Chapter 12: Strategic Leadership 397
The strategic direction could include a host of actions such as entering new international
markets and developing a set of new suppliers to add to the firm’s value chain.^80
Sometimes though, the work of strategic leaders does not result in selecting a strategy
that helps a firm reach the vision. This can happen when top management team members
and, certainly, the CEO are too committed to the status quo. While the firm’s strategic direc-
tion remains rather stable across time, actions taken to implement strategies to achieve the
vision should be somewhat fluid, largely so the firm can deal with unexpected opportuni-
ties and threats that surface in the external environment. An inability to adjust strategies
as appropriate is often caused by an aversion to what decision makers conclude are risky
actions. An aversion to risky actions is common in firms that have performed well in the
past and for CEOs who have been in their jobs for extended periods of time.^81 Research
also suggests that some CEOs are erratic or even ambivalent in their choices of strategic
direction, especially when their competitive environment is turbulent and it is difficult to
identify the best strategy.^82 Of course, these erratic or ambivalent behaviors are unlikely
to produce high performance and may lead to CEO turnover. Interestingly, research has
found that incentive compensation in the form of stock options encourages talented exec-
utives to select the best strategies and thus achieve the highest performance. However, the
same incentives used with less talented executives produce lower performance.^83
In contrast to risk-averse CEOs, charismatic ones may foster stakeholders’ commit-
ment to a new vision and strategic direction. Nonetheless, even when being guided by a
charismatic CEO, it is important for the firm not to lose sight of its strengths and weak-
nesses when making changes required by a new strategic direction. The most effective
charismatic CEO leads a firm in ways that are consistent with its culture and with the
actions permitted by its capabilities and core competencies.^84
Finally, being ambicultural can facilitate efforts to determine the firm’s strategic direc-
tion and select and use strategies to reach it. Being ambicultural means that strategic
leaders are committed to identifying the best organizational activities to take particularly
when implementing strategies, regardless of their cultural origin.^85 Ambicultural actions
help the firm succeed in the short term as a foundation for reaching its vision in the
longer term.^86
12-4b Effectively Managing the Firm’s Resource Portfolio
Effectively managing the firm’s portfolio of resources is another critical strategic leader-
ship action. The firm’s resources are categorized as financial capital, human capital, social
capital, and organizational capital (including organizational culture).^87
Clearly, financial capital is critical to organizational success; strategic leaders under-
stand this reality.^88 However, the most effective strategic leaders recognize the equivalent
importance of managing each remaining type of resource as well as managing the inte-
gration of resources (e.g., using financial capital to provide training opportunities to the
firm’s human capital). Most importantly, effective strategic leaders manage the firm’s
resource portfolio by organizing the resources into capabilities, structuring the firm to
facilitate using those capabilities, and choosing strategies through which the capabilities
can be successfully leveraged to create value for customers.^89 Exploiting and maintaining
core competencies and developing and retaining the firm’s human and social capital are
actions taken to reach these important objectives.
Exploiting and Maintaining Core Competencies
Examined in Chapters 1 and 3, core competencies are capabilities that serve as a source
of competitive advantage for a firm over its rivals. Typically, core competencies relate to
skills within organizational functions, such as manufacturing, finance, marketing, and
research and development. Strategic leaders must verify that the firm’s core competencies
