572  Strategic Management: Mindsets and Behaviors to their ­strategic importance. Too often, however, the chief executive officer (CEO) allocates large clumps of resources to division heads, who in turn allo- cate resources to business units in amounts that are smaller but still too large. This approach detaches resources from broad strategic priorities and makes the entire process vulnerable to the barriers and biases that skew effective resource allocation. In contrast, when executives rank all initiatives, they im- prove the chances that the most important ones will be fully funded, regard- less of where they are within the company—even if, say, all five of a unit’s projects receive funding, compared with only one out of five in another unit. Making such decisions requires not only the analytics discussed in Chap- ter 29 but also a strong set of mindsets, behaviors, and processes to guide and support thinking, motivate managers and employees, and shape and re- inforce a strategic management culture focused on long-term strategic goals. This chapter examines three elements that are particularly important: 1. Strong governance.3 The CEO and top team must be fully committed to the company’s long-term strategy and be willing to invest enough resources accordingly, regardless of short-term consequences. The CEO and top team must also have the support of an influential corporate staff that can challenge the business units’ investment plans. 2. Debiased decision making. Most organizations are susceptible to a wide range of decision-making biases. Companies must make a systematic effort to overcome these biases in order to improve the quality of their decisions. 3 The term governance takes many different forms in a corporate setting. In Chapter 6, we explored the all-encompassing system of processes and controls a company adopts to govern itself. In this chapter, our focus is internal decision making and the CEO’s role in making and delegating important strategy decisions to pursue long-term value creation. Exhibit 30.1  Where Executives Would Spend More to Maximize Value % of respondents saying their company would maximize value creation by spending more or much more Product development IT-related capital expenditures Spending category Sales, marketing, and advertising Costs to finance start-ups for new products or in new markets Acquisitions Non-IT-related expenditures 24 40 23 35 23 34 23 30 17 26 11 21 Spend much more Spend more Source: T. Koller, D. Lovallo, and Z. Williams, “A Bias against Investment?” McKinsey Quarterly, September 2011, www.mckinsey.com; n = 1,586. Strong Governance  573 3. Synchronized processes. Companies must link together more explicitly their strategic planning, budgeting, and other processes to ensure that strate- gic initiatives are funded with a view to maximizing enterprise value. To support the development of such streamlined processes, companies also need to nurture excellent strategic skills throughout the organization. Strong Governance A company can have a very good strategy, but it won’t succeed unless its top executives are committed to making the tough decisions required to carry out that strategy. For example, a technology company announced a thoughtful and ambitious strategy that was on target with emerging trends and technologies. However, the company’s existing businesses were simultaneously under pres- sure from declining demand. To keep short-term profits growing, management held back on making serious investments in the new strategic areas. A competi- tor spotted the new opportunity and became the first to make the necessary investments to win in the market. As of 2019, that competitor was garnering five times the revenues from this new area than the first company was taking in. Long-Term Vision To commit to their company’s strategy, executives must take a long-term view. Otherwise, the demands of short-term profit are likely to create a distraction, as they did at the tech company in the previous example. This is not to say that maintaining a long-term view is easy. In many cases, management and employee incentives are tied to short-term performance, and the company’s board may ob- serve only short-term measurable results, not progress toward long-term goals. Ultimately, overcoming these obstacles requires some subjective behaviors. A commitment to a company’s strategy can often depend on the courage of the CEO and executive team to pursue a long-term vision of value creation against the inclination of executives to give in to short-term pressures and incentives. Three approaches can indicate that governance links strategy to long-term value: 1. Adequate investment where it counts. Investment should be directed to prime prospects at a level sufficient to secure a leadership position. Executives need to avoid spreading investment thinly across too many strategies. The executive team should put enough resources and talent behind the most important initiatives, even if this causes a dip in short- term profits. The success stories of many companies include a period in which profitability pauses while investment in the next wave of growth takes root. Investing to win also means passing up some ideas in favor of those with bigger payouts. That also helps to keep the management team from fragmenting as it tries to oversee too many projects.