Strategy & Leadership

Overcoming barriers to integrating strategy and leadership

Paul J.H. Schoemaker, Steven Krupp,
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 Overcoming barriers to integrating
strategy and leadership
Paul J.H. Schoemaker and Steven Krupp
Paul J.H. Schoemaker is
research director of the
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Mack Institute for
Innovation Management
at the Wharton School of
the University of
Pennsylvania and the
founder and executive
chairman of Decision
Strategies International
(schoemaker@decisionstrat.
com), a consulting firm with
offices in Conshohocken,
Pennsylvania and London
(decisionstrat.com).
Steven Krupp is a Senior
Managing Partner at DSI
(krupp@decisionstrat.com).
This article is based on
research for their new
book Winning the Long
Game: How Strategic
Leaders Shape the Future
(Public Affairs, 2014).
DOI 10.1108/SL-01-2015-0001
he most innovative companies view uncertainty as a source of opportunity and
T profit.[1] It requires strategic leadership to design and deploy the kind of
organizational capabilities that enable such firms to anticipate discontinuity sooner
and adapt faster. The leadership challenge, which involves practicing six abilities while
overcoming barriers to them, allows the best innovators to win the long game while making
frequent tactical adjustments along the way in response to surprise and uncertainty.
Exhibit 1 illustrates six strategic leadership abilities – anticipate, challenge, interpret,
decide, align and learn – that strategic leaders must master to navigate uncertain and
volatile times successfully. These capabilities enable the organizational agility needed to
shift gears quickly when operating in a fast moving marketplace.[2]
The ability to anticipate
The anticipation problem. Most organizations lack sufficient capacity to detect, analyze and
act on ambiguous signals lurking at the periphery of their business. For example, the
Danish company Lego experienced a deep crisis circa 2004 after having missed the video
gaming and computer revolutions in the world of toys and entertainment. Operating from
remote Bilund in Jutland, they discounted the changes in the entertainment industry and
ignored opportunities to break into the emerging market for video-based play.
Strategic leaders need to foster a vigilant organization with processes that effectively watch
for, evaluate, and respond to signals from the near and far reaches of its business
environment, especially signals that are quite faint at first. A study of over 160 senior
executives showed that a vigilant attitude in leaders is the most significant component of a
superior capability to anticipate.[3] Leaders define what the organization sees and how it
makes sense. Leadership at various levels either opens the organization to signals from
within the organization as well as outside it, or shuts these signals out. The outside
environment includes an extended network of suppliers, partners, customers and other
agents whose eyes and ears reach much farther than the organization can on its own.
When Lego recognized its impending crisis, it embarked on an ill-fated innovation spree.
Their scatter-shot approach actually made things worse until a more focused strategy was
put in place and the company embraced a strategy of co-creation with partners. It teamed
up with outside inventors to create new products, especially for Japan. Lego developed
robotic kits to replace its 1998 product, emphasizing intelligent Lego “bricks,” a new
programming language, motors and sensors, starter models and teaching materials for
schools.[4]
To anticipate impeding change, leaders must both mind and mine the periphery.[5] The
ability to “mind” a broad periphery requires divergent attention and actions across many
VOL. 43 NO. 2 2015, pp. 23-32, © Emerald Group Publishing Limited, ISSN 1087-8572 STRATEGY & LEADERSHIP PAGE 23
 Exhibit 1 Six distinctive abilities of strategic leaders

areas. After all, one doesn’t know whether the next relevant signal will come from the realm
of economics, politics, technology or from within the industry itself by way of customers or
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competitors. In contrast, when dealing with a well-defined part of the periphery, such as
pending regulations or a specific technology, leaders should encourage the organization to
thoroughly “mine” for knowledge in a specific area.
Strategic leaders anticipate by:
 Tracking industry trends that pose threats or opportunities for your business.
 Foreseeing the changing needs of customers or end-users; see their evolving needs
sooner than they will themselves.
 Anticipating the moves of competitors and their likely reactions to new initiatives,
products, or services.
 Seeing market uncertainty as a source of potential advantage because they are better
informed, scout more broadly and look under many rocks.
 Gathering information from a wide network of experts and other sources both inside and
outside their function or industry.
 Thinking in terms of multiple futures and new business models, different from today, by
studying innovators inside and outside their industry.

The ability to challenge

The challenge problem. The 2010 oil spill in the Gulf of Mexico is a poignant example of the
consequences of leaders’ failure to ask deeper questions and process information to find
the best way to address a complex problem. The Presidential Commission investigating
this eco-tragedy traced the oil well blowout to multiple factors.[6] The first one listed relates
to managerial missteps that could have been avoided. “Company officials failed to consult
with one another on critical decisions.” Decision errors included not installing sufficient
devices to stabilize the well, not waiting for results of tests on the foam used to seal the well
and ignoring results from an important pressure test. Ignoring signals that challenged
deeply held beliefs, combined with fear of not meeting performance goals, put the platform,
workers and the ecosystem in jeopardy.
To promote challenging dialog, strategic leaders recognize the need for input from diverse
stakeholders – colleagues, frontline employees, mentors, peers in other industries and
even competitors – to encourage creative problem solving. Hala Moddelmog, president of
Arby’s Restaurant Group, surrounds herself with people of different perspectives,
backgrounds, styles, and ethnicity. “You really don’t need another you,” she says. At
Amazon, CEO Jeff Bezos promoted a culture where “leaders are obligated to respectfully

PAGE 24 STRATEGY & LEADERSHIP VOL. 43 NO. 2 2015

 ‘‘The leadership challenge, which involves practicing six
abilities while overcoming barriers to them, allows the best
innovators to win the long game while making frequent
tactical adjustments along the way in response to surprise
and uncertainty.’’

challenge decisions when they disagree, even when doing so is uncomfortable or

exhausting.”[7] Bezos expects leaders to advocate for their view, challenge the status quo
and expand possibilities instead of compromising just to end debate or get a quick
agreement.
Strategic leaders challenge by:
 Regularly seeking out diverse views to see multiple sides of an important or complex
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issue.
 Putting practices in place to offset complacency.
 Challenging long-standing assumptions, tradition, and conventional wisdom.
 Encouraging both constructive criticism and creative thinking to surface new
perspectives and better options.
 Purposely reframing important problems from several angles to understand root
causes.
 Confronting their own biases as well as those of their team.

The ability to interpret

The interpretation problem. Our interpretation of signals is very much determined by what
we expect to see as a result of selective perception. If something doesn’t fit our mental
model, we often distort reality to make it fit rather than challenge our deeper assumptions.
We may actively look for new evidence that bolsters our perspective – the confirmation
bias – rather than pursuing a more balanced search strategy that also examines
disconfirming evidence.
Strategic leaders try to make sense of uncertain environments by generating competing
hypotheses that avoid the trap of getting stuck on a simple, single answer. For example,
when early hints arise that sales are weaker than expected, a strategic thinker would
consider multiple explanations, from the reports being false to a recession looming. By
considering competing hypotheses, one avoids getting locked into narrow views of what is
happening. Rather than muffle weak signals, strategic leaders embrace scenarios informed
by “postcards from the edge.”
Consider how Du Pont CEO Charles Holliday was able to discern weak signals, connect the
dots and interpret the meaning in real time to better prepare for the financial crisis starting
in 2007. While in Japan, he noticed a key customer was conserving cash, a step usually
taken when a company is anticipating a decline in profitability. Holliday soon picked up
another signal: reservations at the Hotel Du Pont in Wilmington, Delaware had dropped 30
percent in 10 days, an unusual decline. Further insight came from several key automotive
customers who were slowing production schedules. As he asked questions to test his
emerging hypothesis, the answer became clear: new car sales were collapsing and the
economy was starting to tank. Having connected all these dots, Holliday was able to
prepare his team in advance.[8]

VOL. 43 NO. 2 2015 STRATEGY & LEADERSHIP PAGE 25

 Strategic leaders interpret by:
 Systematically developing deep insights about customer experiences, competitive
perspectives, or the changing dynamics of their marketplace and industry.
 Moving fluidly between specific details and the big picture when analyzing complex
data.
 Matching the level of data, analysis, intuition and judgment needed to the complexity
of the problem at hand.
 Leveraging both rich data and analytic reasoning to recognize patterns among
disparate data points.
 Deploying multiple lenses to connect dots, alone or with others, before jumping to
conclusions. Seeking additional data points to round out the picture.
 Asking the right questions to demonstrate curiosity and an open mind about
ambiguities and what they might connote.

The ability to decide

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The decision problem. Faced with complex decisions, some leaders become anxious
because of the lack of proof or overwhelmed by conflicting data and begin to slow-walk
decisions. Others jump to the conclusion that a decision recommendation is right, even
infallible. As a result, decision cycles may either move too slowly or too fast.
Successful leaders will carefully frame a decision approach from the outset, review multiple
options and balance rigor with speed. Yet, given the speed of change and degree of
uncertainty, it is not possible to think everything through in advance. The most adaptive
leaders iterate their decisions as they respond to real-time market feedback.[9]
Many organizations have introduced decision ownership models that help clarify roles and
responsibilities across complex systems, including who can make which decisions. In
setting up project initiatives, team members create a lengthy list of stakeholders and then
specify who will make the key decisions to move things forward. “Who has the ‘D’?” is a
frequent refrain.[10] Ironically the ultimate decision makers cannot be immersed in all of the
elements of the decision that their teams bring forward. Yet they own the finding – to
proceed, to hold, redirect or abort.
As a case in point, when the DVD subscription and online streaming company Netflix
announced their results for the third quarter of 2011 on October 23rd, earnings had
increased 65 percent. Yet the company’s recently battered stock plunged by more than 26
percent on the same day. Netflix also reported that it had lost 800,000 customers in the
quarter.
A month earlier, Reed Hastings, co-founder and CEO of Netflix, had sent an email to
customers that opened as follows: “I messed up. I owe you an explanation.” The email
focused on his company’s decision to spin off a business unit in order to accelerate the
company’s focus on streaming video. The company’s intent was to better execute two
distinct delivery models for providing video content to customers. What followed in the letter
was an explanation of what went into the decision that had riled the customer base enough
to drive hundreds of thousands to drop their subscriptions.[11]

‘‘To anticipate impeding change, leaders must both mind and

mine the periphery.’’

PAGE 26 STRATEGY & LEADERSHIP VOL. 43 NO. 2 2015

 ‘‘To promote challenging dialog, strategic leaders recognize
the need for input from diverse stakeholders – colleagues,
frontline employees, mentors, peers in other industries and
even competitors – to encourage creative problem solving.’’

Hastings exposed the bad assumptions underlying the decision about what customers’
valued – considerations that were not properly evaluated and weighted. Despite being one
of the most successful entrepreneurs of our time, it is clear that Hastings did not adequately
consider all options and the potential unintended consequences from the customer
perspective. His leadership team missed the angry reaction of a large segment of prized
customers.
In his letter to customers, Hastings admitted a lack of rigor when seeking alternative views,
especially from valued customers, before acting, and he showed a willingness to reverse
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his decision, albeit under duress. As part of this explanation, he wrote in a blog post,
“Companies rarely die from moving too fast, and they frequently die from moving too
slowly.” He felt that Netflix had to act aggressively to expand its fast-growing streaming
service by separating its DVD-by-mail arm.
While it may be necessary to drive decisions in a fast-changing technological arena, the
Netflix case highlights the subtle balance between a sense of urgency and a rush to action.
Strategic leaders must balance the need for predictable, consistent performance
achievement with the surprises inherent in taking calculated risks.
Strategic leaders promote better decision making by:
 Always generating and evaluating multiple options for realizing their strategic vision,
including an analysis of the status quo.
 Carefully balancing trade-offs, assessing risks, and considering unintended
consequences for complex projects.
 Balancing speed and rigor when making complex decisions, especially in fast moving
environments.
 Showing courage in setting a distinctive strategic direction and having the guts to make
tough choices in times of uncertainty.
 Championing innovative solutions and risk-taking to meet changing business
conditions, including evolving customer needs.
 Balancing long-term investment for growth with short-term pressure for results.

The ability to align

The alignment problem. A study by researchers Beer and Eisenstat found that lack of top
team alignment was the most deadly of strategy killers.[12] Poor coordination across
functions, businesses or borders was close behind. A study by author Richard Lepsinger
on why companies struggle to implement strategies found that 47 percent of leaders felt
that they were not appropriately involved in decisions that impact them.[13]
Not only is the world more uncertain, but organizations increasingly are messy, complex,
loosely structured, horizontal and globally dispersed systems. For many managers,
operating in a matrix is the bane of their existence. There are so many stakeholders and
competing interests that it is not always obvious who needs to be involved or what steps are
required to gain agreement.

VOL. 43 NO. 2 2015 STRATEGY & LEADERSHIP PAGE 27

 This puts a premium on the ability of strategic leaders to rally stakeholders around a
strategic direction and bridge differences that can be polarizing. Insight, influence and
bridge building skills are required to navigate the maze, negotiate competing interests and
come out the other side united. Whole Foods has made alignment a top priority. Leaders
rally their organization around three principles – shared purpose, stakeholder
interdependence and team ownership. The intent is to synchronize the expectations,
interests and differences of stakeholders so everyone inside and outside the organization
is working towards the same goals.
John Mackey, the founder of Whole Foods, challenges the premise that different
stakeholders – investors, employees, customers – must have competing agendas. He
believes that common interests can bind diverse stakeholders.[14] That is, if any
stakeholder group suffers, the entire enterprise will suffer in the long term. Conversely, if
Whole Foods thrives, all stakeholders win. Employees are considered co-owners and must
deeply understand and buy into the mission, so that they bring it to life for customers. Many
employees are shareholders, and many are customers as well, which reinforces
stakeholder interdependence. Likewise suppliers are crucial to the cause. They are
screened to ensure that they share Whole Food’s values, which are reinforced through
long-term contracts.[15]
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To further create alignment within stores, each team at Whole Foods is a profit center with
autonomy over decisions such as pricing, promotions, floor layouts and product choices.
Teams solve problems faster and provide transparency on performance data, salaries and
bonuses awarded. They even have decision rights over hiring and firing.[16] Achieving
such a high level of alignment requires frequent communication, transparent information
and open dialogue to engage key players.
Strategic leaders align well by:
 Rallying their team around a compelling strategic vision.
 Identifying and reaching out to those who have a significant stake in change initiatives
or strategies.
 Communicating intentions early, clearly, and continuously to all stakeholders.
 Pinpointing and addressing conflicting interests among stakeholders.
 Understanding the needs of key stakeholders and knowing how to build bridges across
interests.
 Actively seeking to understand cultural differences and bridge cultural divides that
could undermine collective action.

The ability to learn

The learning problem. Arie de Geus, former head of strategic planning at Royal Dutch Shell,
studied what companies must do to survive 200 years or more.[17] He concluded that “the
ability to learn faster than your competitors may be the only sustainable competitive
advantage.”
As a case in point, Ursula Burns who, prior to being appointed CEO of Xerox, was part of
a major makeover that grew out of learning from the company’s near death experience.
Xerox transformed from a product-centric business selling machines to a services

‘‘Our interpretation of signals is very much determined by

what we expect to see as a result of selective perception.’’

PAGE 28 STRATEGY & LEADERSHIP VOL. 43 NO. 2 2015

 company in the document outsourcing business.[18] Burns observed, “One of the things I
characterize as fearlessness is seeing an opportunity even though things are not broken . . .
Companies get into trouble when they get really complacent, when they settle in and say, O.K.,
we’re doing O.K. now.”
Journalist Adam Bryant of The New York Times notes that Burns and other CEOs reward
people who have the guts to experiment, uncover hidden opportunities and make decisions
that might shake up the status quo.[19]
Google is currently the poster child for pioneering a culture of learning, experimentation
and fast failure. “At Google, experimentation is practically a mantra; we evaluate almost
every change that potentially affects what our users experience,” says Diane Tang, who
works on data mining research at Google. The company has created an environment where
there is an insatiable appetite to try new things and grow skills in the experimental
process.[20] To foster truly outlandish experimentation, the company established Google
X, their “moonshot factory,” a lab where engineers collaborate to try to solve society’s
toughest problems. Rewards are given for bold thinking even if projects fail.[21] Not only
are mistakes valuable sources of learning, leaders should encourage well-intentioned
mistakes in select situations in order to challenge deeply held assumptions.[22]
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Strategic leaders stimulate learning by:

 Encouraging experiments and “failing fast” as a source of innovation and learning.
 Learning from the outside in instead of internal or industry conventions.
 Exposing themselves to a range of different models and cultures.
 Establishing regular checkpoints and after-action briefs as early indicators of success
and failure.
 Correcting their course when receiving disconfirming evidence or surprises about the
current direction, even after they committed to that direction.
 Sharing stories about success and failure to promote institutional learning and foster
collective intelligence.

How to assess gaps in the six abilities in practice: the “PharmCo” case
Organizations wishing to invest more in strategic leadership capacity can use an
assessment instrument designed based on data collected with over 30,000 leaders (see
“Research note”). It is based on a survey that measures specific behavioral attributes to
evaluate a leader on the six abilities. The survey can have multiple uses in leadership
development, high potential programs, talent management and succession planning as the
case of “PharmCo” illustrates.
PharmCo was struggling with pressing growth and succession challenges. Like many other
businesses today, they have a shortage of leaders ready to step into C-suite roles. The firm
needed current leaders to be more strategic and new people to step into top roles in
emerging markets. Based on in-depth interviews with board members and senior
executives, a profile for the “Regional Presidents of the Future” was developed. It reflected
major shifts in strategic direction and global footprint, as well as an increasing need for

Research note
The six leadership abilities profiled in this article are more fully discussed in Winning the Long Game
(Public Affairs, 2014). The underlying conceptual model was pre-tested with selected executives.
Using factor analysis and other standard tests of validity, we refined an assessment questionnaire
and identified remedies. It has been taken by some 30,000 managers from diverse companies
around the world. Readers can complete a 12-item assessment online (www.decisionstrat.com).

VOL. 43 NO. 2 2015 STRATEGY & LEADERSHIP PAGE 29

 innovation to compete in the changing marketplace. Strategic thinking was identified as the
biggest need for the next generation of leaders.
A comprehensive assessment was used to assess the strategic leadership capabilities of
eight leaders deemed to have C-suite potential. Exhibit 2 shows sample results. For “M,”
one of the more promising internal candidates, the data reveal significant gaps compared
to other top leaders with respect to the ability to “Interpret” and “Align.” As a comparison,
“G,” a second leader we assessed, scored at the expected norm for the group but below
average on “Anticipate.” After the assessment, specific development plans to foster
increased strategic acumen were customized for each leader.
The collective results identified that “Anticipate” and “Learn” represented the firm’s
weakest areas of strategic leadership. In a session with the top 25 leaders, this analysis
then led to a dialogue about what gets in the way of entrepreneurial risk taking across the
organization. The tendency to punish mistakes rather than learn from them surfaced as a
key cultural issue. The CEO and top executives acknowledged that this issue must be
addressed to build a more adaptive learning organization.

A self-reinforcing system
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The skills that comprise strategic leadership in a world of increasing uncertainty should be
viewed as a self-reinforcing system. For example, excellence in “Challenge” without the
ability to “Anticipate” is feeble, and without the ability to “Learn” it becomes hollow. But
even excellence in all three of these cognitive skills remains inadequate if the abilities to

Exhibit 2 Score profiles of selected leaders

PAGE 30 STRATEGY & LEADERSHIP VOL. 43 NO. 2 2015

 ‘‘The most adaptive leaders iterate their decisions as they
respond to real-time market feedback.’’

“Interpret,” “Decide” or “Align” are lacking, since all are necessary for progress in any
organization. We believe that improving leaders’ aptitude in any of the six abilities will be
beneficial to their individual adaptability and the organization’s future success.
In the long run, all organizations compete on their ability to learn and adapt. As Charles
Darwin noted, “It’s not the strongest of the species who survive nor the most intelligent but
the ones most responsive to change.”

Notes
1. Paul J.H. Schoemaker, Profiting from Uncertainty, Free Press, 2002.

2. Schoemaker, P.J.H., Steve Krupp and Samantha Howland, “Strategic Leadership: The Essential
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Skills” Harvard Business Review, Jan/Feb 2013, pp. 131-134. Steven Krupp and Paul J.H.
Schoemaker, Winning the Long Game: How Strategic Leaders Shape the Future, Public Affairs,
2014.

3. George S. Day and Paul J.H. Schoemaker, Peripheral Vision: Detecting the Weak Signals that Will
Make Or Break Your Company, Harvard Business School Press, 2006.

4. Robertson, David C., with Bill Breen. Brick by Brick: How Lego Rewrote the Rules of Innovation and
Conquered the Global Toy Industry. Crown Business. Random House, NY: June 25, 2013.

5. The notions “minding and mining” are further developed by John Seely Brown in “Minding and
Mining the Periphery,” Long Range Planning 37, 2004, 143-215.

6. E. Crooks and S. Pfeifer. 2011 “BP shares rise despite US oil spill verdict,” FT.Com. London:
Financial Times.

7. www.businessinsider.com/the-strategies-jeff-bezos-used-to-build-the-amazon-empire-2014-3#
ixzz3GFIZCF2V

8. Charan, Ram. “DuPont’s Swift Response to the Financial Crisis.” Bloomberg BusinessWeek.
BLOOMBERG L.P., 7 Jan. (2009), Web. December 11, 2013. 2013, www.businessweek.com/
stories/2009-01-07/duponts-swift-response-to-the-financial-crisis#rshare⫽email_article

9. Eisenhardt, Kathleen M. “Making fast strategic decisions in high-velocity environments.” Academy

of Management Journal 32.3, 1989, 543-576.

10. Paul Rogers and Marcia Blenko, “Who Has the D? How Clear Decision Roles Enhance
Organizational Performance” Harvard Business Review, January, 2006.

11. Letter from Reed Hastings via email, September 19, 2011 entitled “An Explanation and Some
Reflections” Stelter, Brian, NY Times Blog, October 10, 2011, 8:00 AM.

12. Michael Beer and Russell Eisenstat, The Silent Killers of Strategy Implementation and Learning,
Sloan Management Review, Summer, 2000, Number 41.

13. Richard Lepsinger, Closing The Execution Gap: How Great Leaders and Their Companies Get
Results, Jossey-Bass, 2010.

14. Shaywitz, David. “Five Take-Aways From Whole Foods CEO John Mackey’s Surprising New Book.”
Forbes, February 16, 2013.

15. Colvin, Geoff. “Walter Robb: Whole Foods’ Other CEO on Organic Growth.” CNNMoney. Cable
News Network, May 6, 2013.

VOL. 43 NO. 2 2015 STRATEGY & LEADERSHIP PAGE 31

 16. Fishman, Charles, “Whole Foods Is All Teams.” Fast Company, April 30, 1996, Mackey, John,
Rajendra Sisodia. “Conscious Capitalism: Liberating the Heroic Spirit of Business.” Boston, MA:
Harvard Business Review, 2013.

17. De Geus, Arie. “The Living Company.” Harvard Business Review, March, 1997.

18. Kalbag, Chaitanya, and Josey Puliyenthuruthel, “The Personality of Xerox Is Not Gender-based,
But It Is One That Enables Women.” Business Today, September 29, 2013.

19. Bryant, Adam, The Corner Office: Indispensable and Unexpected Lessons From CEOs On How To
Lead and Succeed. Times Books, Henry Holt and Company, 2011.

20. Tang, Diane, Ashish Agarwal, Deirdre O’Brien, Mike Meyer. Paper. “Overlapping Experiment
Infrastructure: More, Better, Faster Experimentation.” Proceedings 16th Conference on Knowledge
Discovery and Data Mining, ACM, WA, DC, 2010, pp. 17-26.

21. Grossman, David, “Secret Google Lab Rewards Failure.” BBC News,, January 24, 2014, www.
bbc.co.uk/news/technology-25883016

22. Schoemaker, Paul J.H., Brilliant Mistakes, Wharton Digital Press (2011), see also Schoemaker,
Paul J.H. and Gunther, Robert E. “The Wisdom of Deliberate Mistakes” Harvard Business Review,
June, 2006, pp. 109-114.
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Corresponding author
Paul J.H. Schoemaker can be contacted at: schoemaker@decisionstrat.com

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