CHAPTER 13
Strategic Leadership and Knowledge
Management
The purpose of this chapter is to examine the leader’s role in developing strategy, an integrated, overall
concept of how the firm will achieve its objectives. We also focus on the leader’s contribution to a
continuing thrust in strategy, knowledge management, and developing a learning organization.
CHAPTER OUTLINE AND LECTURE NOTES
Strategic leadership deals primarily with leadership in the executive suite, yet leaders at all levels are
expected to think strategically. For example, they should see the “big picture,” understand the long-
range implications of their actions, and recognize how their daily activities support the firm’s strategy.
I. THE NATURE OF STRATEGIC LEADERSHIP
For the present purposes, strategic leadership is the process of providing the direction and inspiration
necessary to create, provide direction to, or sustain an organization. Strategic leadership is the province
of top-level executives, but not only the chief executive. Such leadership is a complex of personal
characteristics, thinking patterns, and effective management, all centering on the ability to think
strategically.
Key components of strategic leadership are described next.
A. High-Level Cognitive Activity of the Leader
Thinking strategically requires high-level cognitive skill, such as the ability to think
conceptually, absorb and make sense of a multitude of trends, and condense this information
into a straightforward plan of action. The ability to process information and understand its
consequences for the organization in its interaction with the environment is often referred to
B. Maintaining a Human and Emotional Aspect
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Knowledge Management
As implied by the creative component to strategy, strategic leaders rely heavily on intuition as to
what the direction the organization should take. To make strategy more personal, leaders should
answer the questions: “Does you company matter? “What is your company adding to what already
exists in the market?” Most great companies start with great purposes formulated by the founder.
Henry Mintzberg believes that synthesizing information and thinking ahead is more important
than strategic planning in developing useful business strategy.
C. Gathering Multiple Inputs to Formulate Strategy
Many strategic leaders arrive at their ideas for the organization’s future by consulting with a
wide range of parties with an interest, similar to the process of conducting research to create
a vision. Customers are a natural source of inputs for formulating strategy, often simply by
D. Anticipating and Creating a Future
A major component of leadership is direction setting, which involves anticipating and
sometimes creating the future for the enterprise or organizational unit. To set a direction is
also to tell the organization what it should be doing. To set a productive direction for the
E. Revolutionary and Contrarian Thinking
Hamel characterizes strategy as revolutionary. Incrementalism is not sufficient. To be an
industry leader, a company’s leaders must think in revolutionary terms. Any strategy that
does not challenge the status quo should not even be considered a strategy. Another variation
of revolutionary thinking is to discover ways to disrupt the business activities of other
companies or to ward off being disrupted by others. A disruptive innovation is aimed at
F. Creating a Vision
Visions are an integral part of strategic leadership. The final vision statement is relatively
short. A carefully considered and articulated vision helps us know who we are and who we
are not. Articulating a clear vision helped get several great companies off the ground when
the company founders were seeking funding from venture capitalists, with Google being a
good example. In companies that believe strongly in visions and strategic goals, all activities
G. Leadership Effectiveness and Strategy Implementation
Carefully crafting a strategy and vision is not sufficient for its effectiveness. The strategy and
vision must also be implemented or executed by the leader/manager. No strategy, however,
brilliant, can be implemented successfully unless the people with key jobs know what they
II. CONDUCTING A SWOT ANALYSIS
Strategic planning encompasses those activities that lead to the statement of goals and objectives
and the choice of strategy. Strategic planning often takes the form of a SWOT analysis, a method
of considering internal strengths and weaknesses, and external opportunities and threats in a given
situation. A SWOT analysis examines the interaction between the organization, or organizational
unit, and the environment.
A. Internal Strengths
Assess factors within the organization that will have a positive impact on implementing the
plan. What are your advantages and what do you do well?
B. Internal Weaknesses
C. External Opportunities
Assess socioeconomic, political, environmental, and demographic factors in terms of
benefits they may bring to the organization. Think of the opportunities that welcome you if
you choose a promising strategic alternative.
D. External Threats
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In addition to the process of making strategic decisions, the content of these decisions is
important. Business strategies are often classified according to their focus of impact: corporate
level, business level, or functional level. Thirteen current strategies are described next.
2. Cost leadership. A cost leadership strategy is to produce a product or service at a low
price to lower price and gain market share.
3. Focus or niche. Using a focus strategy, the organization concentrates on a specific
4. High quality. Leaders continue to emphasize quality even if there is less explicit
emphasis today on formal quality programs. An important exception is the Six Sigma
6. Strategic alliances. An increasingly popular business strategy is to form alliances, or
7. Growth through acquisition. A standard strategy for growth is for one company to
8. High speed and first-mover. High-speed managers focus on speed in all of their
business activities, including production development, sales response, and customer
9. Product and global diversification. A natural business strategy is to offer a variety of
10. Sticking to core competencies. Many firms of all sizes believe that they will prosper if
11. Brand leadership. Succeeding through developing the reputation of your brand can be
considered a business strategy. Many Internet-based companies perceive brand leader–
12. Focus on environmental sustainability. Company leadership can focus on being green,
13. Competitive advantage through hiring talented people. To build great companies the
most urgent business charge is to find and keep great people. Talented people may
need some leadership, but they will think of new products and services and develop
effective work processes.
All of the impressive strategies just described have limited impact unless they are
implemented properly, meaning that effective management must support strategic
IV. KNOWLEDGE MANAGEMENT AND THE LEARNING ORGANIZATION
Another strategic thrust of leaders is to help their organizations better adapt to the environment by
assisting workers and the organization to become better learners. Knowledge management (KM)
is a concerted effort to improve how knowledge is created, delivered, and applied. Sharing of
information is a key aspect of knowledge information. Managing knowledge well helps an
organization learn. A learning organization is one that is skilled at creating, acquiring, and
transferring knowledge, and at modifying behavior to reflect new knowledge and insights.
A. Knowledge Management
Managing knowledge is an important leadership role because so few organizations make
systematic use of the collective wisdom of employees. Most knowledge in the organization
resides in the brains of employees or in documents not readily accessible to others.
Knowledge management has three components. Knowledge creation is used to spur
innovation. Knowledge dissemination through information technology is the most frequent
activity within knowledge management. Knowledge application is the process of getting
workers better at what they do.
1. General Format of KM Programs. Most knowledge management programs are
technology mediated, yet person-to-person exchange of information is still important.
2. Servant Leadership and the Creation of Knowledge. A key point of a new theory about
knowledge creation is that servant leaders are effective in sharing leadership responsibility,
and shared leadership enhances the creation of knowledge. Shared leadership deemphasizes
hierarchical boundaries which facilitates servant leaders and followers communicating freely.
Caring for people is another aspect of servant leadership that facilitates knowledge creation.
B. The Learning Organization
A learning organization can be looked upon simply as a group of people working together to
enhance their capacities to create results they value. Researched based on 20,000 executives
found that strategic leaders are the focal point for organizational learning, including
establishing a culture of inquiry. To help create a learning organization, several firms have
created a position such as Chief Knowledge Officer.
1. Transformational versus Transactional Leadership and Organizational Learning. A
European study found that transformational leadership behaviors contribute significantly
2. Leadership Initiatives for Enhancing the Learning Organization. A supportive learning
environment is a start, including comfort about expressing disagreement. Concrete
learning processes are important. A third building block of a learning organization is
leadership that reinforces learning; A leader should create a strategic intent to learn
thereby gaining competitive advantage. Creating a shared vision is important. In a
learning organization, employees are empowered to make decisions and seek continuous
improvement.
Systems thinking is almost synonymous with organizational learning, whereby people see
the interrelatedness of their work. Personal mastery of the job should be encouraged, as
V. GUIDELINES FOR ACTION AND SKILL DEVELOPMENT
Three recommended rules toward making strategy understandable are (1) make it simple, (2)
perfection is not necessary, and (3) explain the logic behind the strategy clearly.
COMMENTS ON EXPERIENTIAL EXERCISES
Leadership Self–Assessment Quiz 13–1: Are You a Strategic Thinker?
If taken with a spirit of self-objectivity, this questionnaire can help many students realize that a key area
for growth is the ability to “think big,” as well as linking personal work accomplishment to the good of
the organization. In general, people tend to think less strategically early in their careers.
Leadership Skill–Building Exercise 13–1: Conducting a SWOT
Analysis
Conducting a SWOT analysis is a tangible leadership and management skill that most students enrolled
in a business leadership class would enjoy. Students with an interest in the public sector or the nonprofit
Leadership Self–Assessment Quiz 13–2: My Attiudes Toward Sharing
Knowledge
Sharing knowledge is critical to the success of knowledge management, yet many people would
prefer to keep their best ideas to themselves. This quiz helps the student reflect on how willing he
or she might be to share knowledge in a competitive environment.
Leadership Skill–Building Exercise 13–2: My Leadership Portfolio
This portfolio exercise helps illustrate the idea that strategic thinking is possible even in
relation to everyday occurrences. Practicing a little strategic thinking along the way might
Leadership Skill–Building Exercise 13–3: Developing a Business
Strategy for an Appliance Repair Chain
This exercise provides an opportunity to practice one of the most useful aspects of
developing business strategy—creating ideas for the survival of an enterprise. The tactic so
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Knowledge Management
often used by turnaround managers of laying off a large chunk of the workforce, is
COMMENTS ON DISCUSSION QUESTIONS AND ACTIVITIES
1. Why might being very practical-minded interfere with being an outstanding strategic leader?
2. How might being very strong with business analytics (such as analyzing reams of data and
preparing spread sheets) help a person develop business strategy?
Although effective business strategy is often based on hunches and intuition, it can also arise
from a careful analysis of data, such as scrutinizing data to find a marketplace niche. For example,
automobile executives probably studied enormous amounts of data from dealers to recognize that
3. In what way can a business strategy motivate and inspire employees?
4. How could you adapt a business strategy to guide you in your own career as a leader?
Several business strategies can be applied personally to guide a person’s leadership career. How
about differentiation to gain an edge on the competition, such as being skilled at cloud computing,
5. Many top-level managers say that they want lower-ranking managers to think strategically. How
can a middle manager or a first-level manager “think strategically”?
6. Imagine that you are a high-level executive of a consumer products or industrial company, and
that you are in the final stages of developing a business strategy. What would be an advantage and
a disadvantage of posting this strategy on several social media sites, and asking for input from
readers?
The advantage of posting the strategy on social media sites to obtain feedback (the crowdsourcing
method) would be that many comments would be forthcoming. An unknown percentage of these
7. Working alone or with several team members, provide a recent example of revolutionary thinking
by a company.
For an idea dreamed up by company management to qualify as revolutionary thinking, it must go
beyond a product or service that already exists. The smart phones that include Internet access
might be considered revolutionary because the owner does not have to be at a fixed, wired
8. During the Great Recession, many consumers who had previously shopped at traditional
supermarkets shifted to doing basic shopping at dollar stores and discount department stores.
Furthermore, some of these shoppers remained loyal to the low-priced stores after the recession.
What are the strategy lessons here?
9. In what way might doing a good job of knowledge management give a company a competitive
advantage?
10. Why do you think it has been so difficult for researchers to prove that knowledge management
really pays dividends to an organization?
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Knowledge Management
PLAUSIBLE RESPONSES TO CASE QUESTIONS
Leadership Case Problem A: The Saratoga Supply Company Needs a
Strategy
This case illustrates that strategic leadership, and it associated strategy, might be needed to help a
business firm survive.
1. How should Wes and his team go about developing a survival stratgegy for Saratoga Supply?
Wes and his team face a major challenge, and they must be far reaching in their quest to
develop a survival strategy. A good starting point would be to investigate, if possible, how
2. Does Sarataoga Supply really need a survival strategy? Or should the company just begting to
downsize to fit the demand for its products and services?
3. From the limited evidence presented, how effectively do you think Wes is carrying out the
role of a strategic leader?
From the evidence presented, Wes is doing an incomplete job of being a strategic leader. He
is pointing the company toward a strategy session to deal with the problem, yet he needs to
Leadership Case Problem B: “Superintendent Briggs is Busy
Creating Visions Today”
This case deals with the vital problem of how much time a leader should spend creating visions
versus taking care of operational details.
1. As a strategic leader, what error might Mary Briggs be making?
2. To what extent should a school superintendent be spending more time on strategy than
operational problems?
3. What advice might you offer Briggs to enhance her leadership image in her school district?
Then information presented in the case suggests that the leadership image of Briggs is suffering
to the point of being the brunt of too many jokes. Replacing the voice–mail message about
visioning would be an effective gesture. Briggs should also spend more time working with