1. Problem Description In 1996, the Arctic Timber Engineered Woods division, a highly mature business unit, faced a market crisis and began losing millions of dollars every month. Before becoming president of the Engineered Woods division, Bjorn Gustavsson had already determined that the company could not sustain its raw materials business and was not aligned with the new direction designed by Peter Hammarskjöld, CEO of Arctic Timber. 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 percent of its commodity business to indeterminate specialties by 2000. However, the Division had shifted only 10 percent of its business to specialty products by 1997. The challenge was to overcome general 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, combined with past norms championed by key senior executives, have made it difficult to initiate radical innovation. These norms constituted the division's mechanistic organizational structure, incentives based on overall industry performance, operational expertise, and low-risk culture that hindered innovation. This paper explores the leadership challenges involved in managing strategic change in a highly 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 the number one failure for leaders. Lacking a strong enough sense of urgency, senior executives in the Engineered Woods division were uncooperative in moving the division from a commodity business to a specialized business, and the efforts remained unsuccessful. This was a leadership issue where few senior team members were motivated and passionate about transitioning. In addition to the urgency, Gustavsson was unable to create a powerful leadership coalition. Created a cross-functional team to develop a new moisture-resistant product. But the team did not include a sales manager who knows the customers' needs and ultimately sells the product. Although the team developed a commercially viable product, its efforts, at least in the short term, were unsatisfactory, because with the sellers' own doubts about the new product, they were afraid of jeopardizing the reputation of the current product. Furthermore, these cross-functional teams operating within the established organization maintained the company's dominant culture and norms of the past. We know that teams that are structurally independent and tightly integrated into the existing hierarchy with different cultures and processes are often more successful.