Chapter 11

Strategy Implementation

2

FORMULATION AND IMPLEMENTATION
Strategy formulation The central, integrated, externally oriented concept of how we will achieve our objectives Strategy implementation

Analyze the external And internal environments Define strategic intent and mission Formulate strategies

Implementation Levers & Strategic Leadership

STRATEGIES OF VOLKSWAGENWERK 1920 - 1992

BEFORE 1948 FERDINAND PORSHE - „PEOPLES CAR‟ 1920s GOVERNMENT SUPPORT 1934 - PLANT ON STREAM
1939 1939 WAR - PLANT TURNED TO PRODUCTION OF WAR VEHICLES 1948 NORDHOFF PUT IN CHARGE 1948 NORDHOFF TAKES HALF A STRATEGY - PEOPLES CAR ADDS EMHPASIS ON QUALITY, TECHNICAL, EXPORT, SERVICE STANDARDS 1949 - 1958 INTENDED STRATEGY REALIZED CAR IDEAL FOR POST WAR CONDITIONS RAPID EXPANSION IN VOLUME NO NEW MODELS (WORK ON NEW MODEL HALTED IN 1954)

1959
INCREASED COMPETITION AND CHANGES IN TASTES RESPONSE - INCREASED ADVERTISING - DESIGN STARTED FOR 1500 ORIGINAL STRATEGY UNCHANGED IN ESSENTIALS 1960 - 1964 1500 MODEL INTRODUCED SALES INCREASED BUT PROFITS SQUEEZED 1965 - 1975 PRESSURES OF COMPETITION BECOME SEVERE NEW STRATEGY FROM AUDI - FRONT WHEELED DRIVE, STYLISH, WATERCOOLED OTHER LINES DROPPED PRODUCTION RATIONALISED ON WORLD BASIS MARKETING EMPHASISED PERFORMANCE, RELIABILITY AND SERVICE

1976 - 1989 GOLF ESTABLISHED AS MARKET LEADER CONTINUED EMPHASIS ON TECHNICAL EXCELLENCE OLD DESIGNS PERIODICALLY FASHIONABLE MAIN EUROPEAN COMPETITOR SEEN AS FIAT SOME PRESSURE FROM JAPANESE MANUFACTURING

1990 - 1996 INCREASING PRESSSURE ON COSTS FROM JAPANESE MANUFACTURERS GERMAN LABOUR COSTS AND EXCHANGE RATE ARE DISADVANTAGEOUS LATTERLY EUROPEAN RECESSION INCREASES PRESSURE COST CUTTING MEASURES - EAST EUROPEAN PLANT - AGGRESSIVE PURCHASING 1997 - 2000 DEVELOPING SEPARATE BRANDING STRATEGIES TO OCCUPY DIFFERENT MARKET SEGMENTS DEVELOP SEPARATE PRODUCTS FROM COMMON PLATFORMS TO REDUCE COST CONTINUE AGGRESSIVE COST REDUCTION AND PROCESS IMPROVEMENT

but poor implementation will usually result in a company performing poorly in the marketplace .Why Does Implementation Matter? • Inappropriate strategy can be partially offset by proper implementation.

or borders – Inadequate down-the-line leadership skills and development .Implementation Mistakes made by Companies • Six “silent killers” of implementation – Top-down or laissez-faire senior management style – Unclear strategy and conflicting priorities – Ineffective senior management team – Poor vertical communication – Poor coordination across functions. business.

Framework for Implementation Human Assets Partnerships Processes Business Model Leadership Organizational Structure Culture Systems .

MCKINSEY’S 7S FRAMEWORK .

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covering everything from management information systems. call center systems. through to the systems at the point of contact with the customer (retail systems. reporting lines. its departments. areas of expertise and responsibility (and how they inter-relate). Structure: the basic organization of the company. Systems: formal and informal procedures that govern everyday activity.THE HARD S’s Strategy: the direction and scope of the company over the long term. etc). online systems. .

Style: the leadership approach of top management and the company's overall operating approach. Staff: the company's people resources and how they are developed. Ultimately they guide employees towards 'valued' behavior. . What it does best. trained and motivated. Shared values: the values and beliefs of the company.THE SOFT S’s Skills: the capabilities and competencies that exist within the company.

plan for action emergent strategy-.KEY FACETS OF STRATEGIC IMPLEMENTATION 13 • Organization structure Systems and processes People and rewards Intended Strategy Implementation Levers Realized & Emergent Strategies Strategic Leadership • Lever and resource allocation decisions Communicating the strategy to stakeholders intended strategy-. 1987 .source.outcome .Henry Mintzberg.process realized strategy--.

MINTZBERG‟S CONCEPT OF EMERGENT STRATEGIES NOT ALL INTENDED STRATEGIES ARE REALISED and …... NOT ALL REALISED STRATEGIES ARE INTENDED DELIBERATIVE STRATEGIES UNREALISED STRATEGIES EMERGENT STRATEGIES Emergent strategies derive from the shared understanding of managing the resources of the organization The concept of emergent strategies therefore has a particular significance for operations strategy .

and emergent strategies where patterns developed in the absence of intentions. or despite them.Intended Strategy Deliberate Strategy Realised Strategy Unrealized Strategy Emergent Strategy Mintzberg‟s concept of emergent strategy Plans are intended strategy. where intentions that existed previously were realised. whereas patterns are realised strategy. from this we can distinguish deliberate strategies. .

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Decisions. and activities Strategy .17 ORGANIZATIONAL STRUCTURE ALIGNED TO STRATEGY Organizational Structure • Insures Control • Coordinates Information.

SIX FORMS OF ORGANIZATIONAL STRUCTURE Functional Multidivisional Matrix 18 Network Partnerships Franchises .

marketing. and R&D . HR.19 FUNCTIONAL STRUCTURE Corporate Office Finance Marketing/ Sales Operations R&D Organizes activities according to the specific functions that a company performs Example Platypus Technologies has 30 employees organized into small departments: finance.

etc. Each maintains its own finance. and other support functions . Chevrolet. marketing. Cadillac. Buick. Pontiac. Saturn.20 MULTIDIVISIONAL STRUCTURE Headquarters One solution to problems of managing activities in multiple markets or managing multiple products Business Group A Finance Business Group B Finance Business Group C Finance Marketing Operations Marketing Operations Example Marketing Operations GM is organized according to product division (GM Trucks.

cio.com/archive/090103/hs_reload.21 MATRIX STRUCTURE Headquarters Product or Region A R&D Hybrid between functional and multidivisional structure Product or Region B Product or Region C Product or Region D Operations Marketing Finance Source: http://www.html .

semiautonomous.000 employees spread across the world work in small teams and are encouraged to seek out colleagues on their own .22 NETWORK STRUCTURE Project group Project group Small. and potentially temporary groups brought together for a specific purpose Example Gore’s 6.

but license all local management responsibility Example Burger King .23 PARTNERSHIPS AND FRANCHISES Partnerships The company is organized as a group of partners who own shares or units in the corporation Example Most law firms Franchises Company not only transfers ownership of local facilities to franchisees.

– Suggest corrective actions to take when the difference between actual and expected results is unacceptable.Organizational Controls • Purposes of Organizational Controls: – Guide the use of strategy. – Indicate how to compare actual results with expected results. • Two Types of Organizational Controls – Strategic controls – Financial controls .

• What the firm can do (competitive advantages). – Evaluate the degree to which the firm focuses on the requirements to implement its strategy. .Organizational Controls Strategic Controls Organizational Controls Financial Controls • Strategic Controls: Subjective criteria – Are concerned with examining the fit between: • What the firm might do (opportunities in its external environment).

Organizational Controls Strategic Controls Organizational Controls Financial Controls • Financial Controls: Objective criteria – Accounting-based measures include: • Return on investment • Return on assets – Market-based measures include: • Economic Value Added (EVA) .

Strategic Control Systems • Four basic building blocks – Control and efficiency – Control and quality – Control and innovation – Control and responsiveness to customers .

Steps in Designing an Effective Control System .

Levels of Organizational Control .

department. and individuals • Operating budget • Standardization . and employee • Behavior control – Rules and procedures to direction actions or behaviors of divisions. functions.Types of Strategic Control System • Personal control – Face-to-face interaction • Output control – Performance goals for each division.

5 .Strategic and Financial Controls in a Balanced Scorecard Framework Financial • Cash flow • Return on equity • Return on assets • Assessment of ability to anticipate customer needs • Effectiveness of customer service needs • Percentage of repeat business • Quality of communications with customers Customer Adapted from Figure 12.

5 .Strategic and Financial Controls in a Balanced Scorecard Framework Internal Business Processes Learning and Growth • Asset utilization improvements • Improvements in employee morale • Changes in turnover rates • Improvements in innovation ability • Number of new products compared to competitors’ • Increases in employees’ skills Adapted from Figure 12.

33 BALANCED SCORECARD IS A MEASUREMENT SYSTEM TO MANAGE STRATEGY IMPLEMENTATION Financial “To Objective Measure Initiative succeed s Targetss financially. at what business pro-cesses must we excel?” Learning and Growth “To achieve Objective Measure Target Initiative our vision. s how should we appear to our shareholders?” External “To achieve Objective Measure Initiative our vision. s s s s how will we sustain our ability to change and improve?” Source: Kaplan & Norton. 1996 . s s Targetss how should we appear to our customers? ” Vision and Strategy “To satisfy Internal Business Process our Objective Measure Initiative shareholder s s Targetss s and customers.

STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY Implementation levers34 .

Sustaining an Effective Organizational Culture • An organizational culture consists of a complex set of ideologies. and core values that is shared throughout the firm and influences the way it conducts business • Shaping the firm’s culture is a central task of effective strategic leadership . symbols.

Sustaining an Effective Organizational Culture • An appropriate organizational culture encourages the development of an entrepreneurial orientation among employees and an ability to change the culture as necessary • Reengineering can facilitate this process .

Sustaining an Effective Organizational Culture Changing Culture and Business Reengineering • The benefits of business reengineering are maximized when employees believe that: – every job in the company is essential and important – all employees must create value through their work .

Sustaining an Effective Organizational Culture Changing Culture and Business Reengineering • Constant learning is a vital part of every person’s job • Teamwork is essential to successful implementation • Problems are solved only when teams accept the responsibility for the solution .

and loyalty Bureaucratic .Innovative Adaptive .Flexible .Unbounded by rules and precedents .Responsive to market changes . established routines.Emphasizes stability.Willing to take risks .Emphasizes internal cohesion.Generic Organizational Culture Types External Entrepreneurial . and formal authority Internal Low Specificity High .Good at planning and setting goals . teamwork. participation.Outcome oriented Commitment .Proactively identifies issues .

Human Assets • Recruitment – Refers to the formal task of searching for the right employees • Selection – Is the process of making hiring decisions and formal job offers • Development – Providing the employee a professional development plan to accentuate individual strengths and improve on weaknesses • Retention – Constantly evaluating and “ranking” employees to ensure the company provides the best work environment and best total compensation packages .

• Patterns of interaction. communication. and decision-making that employees use to standardize how work is done. • These must be configured by firms during implementation: – – – – – Resource-allocation processes Human resources management processes Manufacturing and distribution processes Payment and billing processes Customer support/handling processes Processes . coordination.

moved the wrong people off.PEOPLE AND REWARDS Successful CEOs “attended to people first [and] strategy second. ushered the right people to right seats – and then they figured out where to drive it” Jim Collins JetBlue and Southwest Airlines both expend considerable effort making sure new hires will fit the firm People Rewards Implementation levers42 . They got the right people on the bus.

. stock.PEOPLE AND REWARDS People Reward systems have two components • Performance evaluation and feedback Rewards • Compensation (e. coveted office space) They can serve as a force of control over outcomes or behaviors GE which owns several unrelated companies.g. links division manager pay to the performance of the unit they manage Implementation levers43 . salary. promotions. bonuses.

Leadership • The Roles of Company Leadership – Responsible for building the capacities needed for strategy implementation – Designing structures and systems – Setting roles and responsibilities – Allocating resources – Assigning managers .

Leadership (cont‟d) • The Role of Top Leadership – Think strategically – Communicate persuasively – Act decisively – Demonstrate ethical behavior and strong character – Build a sense of momentum for their firm .

STRATEGIC LEADERSHIP IS RESPONSIBLE FOR 2 KEY OBJECTIVES • Making substantive implementation lever and resource allocation decisions • Communicating the strategy to key stakeholders 46 .

g..g.STRATEGIC LEADERSHIP – COMMUNICATING WITH KEY STAKEHOLDERS Convince top management of a new strategy (e.. Intel’s shift to microprocessors) Upward Managers must sufficiently communicate in 4 directions Downward Win cooperation of external stakeholders including customers and distributors (e. Compaq failed to do this with retailers) Win support of other units within the firm Across Outward Enlist support of those who implement Strategic Leadership47 .

THREE C’S OF STRATEGY COMMUNICATION C ontacts C ultural understanding C redibility 48 .

but demand is filled by centralized production Japanese companies 1970s & 1980s Transnational configuration Structure allows dispersion.STRUCTURAL OPTIONS Multinational configuration Resembles a decentralized federation much like the relationship between US federal government and 50 states SAP pre 1990 International configuration Coordinated group of federations over which more administrative control is exerted by home country headquarters SAP post 1990 Descriptio n Global configuration Foreign offices are used to access customers. and interdependenc e – networked control system McDonald’s Examples Global and Dynamic contexts 49 . specialization.

FIRM RESPONSES TO DYNAMIC CONTEXTS Challenges of dynamic. high velocity contexts Two common responses • Ambidextrous organization • Patching Global and Dynamic contexts 50 .

etc.THE AMBIDEXTROUS ORGANIZATION Corporate Office Structural barriers preventing interference and interactions between existing and emerging businesses Existing Business Emerging Business Manufacturing Sales R&D Manufacturing Sales R&D Existing organization with historic implementation levers New organization develops its own levers consistent with the needs of the radical innovation Ambidextrous organizations establish units that are structurally independent from all other units. systems. They are only integrated into the mother organization at the level of senior management Global and Dynamic 51 contexts . The emerging business units are to develop their own structures. processes. strategies. cultures.

PATCHING Example: HP Laser printing business Patching: regularly remapping businesses in accordance with changing market conditions and restitching them into internal business ventures New technologies New business unit Global and Dynamic52 contexts .

SUMMARY 1 Understand the interdependence between strategy formulation and implementation 2 Demonstrate how to use organizational structure as a strategy implementation levers 3 Understand the use of systems and processes as strategy implementation levers 4 Identify the roles of people and rewards as implementation levers 5 Explain the dual roles that strategic leadership plays in strategy implementation 6 Understand how global and dynamic contexts affect the use of implementation levers 53 .

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