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Can you make the bold, strategic bets?

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in Best-Practices Leadership,Leaders & Managers

At some point within the next decade, leaders of both large and small companies will have to make a strategic bet, perhaps even several. That’s why leaders must have the ability to see the need for a game-changing move and seize the moment.

A strategic bet is a life-or-death move made either to transform a company and create a new growth trajectory, or to create a totally new enterprise. It requires commitment from leadership and will likely be uncomfortable to make.

Do you have the fortitude for it?

CEO Andrew Liveris of Dow Chemical Company made such a strategic move when he bet the company’s future on the acquisition of Rohm & Haas. The acquisition took all of Dow’s financial resources and would shift the company’s business model. Liveris said it would be “transformational.”

From the beginning, the deal nearly fell apart. Financing was hard to come by. Wall Street was skeptical. Two days before the close of the deal, a funder backed out, throwing everything into jeopardy.

With the plans wobbling, most ex­­pected Liveris to retreat. But he summoned his mental toughness and perseverance, and continued to project confidence in his vision.

In the end, he succeeded.

He kept the board of directors committed, found new sources of financing from Warren Buffett and two members of the Rohm & Haas family, and convinced the ratings agencies to maintain the company’s rating.

Liveris was right; it was a transformational deal. It tilted the mix of the business and pushed Dow’s stock up.

The example points to the sort of challenge more companies will face in the future, requiring leaders to put their companies on the line. Liveris saw that the global environment affecting the chemicals industry was changing rapidly and that, sooner or later, his company would be forced to change.

He knew what great leaders know: ­Better to take bold, thoughtful moves to stay ahead of change, even if it means putting everything at risk.

— Adapted from “Strategic Bets,” Ram Charan and Michael Sisk, strategy+business.

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{ 3 comments… read them below or add one }

Joshua Hammerstein November 3, 2011 at 8:51 am

Talk about spin. This article is beyond absurd. Dow stock was around $50 per share, and Mr. Liveris drove it down to around $5 and took the company to the brink of bankruptcy. The entire world knows he blew the deal with the Kuwaiti’s and way overpaid for R&H. It is incredible that he wasn’t canned.

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phwest November 1, 2011 at 5:37 pm

Not for Rohm & Haas shareholders….

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SirEvil October 27, 2011 at 11:58 am

As an investor, I don’t care about boldness, I care about value. And all Dow did with the Rohm and Haas deal was destroy value. Since the day the deal was announced (7/1/2008) to today, Dow’s shares are down $4.54 (after correcting for the massive dilution required to fund this deal). On fewer than 25% of trading days since the deal was announced, the stock has been below the pre-announcement value. If this is success, I’d hate to see what the authors think failure is!

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