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The Managerial Process ofCrafting and Executing Strategy

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Fig. 2.1: The Strategy-Making,Strategy-Executing Process

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Developing a Strategic Vision

A strategic visionis a road map showing the route a

company intends to take in developing and

strengthening its business. It paints a picture of a

companys destination and provides a rationale forgoing there.

Phase 1 of the Strategy-Making Process

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Defines currentbusiness activities, highlightingboundariesof current business

Present products and services

Types of customers served

Conveys

Whowe are,

Whatwe do, and

Whywe are here

A companys mission is notto make a profit! Its true mission

is its answer to What will we do to make a profit?

Making is profit is an objective or intended outcome!

Characteristics ofa Mission Statement

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Key Elements ofa Mission Statement

Three factors to consider

Customer needs

What is being satisf ied

Customer groups

Who is being satisf ied

Technologies/resources/business approaches used andactivities performed

How customer needs are satisf ied

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A statement of valuesis often provided to guide thecompanys pursuit of its vision

ValuesBeliefs, business principles, and ways of doing

things that are incorporated into

Companys operations

Behavior of workforce

Values statements

Contain between four and eight values

Are ideally tightly connected to and reinforce companys

vision, strategy, and operating practices

Value statement

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Overcoming Resistance toa New Strategic Vision

Mobilizing supportfor a new visionentails

Reiterating basis for the new direction

Addressing employee concerns head-on

Calming fears

Lifting spirits

Providing updates and progress

reports as events unfold

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Setting Objectives

Purposeofsetting objectives

Converts vision into specific performance targets

Creates yardsticks to track performance

Pushes firm to be inventive, intentional, andfocused in its actions

Setting challenging, achievable

objectives guards against

Complacency

Internal confusion

Status quo performance

Phase 2 of the Strategy-Making Process

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Characteristics of Objectives

Represent commitment to achieve specif ic performancetargets

Spell out how muchofwhat kindof performance by when

Well-stated objectives are

Quantifiable

Measurable

Contain a deadlinefor achievement

Establishing objectives convertsthe

visioninto concrete performance outcomes!

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Outcomes focused

on improving financial

performance

Outcomes focused onimproving long-termcompetitivebusinessposition

Financial Objectives Strategic Objectives

$

Types of Objectives Required

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Balanced Scorecard Approach Strategic and Financial Objectives

Balanced scorecard approachfor measuringcompany performance requiresboth Financial objectives

Strategic objectives

Emphasison f inancial performancemay assume

priorityover strategic performance whencompanys Financial performance is dismal and

Survival is threatened

Otherwise, management is advised to put more emphasison

achieving strategic objectivesThe surest pathto sustained future prof i tabil i ty

year after year is to relentlessly pursue strategic outcomesthat strengthen a companys business position andgive it a growing competi tive advantageover rivals!

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Short-Term vs.Long-Term Objectives

Short-term objectives

Targets to be achieved soon

Milestones or stair steps for reaching long-rangeperformance

Long-term objectives

Targets to be achieved within3 to 5 years

Prompt actions now that willpermit reaching targetedlong-range performance later

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1. First, establish organization-wideobjectives and

performance targets

2. Next, set businessandproduct l ineobjectives

3. Then, establish functional

and departmentalobjectives

4.Individualobjectives are established last

Objectives Are Neededat All Levels

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Corporate

Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level

Managers

Business-LevelManagers

Functional

Managers

Operating

Managers

Crafting a Strategy

Phase 3 of the Strategy-Making Process

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Levels of Strategy-Making ina Single-Business Company

BusinessStrategy

Two-Way Influence

Functional Strategies

Operating Strategies

Business-LevelManagers

OperatingManagers

FunctionalManagers

Two-Way Influence

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Action-or iented, operations-drivenactivity aimed atshaping performance of core business activities in astrategy-supportive manner

Tougherand more time-consumingthan crafting strategy

Key tasksinclude

Improving efficiency of the strategy being executed

Showing measurable progress in achieving targeted results

Phase 4 of the Strategy-Making Process

Implementing and Executing Strategy

h S

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Building a capable organization Allocating resourcesto strategy-critical activities

Establishing strategy-supportive poli cies

Instituting best practicesand programs for

continuous improvement Installing information, communication, and operating

systems

Motivatingpeople to pursue the target objectives

Tying rewardsto achievement ofresults Creating a strategy-supportive corporate cul ture

Exerting the leadershipnecessary to drive the process forward

and keep improving

What Does StrategyImplementation Involve?

Evaluating Performance and

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Tasksof crafting and implementing the strategy are notaone-time exercise

Customer needs and competitive conditions change

New opportunities appear; technologyadvances; any number of other

outside developments occur

One or more aspects of executing the

strategy may not be going well

New managers with different ideas take overOrganizational learning occurs

All these trigger the need forcorrective actions andadjustments on an as-needed basis

Phase 5 of the Strategy-Making Process

Evaluating Performance andMaking Corrective Adjustments