sethi, Introduction toAMR's Special Topic Forum on Shifting Paradigms: SocietalExpectations and Corporate Performance, Academy of Manage-ment Review, 20, 1995, 18-21.

^ R. Simons, How New Top Managers Use Control SystemsAs Levers of Strategic Renewal, Strategic Management Journal,15, 1994, 169-189.

'^ Extensive considerations of the differences between stra-tegic controls and financial controls are presented in severalpublications including: M. A. Hitt, R. E. Hoskisson, R. A. Johnson,and D. D. Moesel, The Market for Corporate Control and FirmInnovation, Academy of Management Journal, 39, 1996, 1084-1119; M. A. Hitt, R. E. Hoskisson, and R. D. Ireland, Mergers andAcquisitions and Managerial Commitment to Innovation in M-form Firms, Strategic Management Journal, 11 (Special Issue),1990, 29-47.

^ P. Shrivastava, Ecocentric Management for a Risk Society,Academy of Management Review, 20, 1995, 119.

'^ Bennis, Cultivating Creative Genius, 87.'^ Three researchers explain theoretically the value firms can

derive through implementation of cooperative strategiesformed through interfirm collaborations: A. A. Lado, N. G. Boyd,and S. C. Hanlon, Competition, Cooperation, and the Search forEconomic Rents: A Syncretic Model, Academy of ManagementReview, 22, 1997, 110-141. See also K. M. Eisenhardt and C. B.Schoonhoven, Resource-based View of Strategic Alliance For-mation: Strategic and Social Effects in Entrepreneurial Firms,Organization Science, 1, 1996, 136-150.

™ Lado, Boyd, and Hanlon argue that "Success in today'sbusiness world often requires that firms pursue both competi-tive and cooperative strategies simultaneously." They define

syncretic rent-seeking behavior as actions firms can take toearn economic rents while engaging jointly in competitive andcooperative behaviors.

^' This point is discussed in some detail in: M. A. Hitt, B. W.Keats and S. DeMarie, Navigating in the New CompetitiveLandscape: Building Strategic Flexibility and Competitive Ad-vantage in the 21^' Century. Academy of Management Execu-tive, 12(4), 22-42.

® A comprehensive description of James Bonini's experi-ences as a young, inexperienced manager at a Chrysler Corp.plant is offered in: G. Stern, How a Young Manager Shook Upthe Culture At Old Chrysler Plant, Wall Street Journal, April 21,1997, Al, A6.

® These possibilities, and their accompanying competitiveimplications for firms committed to achieving success in theglobal marketplace are examined in: J. E. Garten, TroublesAhead in Emerging Markets, Harvard Business Review, 1997,75(3), 38-49.

R. Duane Ireland holds the Curtis Hankamer Chair in Entrepre-neurship at Baylor University and is the director of the Entre-preneurship Studies Program at Baylor's Hankamer School ofBusiness. He received his PhD from Texas Tech University. Hehas been an associate editor of the Academy of ManagementExecutive and a consulting editor for Entrepreneurship; Theoryand Practice. He is now serving as a member of the editorialreview boards for Academy of Management Review and Journalof Management. His research examines questions related tocorporate-level strategy, innovation, and core competencies.Currently, he is studying issues related to the intersectionbetween the entrepreneurship and strategic management lit-eratures and factors that differentiate success from failure inmergers and acquisitions. He is the coauthor of Strategic Man-agement: Competitiveness and Globalization and is working onthree books. He has been selected as Baylor University's out-standing researcher (1998) and as the distinguished professor inthe Hankamer School of Business (1986).

Michael A. Hitt holds the Paul M. and Rosalie Robertson Chairin Business Administration at Texas A&M University, He re-ceived his PhD from the University of Colorado and has beenselected to receive an honorary doctorate from the UniversidadCarlos ni de Madrid for his contributions to the field. He is aformer editor of the Academy of Management Journal and apast president of the Academy of Management. A frequentcontributor to the literature, he focuses on international strat-egy, corporate governance, innovation, importance of intangi-ble resources and the new competitive landscape. He is thecoauthor or coeditor of several recent books, including Down-scoping; How to Tame the Diversified Firm; Strategic Manage-ment: Competitiveness and Globalization; Managing Strategi-cally in an Interconnected World; and New ManagerialMindsets. He is a fellow of the Academy of Management andreceived the 1996 Award for Outstanding Academic Contribu-tions to Competitiveness from the American Society for Com-petitiveness.