Leadership challenges and development

Accounting Ahead | Original study resource | accountingahead.com.au

Leadership challenges and development

MODULE 7 | 7.6.2 | STUDENT COMPANION

Clayton Christensen saw a tension between running an established business well (listening to customers,

building capabilities, investing carefully) and responding to disruptors. With Michael Raynor he argued that

resource-allocation processes tuned to improving existing products leave incumbents structurally unable to

respond. Other researchers disagree: most firms do spot disruption, and many fight it off.

Why incumbents respond slowly

Reason Imagined example

The threat doesn't touch key customers at first, so it isn't

seen as legitimate

A bank ignores a payments app used mainly by

teenagers

Protecting existing returns limits how far focus and

money can shift

A newspaper keeps funding print because it still earns

most of the profit

The innovation needs capabilities the firm lacks A petrol-car maker without battery expertise

Regulation or other hurdles restrict the response A licensed taxi firm that can't change its fares without

approval

Three steps to meet a new competitive threat (imagined)

1. Value the threat

What is defeating it worth? Compete,

or plan an exit

Value the classroom business honestly

2. Use capabilities

Fight directly, or shift focus to a new

market

Professional-body recognition: a

capability rivals lack

3. Collaborate

Where practical, even with the new

rival

Partner with an online platform for

recognised courses

Imagined: Larkspur Learning facing online course providers

Managers nearly always respond in line with their capabilities: firms able to adopt or compete with an innovation

do so, while those that can't concentrate on earning as much as possible from the existing business while

planning their departure.

The start-up's side. Incumbents often dismiss a start-up's market as too small, a serious mistake, since

disruption often begins with a foothold in an overlooked segment. The bigger danger for a successful start-up is

a heavy response from far richer incumbents, so it looks for what large firms find hard to copy: customisation,

exclusivity and other points of difference.

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Accounting Ahead | Original study resource | accountingahead.com.au

Four conditions for fending off imitation

1. A major strength

The incumbent relies on one big strength for its success

2. A segment it fails

Some customers find that strength works against them

3. Imitation hurts

Copying the start-up would damage the main business

4. Strength surrendered

To compete, the incumbent would have to give up its strength

Only when all four hold is the start-up's offering hard to copy

Stakeholder issues for emerging business models

Some of the world's largest investment funds now push companies towards sustainable, socially responsible

agendas, treating good corporate citizenship as part of long-term value.

Issue Leader's response

A wider range of stakeholders with a legitimate

interest

Map them by interest and power (Module 3), and engage

early

Unfamiliar models seem riskier Show evidence of demand, such as early sign-ups or

pre-orders

Investors wary of models that may run at a loss for

years

Share milestones and the path to profit; seek patient investors

Internal stakeholders unready for change Explain, train, involve and reward

A workforce that is less and less permanent Include contractors in purpose, recognition and learning

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Accounting Ahead | Original study resource | accountingahead.com.au

What shapes readiness for change

Organisations need to be adaptable by nature. Readiness rises with training and skills development, and when

workloads are lightened to free time for new ways of working. Larkspur (imagined) includes its contract trainers

in team meetings, recognition and training, so they share the purpose as well as the work.

Factor Question to ask

Stage of life Is the organisation young and fluid, or mature and settled?

Attitude to risk How are failed experiments treated?

Culture Do people expect change, or resist it?

Social relationships Do colleagues trust and help each other?

Management and leadership Do managers and leaders pull in the same direction?

Job knowledge and skills Do people have the skills the new model needs?

Leaders keep developing. No chief executive can make every important decision, so leaders increasingly guide

how the organisation evolves. Gary Hamel saw the leader's job as designing the organisation's social system

(structures, ground rules and meaningful work) so that everyone can collaborate, innovate and excel. McKinsey

research found two attributes that most set effective leaders apart: openness to different perspectives and the

ability to support others. Middle managers are moving from administering and controlling towards acting as

entrepreneurs, coaches and team leaders.

The four components of emotional intelligence

Self-awareness

Knowing your own emotions

and their effect on others

Social awareness

Empathy: reading others'

feelings and needs

Self-management

Self-control, integrity and

initiative

Social skills

Communication, collaboration,

building relationships

Self Others

Focus

Aware

Act

Skill

Developing leaders

1 Interpersonal and technical skills,

together

2 Learning that resembles real work

3 Ongoing: microcredentials and

coaching

4 Network intelligence: learn from many

voices

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Accounting Ahead | Original study resource | accountingahead.com.au

Making development stick

Principle In practice

Teach interpersonal skills alongside

technical ones

A finance lead practises presenting a budget to sceptical managers

Make learning resemble the workplace Personalised, social and interactive, ideally at work

Keep it ongoing Short, assessed microcredentials, with personal coaching

Use network intelligence Talk with, question and listen to people across the organisation and

its ecosystem, not only the most senior

Case note: Warby Parker and Luxottica

Condition Warby Parker and Luxottica

A major strength Luxottica owned brands such as Ray-Ban and Oakley, made frames under licence for

fashion houses, and ran chains such as LensCrafters and Sunglass Hut

A segment it fails Price-conscious buyers who wanted stylish glasses without high store prices

Imitation hurts Cheap direct sales would undercut its most profitable business

Strength surrendered Competing head on meant bypassing its own stores and brands

In February 2010 four Wharton business-school students launched Warby Parker to sell prescription glasses

online from US$95 a pair. Customers could try five frames at home free (a service it ended in 2025), and for

each pair sold it distributes a pair to someone in need. It listed on the New York Stock Exchange in September

2021, valued at over US$6bn, had 352 stores by mid-2026, and made its first full-year profit in 2025. Luxottica

has been part of EssilorLuxottica since 2018. The incumbent's greatest strength made the newcomer hard to

copy.

Sources: Warby Parker S-1 (2021) and results releases (2026); Fortune (June 2025) on EssilorLuxottica.

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Practice questions

MODULE 7 | 7.6.2 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - A new threat

TorqueTown Servicing (imagined) runs 80 car-servicing workshops. Electric cars need far less servicing, and a

start-up now services electric cars at customers' homes. Apply the three steps.

Step TorqueTown's response

1. Value the threat

2. Use capabilities

3. Collaborate

Question 2 - Can it fend off imitation?

PaperTrail (imagined) sells simple, flat-fee accounting software for sole traders. The incumbent, LedgerPro

(imagined), earns most of its profit from feature-rich software sold through accountants, who charge clients for

set-up and support.

Condition Met? Why?

1. A major strength

2. A segment it fails

3. Imitation hurts

4. Strength surrendered

Conclusion

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Accounting Ahead | Original study resource | accountingahead.com.au

Question 3 - A development plan

Sam (imagined), a strong technical analyst, has just been promoted to lead a team of eight. Team members find

Sam abrupt under pressure, and Sam rarely talks with colleagues outside finance. Design a 12-month

development plan using the four components of emotional intelligence and network intelligence.

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Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 7 | 7.6.2 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - TorqueTown Servicing (sample)

Step Response

1. Value the threat Estimate servicing revenue at risk as electric cars spread; worth competing for tyres,

brakes and electric servicing, while planning to close some engine-heavy sites

2. Use capabilities A trusted brand, 80 sites and skilled mechanics: retrain mechanics for electric cars

and use workshops as bases for mobile vans

3. Collaborate Partner with, or invest in, the mobile start-up, or become a car maker's approved

servicing partner

Question 2 - PaperTrail (sample)

Condition Answer

1. A major strength Met: LedgerPro relies on rich features and its accountant channel

2. A segment it fails Met: sole traders find the features and accountants' fees costly and complex

3. Imitation hurts Met: a cheap flat-fee product would cannibalise sales and anger accountant partners

4. Strength surrendered Met: competing directly would mean bypassing accountants

Conclusion All four hold, so PaperTrail is hard to copy; LedgerPro might still launch a separate

brand

Question 3 - Sam's plan (sample)

Self-awareness: 360-degree feedback in the first month; a short journal after tense meetings

Self-management: coaching on staying calm under pressure; pause before replying

Social awareness: one-to-one meetings with each team member to understand their goals

Social skills: a microcredential in coaching and feedback, practised on real team issues

Network intelligence: monthly conversations with colleagues in sales, operations and IT, asking questions

and listening

Review: repeat the 360-degree feedback at 12 months

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