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The Wise Leader
Prasad Kaipa and Navi Radjou / Strategy + Business / May 28, 2013
Smartness is the operating currency of organizational culture in the 21st-century. Whether it’s called cleverness, practical intelligence, or savvy, one can never have too much of it in a company. Smart leaders can see patterns in seemingly random information, enabling them to take decisive action while their peers are still assessing a situation, and to make the strategic choices that bring competitive advantage. But there are two categories of smartness, both of which carry benefits and risks. Most executives favor one or the other, and that makes it more difficult for them to lead.
“Business smart” leaders, like GE’s Jack Welch and Oracle’s Larry Ellison, are big-picture thinkers who recognize that opportunities are unlimited, at least for those ready to seize those opportunities. They are competitive, dynamic, and proactive. They relish high-stakes games, and display an aggressive, winner-take-all mentality. Bill Gates exemplified this form of leadership when he took Microsoft from a college dropout’s startup in 1976 to a company with a market capitalization of more than US$616 billion by 1999. But these leaders’ expeditious and sometimes self-centered approach to decision making can also cause trouble. Gates learned this in 1998, when the U.S. Justice Department (followed by a number of European countries) filed an antitrust suit against Microsoft. By most accounts, this was a rude awakening for Gates. Under questioning at trial, he appeared combative and defensive. Although Microsoft settled the lawsuit in 2001, these events contributed to the company’s loss of dominance.
“Functional smart” leaders are grounded in the concrete, tangible, and tactical, enabling them to achieve operational and execution effectiveness. Like Genentech co-founder Herbert Boyer and HP founders William Hewlett and David Packard, functional-smart leaders tend to have deep expertise in narrow domains. They understand that constraints are unavoidable, but also know that they can be managed by those willing to design appropriate solutions. Tim Cook, for example, who took over as CEO of Apple after Steve Jobs’s death, brought a new level of operational efficiency and bottom-line productivity to Apple, honed during his years as chief operating officer. Functional-smart leadership may seem like a safer bet, but these leaders are prone to repeating poor decisions or procrastinating on tough decisions. They are more likely to be caught in the weeds of habitual practice, neglecting things outside their purview. Cook, for example, in overlooking the poor working conditions at Apple’s Chinese subcontracted factories, damaged Apple’s reputation and some of its profitability.