1. Problem StatementIn 1996, the Arctic Timber Engineered Woods division, a very mature business unit, faced a market downturn and began losing millions of dollars each month. Before becoming president of the Engineered Woods division, Bjorn Gustavsson had already determined that the company could not sustain its raw materials operations and was not aligned with the new direction designed by Arctic Timber CEO Peter Hammarskjöld. According to Gustavsson, to thrive in a more challenging market environment, developing a specialized business was the only viable approach. The goal was to shift 50% of its core product business to unspecified specialties by 2000. However, the Division had shifted only 10% of its business to specialty products by 1997. The challenge was to overcome the overall resistance to change and find a way to get the organization behind ArcTech Flooring, the new specialty product. A culture of customer disengagement and communication problems between divisions, as well as the past norms of key senior management, made it difficult to launch radical innovation. These standards comprised the division's mechanistic organizational structure, incentives based on overall industry performance, operational skills, and low-risk culture, all of which inhibited innovation. This article explores the leadership challenges involved in managing strategic change in a very mature Arctic Timber Engineered Woods division.2. AnalysisAs John P. Kotter suggests in his article “Leading Change: Why Transformation Efforts Fail,” failing to establish a sense of urgency is one of the major failures of leaders. Lacking a sufficient sense of urgency, senior management in the engineered wood division was uncooperative in transforming the division from a commodity division to a specialty business and the efforts were unsuccessful. This was a leadership issue where few on the senior team were motivated and passionate about the transition. In addition to the emergency, Gustavsson was unable to create a powerful guiding coalition. He created a cross-functional team to develop a new moisture-resistant product. But the team did not include a sales manager who knows customer needs and ultimately sells the product. Although the team developed a commercially viable product, their efforts, at least in the short term, were unsatisfactory, because with sellers' doubts about the new product, they were afraid of jeopardizing the product's reputation current. Additionally, these cross-functional teams operating within the established organization maintained the dominant culture and past norms of the company. We know that structurally independent teams, closely integrated into the existing hierarchy, with different cultures and processes, often perform better..