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Module 9
Implementing Strategy:
Core Competencies, Reengineering, and Structure
Module Outline
• Strategy Implementation Framework
– Key Tasks
– Leading the Implementation Process
• Building a Capable organization
– Selecting People for Key Positions
– Building Core Competencies
– Matching Organization Structure to Strategy
• Why Organization Follows Strategy
• Strategic Advantages and Disadvantages of Different
Organization Structures
• Perspectives on Organizing the Work Effort
Nature of the Strategy Implementation
Task
• Action-oriented, operations-driven people and systems management activity involving
– Leading
– Motivating
– Organization change
– Engineering business processes
– Creating strong fits between strategy and how organization does things
• Implementing strategy is tougher and more time-consuming challenge than crafting strategy
The Strategy Implementer’s Task
To convert the strategic plan into action and
get on with what needs to be done to achieve
the targeted strategic and financial
objectives!
Why Implementing Strategy is a Tough
Management Job?
• Tougher and more time-consuming than
strategy-making due to
– Variety of managerial activities
– Many different ways to tackle each activity
– People management skills required
– Perseverance and wave-making it takes to
launch a variety of initiatives
– Number of bedeviling issues to be worked
through
– Resistance to change to overcome
Why Implementing Strategy is a Tough
Management Job?
• Implementing a new strategy takes adept
managerial leadership to
– Overcome pockets of doubt and disagreement
– Build consensus of ho to proceed
– Secure commitment and cooperation of
concerned parties
– Get all implementation pieces in place
Characteristics of Strategy
Implementation Process
• Every manager has an active role
• No 10-step checklist and few concrete
guidelines
– It’s the least charted, most open-ended part of
strategy management
• Best evidence of do’s and don’ts comes from
personal experiences, anecdotal reports, and
case studies
– But wisdom yielded is inconsistent
Characteristics of Strategy
Implementation Process
• Each implementation situation occurs in a different context, affected by differing
– Business practices and competitive situations
– Work environments and cultures
– Policies
– Compensations incentives
– Mixes of personalities and firm histories
• Approach to implementation should be customized
• People implement strategies – No companies!
What is the Goal of Strategy
Implementation?
• Unite total organization behind strategy
• See that activities are done in a manner that
tightly matches requirements for first-rate
strategy execution
• Generate such a determined commitment at
all organizational levels that an enthusiastic
crusade emerges to carry out strategy
• Create a series of strategy-supportive “fits”
Who are the Strategy Implementers?
• Implementing strategy is a job for whole
management team
• Persons most responsible for implementation effort
– Chief Executive Officer (CEO)
– Heads of Major Organizational Units
• Implementation involves every organization unit
• Top management has to orchestrate major
implementation initiatives
– But they must rely on middle and lower-level managers
to get thins done
Strategic Management Principle
Every manager has an active role to play in
implementing and executing the firm’s
strategic plan!
8 Managerial Components of
Implementing Strategy
Corporate
Strategy
Allocating Resources
Establishing Strategy-
Supportive Policies
Instituting Best
Practices for
Continuous
Improvement
Installing Support
Systems for Carrying
Out Strategic Roles
Tying Rewards to the
Achievement of Key
Strategic
Shaping Corporate
Culture to Strategy
Exercising Strategic
Leadership
Building a Capable
Organization
Principal Tasks of a Strategy
Implementation
• Building a capable organization
• Allocating ample resources to strategy-
critical activities
• Establishing strategy supportive policies and
procedures
• Instituting best practices and mechanisms for
continuous improvement
Principal Tasks of Strategy
Implementation
• Installing support systems enabling
personnel to carry out their strategic role
successfully
• Tying rewards and incentives tightly to
achievement of key objectives
• Creating a strategy-supportive corporate
culture
• Exerting strategic leadership
Ways to Lead Implementation Process
• Take active, visible role or low-key, behind the scenes role
• Make decisions on basis of consensus orauthoritatively
• Delegate much or little
• Be personally involved in implementation details or coach others carrying day-to-day burden
• Proceed swiftly to achieve results or move deliberately, content with gradual progress over a long time frame
Factors Influencing Manager in Leading
Implementation Process
• His / her experience and accumulated knowledge
about business
• Whether manager is new to job or seasoned
• Manager’s network of personal relationships
• Manager’s own diagnostic, administrative,
interpersonal, and problem-solving skills
• Authority which manager has been given
• Leadership style manager is most comfortable with
• Manager’s conclusions about role he / she should
play in light of what has to be done
• Context of organization’s situation
Building a Capable Organization
Three key tasks:
1. Selecting able people for key positions
2. Developing skills, core competencies,
and competitive capabilities
3. Creating strategy-supportive organization
structure
Selecting People for Key Positions
Implementation Issues
• What kind of core management is needed to
carry out strategy
• Finding the right people to fill each slot
– Existing management team may be suitable
– Core executive group may need strengthening
• Promoting from within
• Bringing in skilled management talent from
outside
Selecting People for Key Positions
Key Considerations
• Determining mix of backgrounds,
experiences, know-how, values, styles of
managing, and personalities to
– Contribute to successful strategy execution
• Putting together strong management team
with right personal “chemistry” and mix of
skills
– Needs to be acted on early in implementation
process
Building a Core Competence
• When it is difficult to out-strategize rivals with
a superior strategy –
– Next best avenue to industry leadership is to out-
execute them –
• Beat them with superior strategy
implementation!
• Building core competencies that rivals can’t
match is one of the best way to out-execute
them
Building a Core Competence
• Strategically-relevant core competencies
– Greater proficiency in product development
– Better manufacturing know-how
– Superior cost-cutting skills
– Better marketing and merchandising skills
– Capability to provide better after-sale service
– Ability to respond quickly to changes in customer
needs
Examples of Core Competencies
Honda
– Expertise in gasoline engine technology and
small engine design
Procter & Gamble
– Superb marketing-distribution skills and R&D
capabilities in five core technologies – Fats, oils,
skin chemistry, surfactants, emulsifiers
Examples of Core Competencies
Intel
– Design of complex chips for personal computers
Sony
– Expertise in electronic technology and ability to
translate this expertise into developing and
manufacturing innovative products – Miniaturized
radios and video camera and TVs and VCRs
with unique features
Creating a Core Competencies
4 Traits Related to Building Core Competencies
1. Rarely consist of narrow skill or work effort of a
single department
2. Typically emerge from combined efforts of
different work groups and departments
3. Gaining competitive advantage entails
concentrating more effort than rivals on creating
or strengthening core competencies
4. Bases of competency need to be broad and
flexible to react to changes in customer needs
Creating a Core Competence
Creating core competence is an exercise
best orchestrated by senior managers who
understand how firm’s core competence is
created and have the clout to enforce
necessary networking and cooperation
among functional departments!
Value and Power of a Core
Competence
• Helps achieve competitive advantage
• Helps pave way for above-average performance over the long run
• Improves chances for long-term success
Conscious management attention to the task of building strategically relevant internal skills and strengths into the overall organizational scheme is one of the central tasks of organization-building and effective strategy implementation!
Strategic Role of Training and
Retraining
• Training takes on strategic importance in
efforts to build a skills-based competence
• Training is a strategy-critical activity in
businesses where technical know-how is
changing or advancing rapidly
• Strategy implementers ensure training
function is
– Adequately funded, and
– Effective training programs are in place
Matching Organization Structure to
Strategy
Principle
• Design internal organization structure around
tasks and activities most critical to success of
firm’s strategy
Matching structure to strategy requires
making strategy-critical activities and
organization units the main building blocks in
the organizational structure!
Matching Organization Structure to
Strategy
Guidelines
1. Pinpoint primary activities and key tasks critical to
successful strategy execution
2. Establish ways to achieve necessary coordination
when it doesn’t make sense to group all facets of
an activity under a single manager
3. Determine degree of authority each unit needs to
carry out its assignment affectively
4. Determine whether non-critical activities can be
outsourced more efficiently than performed
internally
Pinpointing Strategy-Critical Activities
• Vary according to
– Particular of a firm’s strategy
– Value chain make-up
– Competitive requirements
• Identifying a firm’s strategy-critical activities
1. What functions have to be performed extra well
and on time to achieve sustainable competitive
advantage?
2. In what value-chain activities would mal-
performance endanger success?
Grouping Strategy-Critical Activities into
Department Units
Guidelines
• Make strategy-critical activities main building
blocks in organizational structure
• Assign managers of these activities a visible,
influential position in organizational pecking
order
• Group related value-chain activities under
coordinating authority of single executive
Watch Out for Work Process
Fragmentation!
In traditional functionally-organized
structures, the pieces of strategically-
relevant activities often end up scattered
across many departments
Example:
Filling customer orders accurately and
promptly
Guard Against Organization Designs
That Fragment Activities
• May hand-off lengthen completion time
• Coordination fragmented pieces to avoid
increasing overhead costs
• But come fragmentation may be necessary
• Keys to good organization design
– Maximize how support activities contribute to
performance of primary value-chain activities
– Contain costs of support activities
Understanding Strategic Relationships
Among Activities
• Strategic relationships among the value-chain
activities signal
– How to structure reporting relationships
– Where close cross-functional coordination is needed
• Strategic relationships to look for are those that
– Link caliber of performance of one work unit to another,
and / or
– Can be melded into a core competence
• Organization designs that fragment strategic
activities must be avoided
Ways to Coordinate Fragmented
Activities
• Classical method of coordination activities
– Related activities report to same manager
• Supplemental option of coordinating activities
– Coordinating teams
– Cross functional task forces
– Dual reporting relationships
– Informal organizational networking
– Incentive compensation tied to group performance
– Execution-level insistence on teamwork and interdepartmental cooperation
Determining Authority and
Independence to Give Each Unit
• Centralized organization
– Top executives retain authority for most decisions
• Decentralized organization
– Employees empowered to exercise best judgment
Centralizing strategy-implementing authority at the corporate level has merit when related activities of related businesses need to be tightly coordinated
Determining Authority and
Independence to Give Each Unit
• Decentralized structure have
– Fewer management layers
– Short response times
– Greater employee involvement
• Trend toward leaner structure stressing employee empowerment based on 2 principles
1. Decision-making authority pushed down to lowest possible level
2. Employees empowered to exercise judgment on job-related matters
Outsourcing of Non-Critical Activities
• Outsourcing non-critical strategic activities
allows firm to concentrate resources on
value-chain activities where it
– Can create unique value
– Can be best in industry or in the world
– Needs strategic control
• Outsourcing value-chain activities makes
strategic sense whenever
– They can be performed at lower cost and / or
with higher value-added by outsiders
Outsourcing of Non-Critical Activities
• Outsourcing non-crucial support activities
helps
– Decrease internal bureaucracies
– Flatten organization structure
– Provide heightened strategic focus
– Decrease competitive response times
Why Structure Follows Strategy?
• Changes in strategy may require
– New structure for successful implementation
• Research results indicate
– Organizational structure affects performance
– Structure merits reassessment whenever
strategy changes
– New strategy likely entails different skills and
activities
• How work is structured is a means to an
end – Not an end in itself!
Why Structure Follows Strategy?
• Structure is a tool for
– Facilitating execution of strategy
– Helping to achieve performance targets
– “Harnessing” individual efforts
– Coordinating performance of diverse tasks
Strategic Management Principle
Attempting to carry out a new strategy with
an old organization structure is usually
unwise!
Strategy-Driven Approaches to
Organization Structure
• Functional specialization
• Geographic specialization
• Decentralized business divisions
• Strategic business units
• Matrix structures
Functional Organizational Structures
(Traditional)
General Manager
Engineering Marketing
Research &
DevelopmentManufacturing
Human
Resource
Finance &
Accounting
Functional Organizational Structure
(Process-Oriented)
General Manager
Foundry &
Casting
Screw
Machining
InspectionCustomer
Service
Milling &
Grinding
Finishing &
Heat Treating
Loading &
Shipping
Geographic Organizational Structure
CEO
GM
West
GM
South
GM
Central
GM
North
GM
East
Engineering Production Marketing
Corporate
Staff
District
Staff
A Decentralized Line-of-Business
Organizational Structure
GM
Business A
GM
Business B
GM
Business C
CEO
Functional
Departments
Functional
Departments
Functional
Departments
Corporate
Services
An SBU Organizational Structure
Group VP
SBU I
Group VP
SBU II
Group VP
SBU III
CEO
Strategically
Related
Business Unit
Strategically
Related
Business Unit
Strategically
Related
Business Unit
Corporate
Services
A Matrix Organizational Structure
Head
Manufacturer
Head
Finance
Head
Marketing
Head
R&D
Production
Specialist
Production
Specialist
Production
Specialist
Production
Specialist
R&D
Specialist
R&D
Specialist
R&D
Specialist
R&D
Specialist
Marketing
Specialist
Marketing
Specialist
Marketing
Specialist
Marketing
Specialist
Finance
Specialist
Finance
Specialist
Finance
Specialist
Finance
Specialist
Venture
Manager I
Venture
Manager II
Venture
Manager III
Venture
Manager IV
General
Manager
Supplementing Formal Approaches to
Organizing
Special project teams
Cross-functional task forces
Venture team approach
Self-contained work teams
Process teams
Contact managers
Perspectives on Organizing Work
• No such thing as an ideal organization
design
• Each design has strategic advantages and
disadvantages
• Matching structure to strategy involves
– Picking a basic design
– Modifying it as needed
– Supplementing it with coordinating mechanisms
and communication arrangements
Perspectives on Organizing Work
• While practical realities often dictate
considering
– Existing reporting relationships
– Personalities
– Internal politics
– Other situational idiosyncrasies
• Strategy-structure factors must prevail!
“Pros” of Traditional Approaches to
Organizing
• Hierarchical structures make good strategic
sense when
– Activities can be divided into simple, repeatable
tasks and efficiently performed in mass quantity
– Important benefits to deeper functional expertise
exist
– Customer needs are standardized
“Cons” of Traditional Approaches to
Organizing
• Hierarchical structures can be a liability where
– Customer preferences shifting from standardize to
customized products
– Product life-cycle growing shorter
– Flexible manufacturing replacing mass production
– Customers want to be treated as individuals
– Pace of technological change accelerating
• Major drawbacks
– Lack of responsive customer service
– Slow to adapt to changing conditions
Current Trends in Organizing
• Success in fast-changing markets depends on
– Quick response to shifting customer preferences
– Short design-to-market cycles
– First-time quality
– Customer order and multi-version production
– Personalized customer service
– Accurate order filling and expedited delivery
– Rapid assimilation of new technologies
– Creativity and innovativeness
– Speedy reaction to competitive developments
Current Trends in Organizing
• New Components of strategy are driving a revolution in organization-building
– Leaner, flatter, decentralized structures
– Reengineering work processes to decrease fragmentation across functional lines
– Process teams and cross functional work groups
– Lean staffing of support functions
– Partnerships with key suppliers and outsourcing
– Empowerment
– Electronic information systems
– Accountability for results
Reengineering Can Promote Better
Implementation
• Reengineering strategy-critical processes can
– Reduce fragmentation, and
– Cut bureaucratic overheads
• Involves
– Compressing formerly separate tasks into jobs performed by a single person
– Integrating jobs into team activities
– Reorganizing to link team results
• Provides
– Important new organization design options
Reengineering Can Promote Better
Implementation
• Potential outcomes
– Dramatic gains in productivity and organizational
creativity
– Flattened organization structure
– Responsibility and decision-making authority
pushed to customer contact areas
– Strategy-critical processes being
• Unified
• Performed quicker and at lower cost and
• More responsive to customer expectations
How to Reengineering and
Restructure?
• Develop flow chart of total business process,
including interfaces with other value-chain
activities
• Simplify process first
• Determine parts of process to be automated
• Evaluate each activity in process to
determine if it is strategy-critical or not
• Weigh pros and cons of outsourcing
• Design structure for performing remaining
activities
End of Module 9