Leading Strategic Decision Making: Report on Innovation

This report delves into the crucial role of leadership in strategic decision-making, emphasizing innovation and creativity within organizations. It examines the significance of leaders in fostering an environment conducive to innovation, exploring various leadership theories such as transformational and achievement-oriented leadership. The report highlights the interplay between leadership and innovation through practical examples. Furthermore, it provides an in-depth analysis of the VRIO framework, a tool used for assessing an organization's resources and capabilities. The report also acknowledges the limitations of the VRIO framework and suggests alternative frameworks to overcome these drawbacks. The content is highly relevant for modern businesses, offering insights into effective leadership, innovation, and resource management to achieve a competitive edge in the market.

Running head: LEADING STRATEGIC DECISION MAKING
Leading Strategic Decision Making
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Table of Contents
Introduction....................................................................................................................2
Role of Leaders in Innovation and Creativity in the organisation.................................2
Idea of Innovation and Creativity..............................................................................2
Theories of Leadership and their Implication............................................................4
Examples of Practical Context...................................................................................6
Evaluation of VRIO.......................................................................................................6
Limitation of VRIO....................................................................................................7
Other Framework.......................................................................................................8
Use of the Frameworks in Managing the Limitations of VRIO.................................8
Conclusion......................................................................................................................9
References....................................................................................................................10

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Introduction
Organisations are changing their regular operations because of various factors like
technological innovations, competitive factors, changing trends in customer’s preference and
increase of knowledge. These changes in operations have increased the importance of the
leaders and their insightful leadership. Among the various aspects of organisation, creativity
and innovation stays at the heart of development. The role of the organisational leaders to
increase the capability of innovation nd creativity among the employees would be discussed
in this report. The VRIO framework is used for the assessment of the resources capability of
the organisation (Ariyani & Daryanto, 2018). This report will also talk about the alternative
framework that can be used to overcome the limitations of the VRIO framework.
The topics are relevant for the modern business. Companies depend on their leaders to
make serious and effective decision. Hence, the leaders have the responsibility to understand
the need of the hour and lead the team of workers towards the right direction (Nabil,
Abderraouf & Nadira, 2017). On the other hand, the VRIO framework is essential for supply
chain management and resources management. Therefore it is both important and relevant to
understand the gaps in the model.
Again, in modern organisations, the competition is getting gradually high in every
sector or industry. Effective leadership, innovation and resource management- all these three
are the pillars of achieving competitive edge. Therefore, one must understand VRIO gaps and
role of leadership in creativity to analyse their potential in the market.
Role of Leaders in Innovation and Creativity in the organisation
The modern business needs creative steps and innovations to thrive the stiff
competition of the market. As opined by Javed et al., (2017), most of the time, the
organisations do realise the importance of creativity in their operations, but they do not

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include it in their management. This is a huge mistake at their part as the innovative measures
has to be managed properly and led to its culminating point. Leaders have their role in
channelizing the creative environment, sustaining to and practicing the innovation in the right
way through the employees.
Idea of Innovation and Creativity
Definition of Creativity
There are multiple definitions of creativity and experts have seen it from different
perspectives. According to Jiang & Chen (2018), creativity could be said to be the generation
of new imaginative ideas that involves a radical newness in reaching the solution of some
problem. Some of the experts also define it as implementing the already known information
in a new way to solve the issues (Bagheri, 2017). In the organisational context, one might say
that, creativity means the creation of a useful and valuable product or service that works
through a novel procedure or idea and solves the problems in the organisational set up.
Components of Creativity
Main components of creativity are motivation, knowledge and creative thinking. The
confluence of these three components creates the context for creativity in an organisation.
Definition of Innovation
According to the definition of “the introduction of a new product, service, or process
through a certain business model into the marketplace, either by utilization or by
commercialization” (Nabil, Abderraouf & Nadira, 2017). The innovation have different
aspects in the organisation. There can be multiple type of innovation like product innovation,
system innovation, services innovation, process innovation or business model innovation.
The main purpose of innovation is to strengthen the core of company to gain competitive
advantages. This multidimensional activity cannot be measured under a single indicator

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(Gurd & Helliar, 2017). The innovation do not have be originated from new scientific
discoveries. This can also be the combination of existing technology and their unique
application in the organisation.
Types of Innovation
Organisation might have innovation in various types. Some of them can be product
innovation where new product is innovated in order to gain new markets or customers. The
process innovation is used to improve the functions of the organisation. Other kind of
innovations might include the marketing innovation or the organisational innovation.
Theories of Leadership and their Implication
Leadership theories talks about the characteristics and roles of the leaders in the
organisational environment. Some of the theories are discussed below in the light of their
importance in innovation and creativity.
Transformational Leadership Theory
The transformational leadership is said to be the most effective one among the
leadership theories. This theory believes in mutual understanding between the team leader
and the employees and transforms the team in a better entity. According to Qu, Janssen & Shi
(2015), transformational leaders are the supporter of innovation and creativity in the
organisation. The transformational leaders interacts and communicates with the workers to
build a relationship of trust. The leaders are the motivators and the visionary who lead the
team as a support system and not as the forerunners. The organisations that thrive to gain
competitive advantages are depended on the creativity and innovative approaches of their
employees (Jiang & Chen, 2018). The transformational leaders are the listeners. They give
value to the ideas and views of the team members and motivate them for creativity. Thus,
according to the transformational leadership theory of leadership, the leaders play the role of

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the catalyst in generating innovative measures within the organisation (Braun et al., 2016).
Elon Musk has been an example of transformational leaders as he has always stand forwards
for innovation in his organisation even investing his own money at the time of fund crunch.
The employees became more passionate for their work when they see the leaders’ dedication
and passion towards creativity (Cairns et al., 2017).
Achievement Oriented Leadership Theories
This theory is based on the company objectives and the importance of the leaders in
channelizing the knowledge of it. The companies work according to their need and
objectives. The creativity and innovation are part of the company objective fulfilment (Dodge
et al., 2017). When working on a project, the leader makes the employees aware of the
achievement or goals the company is targeting. The employees then get the chance and
motivation to work towards the achievement through innovative ideas and creative measures.
Apple as a company follows the achievement oriented leadership technique. All the creations
of the company is targeted for the quality and differentiation. Hence, the company employees
are motivated to work for carter innovation.
Impact of leadership on Creativity and Innovation
The role of the leaders in the creativity and innovation is that of the management. The
leaders are expected to manage the different aspects of creativity that the organisation aimed
to have. Therefore, the managers starts motivating the employees to get the right strategies in
development and innovation. According to Anning-Dorson (2018), they are the guide that
shows the right path to the employees in the time of crisis. It is the responsibility of the leader
to monitor the work and assess if the team is getting proper support for the completion of the
innovative work. Again, all the innovative initiatives might not be successful, but that phase
becomes a tough time for the employees (Chen & Hou, 2016). Hence taking care of the

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aspect is also important. The researches shows that the organisation that have better
leadership are tend to have greater achievements.
Leader as a Motivator
Most of the studies confirm that for any innovative work, motivation is necessary.
Motivation and appreciation of the contribution helps the employees to work hard and
develop more innovations in the organisation (Chen & Hou, 2016). The ideas and process are
two different parts that are controlled by different sections in the organisation. The leaders
take calculated risk for gaining that link between process and ideas. According to Gurd &
Helliar (2017), no innovation or creativity would have been in the organisational scenario, if
the leaders would not have taken the risk associated with it. Mark Zuckerberg is considered
the great motivator of creativity and innovation. The leader has built special cell and unit for
innovation where the employees have all the freedom to shape their innovative ideas.
Facebook also allocates huge amount of money in their innovation and creativity heads. The
employees are motivated to share their ideas in the meetings with the CEO and effective
ideas are funded by the company (forbes.com, 2018).
Examples of Practical Context
All the major organisations depend on their leaders for creativity and innovative
operations. The example of Elon Musk need to be considered for his creative ventures of
SpaceX and Tesla. The entrepreneur discussed his journey to reinvent the automobile and
aerospace. There was a huge crunch of funds for his creative ventures. In this circumstances,
Elon decided to put his own money to save his ventures. Elon continued to sell his ideas and
visions to the new entrepreneurs to arrange money for SpaceX and Tesla experiments (Cairns
et al., 2017). This is motivated his employees to work hard on innovative ideas so that their
company can stand along. Elon has always prised his people for the success of his ventures

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and thus encouraging them to come forward with their creativity. Elon is an example of hard
work and passion to the employees. The people working in the ventures of Elon are
motivated and inspired by the vision and passion of their leader towards innovation.
Another inspiration for leadership in innovation is Google. This company encourages
creativity more than any other as they believe “ideas come from anywhere”. This company
gives people chance to create innovative and “cool staffs” in their Google App engine and
Google Toolkit. Anyone can be the part of innovation and the company can get the chance to
incorporate innovative ideas in their products and operations (ijsr.net, 2018).
Evaluation of VRIO
Business firms use VRIO tool in order to do internal analysis of the resources the
company have and they can use for their development. As opined by Galpin (2018), VRIO
analysis is a tool in strategic planning, used by firms to make effective business decisions.
The analysis of the business tool is done in order to achieve the competitive advantages. The
components of the VRIO framework are built in a way that analyses various resources
available to the company and to what extend this is applicable.
The VRIO model is used by the organisations to examine what are their unique
internal firm resources. This Framework stands for four questions about the resources it
have. This model asks if one resource is valuable, rare, costly to imitate and rightly organised
to capture the value? (Buzatu, Pleșea & Iulian, 2019) Each of the questions are related to one
aspect of the business strategy, mainly based on cost leadership or competitive advantages.
Competitive advantages, competitive parity are the main two factors influencing the context
of VRIO analysis.

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 Valuable: The question of this model tries to evaluate if the resources available to the
organisation is adding value by enabling the organisation to fight the market threats or
exploiting marketing opportunities.
 Rare: The rare qualities of the resources make it less imitable and gives the company
opportunities over its competitors. As the resources are rare they can be adopted by
limited companies and hence, the comparative parity in gained.
 Costly to Imitate: The resource is costly if the other companies do not buy it or create
it in low cost. The company that have the costly, rare and valuable resources would
definitely have competitive advantage in the market (Galpin, 2019).
 Effectively organised to capture value: This is an important part of the VRIO model
that examines if an organisation have effective structure and strategy to capture the
utmost value of the resources (Ariyani & Daryanto, 2018). Resources can be
completely ineffective if they are not organised to confer maximum outcome from
them.
Finding the valuable resources of an organisation and putting it in the operational
outcomes is the most difficult part of the VRIO framework. Evaluating the rarity, value, cost
of the resources can give the company idea of their potentiality. One organisation can get
competitive advantages if they can organise their internal resources properly.
Limitation of VRIO
The VRIO model is designed for evaluation the internal resources and their
effectiveness in the organisation advantages gaining. But the framework has the problems of
being static. According to Seo, Park & Choi (2016), if the resources in an organisation is
static, that do not provide any competitive advantage to the company. This is why the
resources need to be modified and match the internal capabilities and market needs. The
VRIO model do not suggest the relationship between the capabilities of the company and the

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resources available. On the other hand, as opined by Ariyani & Daryanto (2018), the
interactions between the appropriability, scarcity and search of fundamental market forces
determines the actual value of the resources. The main gap in the VRIO is that it fails to cater
the dynamic capabilities of the resources (Rockwell, 2019). In order to get competitive
advantages, a company need a model through which they can extend, create or modify their
resources according to the market needs.
Other Framework
The alternative framework for the VRIO can be the Value chain analysis model. The
value chain analysis is the process in which the firm works on identifying their internal
resources and analyse them to reduce costs and gain competitive advantages. This model cam
be useful in fulfilling the gap of the VRIO model in resource identifying and giving them
dynamic perspective.
Use of the Frameworks in Managing the Limitations of VRIO
The basic problems with VRIO framework is that there are many resources in the
organisation but the linkage between them is not establish. This results into the less
sustainable competitive advantage. According to Simatupang, Piboonrungroj & Williams
(2017), the linkage between the resources available and the capabilities of the company can
only be done through the internal capacity analysis. The value chin analysis gives the
organisations this linkage through its process. The aim of the value chain analysis is to
recognise the activities according to the differentiation or cost advantages. The framework of
the value chain analysis allows the company to examine where their advantages lies. This
model was introduced by M. Porter in 1985 and is known as generic value chain model
(Savino, Manzini & Mazza, 2015).

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The primary activities of a firm is measured in the inbound logistics, operations,
outbound logistics, marketing and sales and services output. These steps are analysed in the
value chain model along with the support system available. The primary activities of the frim
add value directly to the production system. Therefore, evaluating these aspects would
provide the company with enough information of their capabilities. The internal and external
resources of the organisation, then, can be arranged or organised according to the need of any
specific part of the value chain. Again, the support activities of the company are evaluated in
this model to get the differentiation effect. Firm infrastructure, technology, procurement and
human resource management- all these parts of the support system are the sources of
differentiation advantages (Zamora, 2016). Value chain analysis model, thus, takes in to
consideration all the capabilities of a firm and links it with the resources. Thus, the
limitations of the VRIO model can be mended through the implementation of value chain
analysis model as the required linkage between the resources and the firm capacity is
addressed.
Conclusion
The above discussion are about the two important part in organisational contexts. The
discussion from the leadership and innovation context shows that the leaders play a crucial
role in the creativity of the employees. The motivation and support they provide their team
members are the source of innovation. The study shows that organisation have to work on
their leaders so that they can cater the innovation and creativity in their operations. As
innovation and creativity are the root of competitive advantage and increased production, the
leaders’ role has been assessed as a crucial one. Again, in the second part of the discussion,
the role of VRIO frameworks in organisation is discussed. The framework is known for
analysis the resources and helping the company gaining competitive advantage. The study
conducted shows that there is a limitation in the framework for its static nature. Many

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organisations lack the linkage between the resources and the capabilities that the VRIO fails
to address. Hence the use of a model like value chain analysis will address this gap by
establishing the link. This can be concluded from this discussion that internal source and
capability analysis would cast and positive impact in cost reduction and advanced
competitiveness.
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