Pitfalls and Threats to Business Leadership

In 2000, Fortune Magazine did a survey of American CEOs and business leaders who were forced out. Top reasons were:

• Bad earnings (Poor return on investments, faulty investment decisions)
• People problems (failure to get on with owners and other executives)
• Lifer syndrome (creativity drought resulting from being too long on the job)
• Decision gridlock (lacking influence and political clout to implement ideas)

The critical challenges facing business leaders today are:

1. Globalization (Balancing Pankaj Ghemawat’s 3As i.e.)

• Arbitrage: has to do with exploiting the variations in the availability and cost of accessing critical resources. For instance, situating your production facility in China may provide you with opportunities for significant cost-reduction with respect to labour as against erecting your facility in Western Europe or the United States. (you can ask BMW why they decided to move some of their operations overseas!)
  
• Adaptation: entails tailoring your products to suite target markets. HSBC’s slogan, ‘the world’s local bank” is a pointer to the fact that they package their products to suite their target markets. Standardization may not always prove effective depending on the nature of products and services being offered.
  
• Aggregation: aims at strategically centralising some aspects of your operations or implementing some form of shared services. The leverage point here is scale. With careful case analysis, multinationals can aggregate aspects of their operations for better coordination, increased throughput and overall effectiveness.

2.Technological change

Any business that isn’t internet enabled would simply be unqualified to be called a business in the nano-second world of today. Deployment of business automation systems and e-solutions including business to business and customer to business applications are basic pre-requisites for conducting any sort of business today. Service providers, finance and consulting firms and companies where knowledge and information management constitute core aspects of their business have significantly higher technological investment obligations including Document Management Systems, Information Security and Availability, Business Continuity Planning and host of others.

In our fast changing world, successful companies (by implication companies with sound leadership and management) focus on a few simple rules:

• How to rules -- There are standard methodologies and approach to problem solving.
• Boundary rules -- A niche has been carved out. This forces you to focus on your target market and ignore almost everything else outside your strategic framework.
• Priority rules -- First things first. Resources ought to be allocated on the basis of the projected estimated value derivable from such resource commitment.
• Timing rules -- There’s a time and season for everything. If you would agree with me, we are past the period of mega-bucks profits from computer hardware sales. It’s critical to discern the right moment for a product offering, but this does not in any way negate the fact that a company must be able to pro-actively articulate the needs of consumers and hit them with a solution they never knew they needed!
• Exit rules – There’s a time to be born and a time to die. One of the most critical issues investors face today is pin-pointing to divest, exit or liquidate an investment. A twenty-hour delay in liquidating an investment could have implications in the realm of billions of dollars in losses for global corporations.

Warren Bennis remarked that the new leader is one who commits people to action, converts followers into leaders, and converts leaders into change agents.
Today’s leaders ought to think globally and act globally (not just locally)!