The U.S. banking industry experienced significant discontinuous changes in the past few years. These 'strategic surprises' have motivated banks to employ innovative competitive strategies in order to gain a greater awareness and share of the market (Araiza, 2009). Recent turbulence in the financial industry has caused a number of banks to fail. The "Mortgage Meltdown" not only affected those banks whose principle business model was lending, but also banks that had a strong retail presence. The subsequent fallout resulted in the strong banks becoming stronger and the weak banks to fail. This paper examines the multiple dimensions of H. Igor Ansoff's Strategic Issue Management System and the applicability of use of the system relative to the industry environmental turbulence level. Based on evidence from industry journals, there is both an implicit and explicit acknowledgement of the systems acumen and it's efficacy as a whole or in part in mitigating costs associated with firms facing volatile, discontinuous, novel, and environmental dynamism.
Management that can implement a system that will respond to strategic surprises during these highly turbulent levels are those who have a higher probability of survival and success.
The first evidence of the housing downturn began to appear to the mortgage and banking industry in 2006. These 'weak signals' were precursors of the economic disaster yet to come. In 2008 the Federal Deposit Insurance Corporation ("FDIC") Chairman Sheila C. Bair, issued a statement after the collapse of lndyMac Bank, which at that time was the 3rd largest bank to fail stating, "Bank depositors should understand that their insured deposits are safe, the majority of banks in this country are safe and sound. The chance that your own bank will be taken over by the FDIC is extremely remote" (FDIC, 2008).
Statistically speaking chairman Bair was correct; from 2003 to 2008 only 1 1 banks required the FDIC intervention. However, in 2008 and 2009, 25 and 140 banks respectively required FDIC intervention. Banks such as Washington Mutual, IndyMac, Bank United, and Colonial Bank have failed and subsequently been sold by the FDIC. (FDIC, 2010)
Although reassured by the FDIC that most banks were not on the FDIC watch list many depositors feared the loss of their savings and pulled their money from their financial intuitions. The resultant 'inertial dynamics' of the falling mortgage industry and consumer panic added to the environmental turbulence and forced banks to operate in a 'reactive mode' to these discontinuous surprises.
Extant research has proven that leadership capabilities directly contribute to organizational performance. Leadership capabilities are defined as 'the ability of the general management to support the strategic behavior of a firm' (Ansoff, Antoniou, Lewis, 2004). Strategic behavior is the interrelationship of two key attributes (variables) that managers must possess; competence, which is the range of skills that a manager can can bring to the organization and motivation, which includes vision, mentality, strategic aggressiveness, and risk propensity (Ansoff, Antoniou, Lewis, 2004; Andreason & Kotier, 2003; Drucker, 1989).
Banks' management now must reevaluate the gap between leadership capabilities and the firm's strategic plan to ensure that they are able to navigate through these highly turbulent times and emerge as a strong bank and lender. Marketing strategy, primarily market penetration and market development, is the most commonly approach used in financial services to increase deposits that will subsequently increase liquidity and capital. (Okenwa, 2009) Although this strategic approach is not without merit, most firms fail to realize the importance of matching leadership capability to strategic aggressiveness in order to achieve a higher probability of any given strategy becoming successful.
Economic principles dictate that all industries are cyclic, including the banking industry, and there will undoubtedly be more downturns in the future. …