Successful leaders continually try to balance structured and unstructured approaches and thinking. Failure to do so has led recently to many burst financial bubbles, such as those in the fibre optics, 3G mobile and related telecommunications, computing and technology, and dot-coms.
Faced with uncertainties in their external environments managers can either adopt a very structured approach to formulating their strategy or can act intuitively, sometimes almost recklessly. But what is really required is a balance of both: a structure that allows risk to be adequately and maturely assessed but one that is not so confining that it prevents intuitive or innovate responses.
Effective strategic leadership and management requires a thorough knowledge of how the industry or market and the value chain leading from raw materials used in the creation of a product or service through to its delivery to the customer work. This can involve a systematic analysis of the industry and competitive market, the situation, as indicated in the right-hand box of Figure 1. Major tasks in such analyses are evaluating the risks and impact of future uncertainties inherent in each situation and spotting emerging or changing trends. It may be an easy task for (or a task already done by) someone who knows the industry well from having worked in it for years.
However, for someone without experience and background, such as many of those involved in the burst bubble companies, it requires considerable skill to complete what will be a difficult and time consuming task. But an inability or unwillingness to do such studies carefully is one early step towards disaster.
Skilful and systematic situation analysis is an indispensable step that provides a basis of knowledge for both the structured and the unstructured thinking and action needed to meet the challenges presented by rapidly changing and highly competitive markets. It is essential in identifying the key activities needed to enter into and survive in a competitive market by meeting threshold requirements (me-too steps and marginal improvements). It also provides the basis for developing dramatically differentiated winning strategies.
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