The Role of leaders in strategy-formulation, strategic decision making (Part 1)

The world in constant changes determines the new type of leaders who are required to confront critical sudden scenarios and bring responses to fit economic and social challenges inside and outside the organizations. A critical, affective, and effective thinking, together with correct decision-making strategies, can head the aims towards the right decisions by using and trusting accurate tools and people that help reduce risks and achieve the appropriate strategy-formulation.

Current globalization has brought new concerns about the importance of the role of the leader in multiple scenarios when the strategy-formulation is built. That is to say that decisions cannot just be based on models and techniques, leaders must also consider different scenarios for a broader perspective in the strategy-formulation. Consequently, the purpose of this article is to describe the roles of the leaders during the strategy-formulation as an environment-adapter, a culture-reader, and as a strategy-player.

The role of the leader as an environment-adapter

As environment-adapter, this scenario challenges leaders to understand that modern businesses are rarely stable. A study published in Harvard Business Review (Reeves, et al., 2012, pp. 76-83) describes 4 types of styles successful leaders adopt in different environments. They assume that leaders must understand that every strategy obeys to a specific and singular environment which are dissimilar according to business sectors, for instance, an industry like oil with a lot predictable variables as GDP, certainty of demand and supply occurrences based on geopolitical movements, weather conditions, among others, is antagonistic to an industry like Internet where changes occur abruptly pushed by constant and fast innovations that affect competition significantly. In the first case, oil strategists set a plan to adapt according to stable and predicted changes in the environment; in the other case, organizations struggling in the internet industry need to read the environment and move faster to adapt quickly to changes to survive; thus, strategies implemented by each industry must be completely different.

To reinforce the idea, the researchers have developed a framework to allow leaders to adapt their styles to the particular business environment. The construction of the framework was based on understanding how predictable and malleable the change is.

Under this logic, leaders should analyze the ‘predictability’ and ‘malleability’ variables, and merge them to 4 strategic styles: ‘classical, adaptive, shaping, and visionary’.

- Classical Style: This strategic style is more suitable for predictable scenarios but hard to change by organizations. This style is very common for business school graduates and demands analytics and quantitative skills. This style is especially attractive for mature corporations, like oil companies, such as ExxonMobil or Shell, which apply it to plan and predict their annual targets.

- Adaptive Style: Many abroad factors like technology, innovation, economy and communities have make the world and the market unpredictable; hence, and adaptive style responds to non-predictable and immutable scenarios. As a result, long term plans become obsolete for leaders, and they must get in charge on adapting and shifting them. A successful implementation of this strategy depends on a coordinated communication and execution of all departments. A good example is that of the fashion industry, as the Spanish retailer Zara that must design, manufacture and ship garments in their shops around the world in less than a month.

- Shaping Style: Difficult scenarios to predict, as the Internet Software, can be altered by big innovations that can change the path of the industry. It is in this environment where a shaping style strategy comes in handy, particularly for Internet software companies that find it as a valuable resource to use for creating communities, standards and platforms that become real breakthrough for new markets or businesses. The most popular example is Facebook, which changed the way to connect the communities and became the number one social network by introducing new applications merging corporations or buying potential competitors.

- Visionary Style: Predictable and mutable scenarios are the most suitable for this strategy. As sculptors, leaders carve the market with careful steps to turn the reality into a new profitable creation. A notable example was that of the visionary UPS which, in 1994, observed Internet as an opportunity to grow the business. Six years later, the initial billion-dollar investment had completely been paid off.

Results of the research showed that some leaders prefer to combine distinctive styles, and adapt them according to the circumstances.

Multiple environments also oblige leaders to be open to the manner they choose and train other leaders. What means diverse types of managing training, backgrounds and personalities give the organizations broader possibilities for adapting to specific scenarios and circumstances.

One research conducted on 12 CEO with military experience, that they called CME, by (Groysberg, et al., 2010, pp. 80-85), presented significant differences in the way military branches trained leaders for business, who may be hired in diverse industries to respond to different environments.

Air force and Navy CMEs (CEO with military experience) had to deal with the use of expensive equipment, any single or slight mistake may end up in expensive damages or loss of many lives, so they are better cut up for a process driven approach to management, what may result on strict procedures with no deviation at all. Researchers found out that these CMEs are successful in highly related industries where they showed successful numbers for the firm during the first five years after being hired, and great innovation in managerial procedures.

On the other hand, “in the Army and the Marine Corps, the leadership environment is inherently messy and uncertain” (Groysberg, et al., 2010, p. 84). Because they must make constant and sudden changes on the ground -as long as they do not lose the intend-, Army and Marine Corps CMEs are more flexible and empowering people-related, so they happened to become more successful leading small groups and working for small firms where they could communicate with the staff and identify individual skills easily, helping the firms make high profits.

Finally, researchers suggest firms to recognize that the military service can be seen as a flexible school which fits different leadership styles according to the singular profile of the job.