Based on the authors’ new book, The Strategic Leader’s Roadmap, this article stresses that strategic leadership constitutes a skillset that can be learned and mastered across a career. Becoming a strategic leader oneself and developing strategic leadership in others is one of the great callings of our era.
As managers navigate a more turbulent marketplace and more global square, the integrated application of both strategy and leadership is of ever greater value. Heightened uncertainty from process innovations, technological shifts, and regulatory changes have placed a premium on the need for managers who not only think strategically but also inspire a workforce. The stakes could not be higher, as has been evident in the achievements of those who have combined both, including Alan Mulally at Ford, Jeff Bezos at Amazon, and Sundar Pichai at Google.
In a new book, The Strategic Leader’s Roadmap, we stress that strategic leadership constitutes a skillset than can be learned and mastered across a career. We draw on accounts of those who have exercised both to illustrate how they can be acquired and integrated, and we begin with the experience a new executive as Nissan Motor Company at a moment when the automaker required a wholesale turnaround if it was to survive.
Strategic Leadership in a Turnaround
The financial situation for Nissan could not have been more dismal. Its global market share had shrunk from 6.6% in 1991 to 4.9% in 1998, and even in its home market only about 10% of its models were proving profitable. The company had chalked up losses in seven of the past eight years, and it was now paying a billion dollars annually just to service its $19 billion debt. An enraged shareholder at Nissan’s annual meeting on June 25, 1999, demanded that Nissan’s president resign: “You’ve made mistake after mistake in your management decisions.”
Not that Nissan’s management had not been trying to make the right decisions to stanch the losses. It had earlier set an ambitious target of taking a quarter of Japan’s auto market by 2000. It was one of those aspirational goals that executives use to concentrate the mind and excite the ambitious. But to achieve that, the chief executive had said that the old way of making and selling cars would no longer work. A new strategy was needed.
The Nissan chief executive had called for a redoubled effort to resurrect its ailing American arm, a market where customers had been flocking to sports utility vehicles – though Nissan had not even introduced an SUV yet. The company, its chief had urged, must also focus more on earnings than sales, slash its car “platforms”, and discontinue its least profitable models. In short, the CEO had warned, the company could never recover if it continued doing business the same old way. And his new way seemed like the right way – providing he could deliver on the plan. But so far he had not. Nissan’s market share in Japan in 1999 had stalled at just 16%, it was faring little better abroad, and losses were mounting everywhere.
Given the widespread skepticism in Japan about whether Nissan executives could ever reverse its declining fortunes – whatever the strategy – further financing for a costly turnaround had dried up. Other carmakers, however, might have an interest in a rescue, though they were sure to exact a high price, such as Nissan’s ability to control its own strategy or even its own leadership. Still, with little real choice in the matter, Nissan sought an international partner, toying first with Germany’s Daimler and then eventually hooking up with France’s Renault.
Renault agreed to infuse $5.4 billion into Nissan, but in return it required more than 36% of the company’s ownership and a commitment from Nissan to appoint Renault executive Carlos Ghosn as Nissan’s chief operating officer. With that, Renault inserted a very different kind of leader into the top ranks of Nissan – more confident, more determined, and certainly by Japanese standards more brazen. With a hint of Antony at the Forum (“I come to bury Caesar, not to praise him”), Ghosn told Nissan’s suffering shareholders at the tumultuous 1999 annual meeting, “I have come to Japan not for the good of Renault but for the good of Nissan.”
“For the good of Nissan” would entail a new combination: a more aggressive execution of the company’s strategy and a more demanding manager in charge of it. And Carlos Ghosn seemed to promise both. Under his leadership, he said, the struggling automaker would return to profitability the following year and halve its debt a year later. To do so, the company would close three assembly plants in Japan, increase factory utilisation from 53% to 77%, cut suppliers by nearly half, eliminate 14% of the workforce, and reduce administrative costs by 20%.
Fifteen years later, under Carlos Ghosn’s strategy and leadership, Nissan was indeed back on its feet. It was still far short of the goal of holding a quarter of the domestic market that its prior CEO had once targeted, and Toyota continued to dominate Japan with more than 30% of auto sales. But Nissan had more than recovered to now outperform its industry in Japan, China, Europe, and even North America.
About the Authors
Harbir Singh is Mack Professor of Management, Co-Director of the Mack Institute for Innovation Management, and Vice Dean for Global Initiatives, Wharton School, University of Pennsylvania. His research and teaching interests include corporate governance, corporate restructuring, joint ventures, management buyouts, and strategies for corporate acquisitions.
Michael Useem is Egan Professor of Management, Faculty Director of the McNulty Leadership Program, and Director of the Center for Leadership and Change Management, Wharton School, University of Pennsylvania. His research and teaching interests include corporate governance, risk management, decision making, organisational leadership, and change management.