SM 8 Strategy Implementation

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Chapter 11

Strategy

Implementation


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FORMULATION AND IMPLEMENTATION

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Strategy formulation Strategy implementation

The central, integrated, externallyoriented concept of how we willachieve our objectives

Analyze the external

And internal environments

Define strategic intentand mission

Formulate strategies

Implementation

Levers & Strategic

Leadership


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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)


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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

1959

INCREASED COMPETITION AND CHANGES IN TASTES

RESPONSE - INCREASED ADVERTISING

- DESIGN STARTED FOR 1500

ORIGINAL STRATEGY UNCHANGED IN ESSENTIALS


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1990 - 1996

INCREASING PRESSSURE ON COSTS FROM JAPANESE MANUFACTURERS

GERMAN LABOUR COSTS AND EXCHANGE RATE ARE DISADVANTAGEOUS

LATTERLY EUROPEAN RECESSION INCREASES PRESSURECOST 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


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Why Does Implementation

Matter?

Inappropriate strategy can be partially offset by

proper implementation, but poor implementation

will usually result in a company performing

poorly in the marketplace


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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, or borders

Inadequate down-the-line leadership skills

and development


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Framework for Implementation

Business

Model

HumanAssets

Processes

Organizational

Structure

SystemsCulture

Leadership

Partnerships


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MCKINSEYS 7S FRAMEWORK


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Strategy: the direction and scope of the company over the long

term.

Structure: the basic organization of the company, itsdepartments, reporting lines, areas of expertise and

responsibility (and how they inter-relate).

Systems: formal and informal procedures that govern everyday

activity, covering everything from management informationsystems, through to the systems at the point of contact with the

customer (retail systems, call center systems, online systems,

etc).

THE HARD Ss


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THE SOFT Ss

Skills: the capabilities and competencies that exist within thecompany. What it does best.

Shared values: the values and beliefs of the company.

Ultimately they guide employees towards 'valued' behavior.

Staff: the company's people resources and how they

are developed, trained and motivated.

Style: the leadership approach of top management and the

company's overall operating approach.


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KEY FACETS OF STRATEGIC

IMPLEMENTATION

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Intended

Strategy

Realized &

Emergent

Strategies

Implementation Levers

Strategic Leadership

Lever and resourceallocation decisionsCommunicating thestrategy to stakeholders

Organization structureSystems and processesPeople and rewards

intended s trategy-- plan for actio n

emergent strategy-- process

realized strategy--- outcom e

- sourc e- Henry Mintzberg, 1987


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MINTZBERGS CONCEPT OF EMERGENT STRATEGIES

NOT ALL INTENDED STRATEGIES ARE REALISED

and ...

NOT ALL REALISED STRATEGIES ARE INTENDED

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

DELIBERATIVE STRATEGIES

UNREALISED

STRATEGIES

EMERGENT

STRATEGIES


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Intended

Strategy

Realised

Strategy

Deliberate

Strategy

Mintzbergs concept of emergentstrategy

Unrealized

Strategy

Emergent

Strategy

Plans are intended strategy, whereas patterns are realised strategy; from this we can distinguish

deliberate strategies, where intentions that existed previously were realised, and emergentstrategies where patterns developed in the absence of intentions, or despite them.


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ORGANIZATIONAL STRUCTURE

ALIGNED TO STRATEGY

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OrganizationalStructure

Insures Control

Coordinates Information,Decisions, and activities

Strategy

8


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SIX FORMS OF ORGANIZATIONAL

STRUCTURE

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Functional

Multidivisional

Matrix

Network

Partnerships

Franchises


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FUNCTIONAL STRUCTURE19

Corporate Office

FinanceMarketing/

SalesOperations R&D

Organizesactivitiesaccording tothe specificfunctions that acompanyperforms

Platypus Technologies has 30 employeesorganized into small departments: finance,marketing, HR, and R&D

Example

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MULTIDIVISIONAL STRUCTURE20

One solutionto problemsof managingactivities inmultiplemarkets ormanagingmultipleproducts

Headquarters

Business Group A Business Group B Business Group C

Finance

Marketing

Operations

Finance

Marketing

Operations

Finance

Marketing

Operations

Example

GM is organized according to product division(GM Trucks, Chevrolet, Buick, Cadillac, Pontiac,Saturn, etc. Each maintains its own finance,marketing, and other support functions

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MATRIX STRUCTURE

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Hybridbetweenfunctional andmultidivisionalstructure

Source: http://www.cio.com/archive/090103/hs_reload.html

R&D

Operations

Marketing

Finance

Product orRegion A

Product orRegion B

Product orRegion C

Product orRegion D

Headquarters

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NETWORK STRUCTURE22

Small, semi-autonomous,andpotentiallytemporary

groupsbroughttogether for aspecificpurpose

Gores 6,000 employees spread across theworld work in small teams and areencouraged to seek out colleagues on their

own

Example

Projectgroup

Projectgroup

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PARTNERSHIPS AND FRANCHISES23

The company isorganized as a group ofpartners who own

shares or units in thecorporation

Franchises

Company not onlytransfers ownership oflocal facilities tofranchisees, but license all

local managementresponsibility

Partnerships

Example

Most law firms Burger King

Example


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Organizational Controls

Purposes of Organizational Controls:

Guide the use of strategy.

Indicate how to compare actual results with expected

results. Suggest corrective actions to take when the

difference between actual and expected results is

unacceptable.

Two Types of Organizational Controls

Strategic controls

Financial controls


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Strategic Controls: Subjective criteria Are concerned with examining the fit between:

What the firm might do (opportunities in its external

environment). 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

Financial

Controls


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Financial Controls: Objective criteria

Accounting-based measures include:

Return on investment

Return on assets

Market-based measures include:

Economic Value Added (EVA)

Organizational

Controls

Strategic

Controls

Financial

Controls


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Strategic Control Systems

Four basic building blocks

Control and efficiency

Control and quality

Control and innovation

Control and responsiveness to customers


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Steps in Designing an Effective

Control System


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Levels of Organizational Control


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Types of Strategic Control

System Personal control

Face-to-face interaction

Output control

Performance goals for each division, department, andemployee

Behavior control

Rules and procedures to direction actions or

behaviors of divisions, functions, and individuals Operating budget

Standardization


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Customer

Strategic and Financial Controls in a

Balanced Scorecard Framework

Adapted from

Figure 12.5

Financial Cash flow Return on equity Return on assets

Assessment of ability to anticipatecustomer needs

Effectiveness of customer service needs Percentage of repeat business

Quality of communications with customers


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Learningand

Growth

Improvements in innovation ability Number of new products compared to

competitors

Increases in employees skills

Strategic and Financial Controls in a

Balanced Scorecard Framework

Adapted from

Figure 12.5

InternalBusinessProcesses

Asset utilization improvements Improvements in employee morale Changes in turnover rates

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BALANCED SCORECARD IS A MEASUREMENT

SYSTEM TO MANAGE STRATEGY IMPLEMENTATION

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Source: Kaplan & Norton, 1996

Tosucceed

financially,how

should we

appear to

our share-

holders?

FinancialObjective

s

Measure

s Targets

Initiative

s

To achieve

our vision,

how should

we appear to

our

customers?

ExternalObjective

s

Measure

s Targets

Initiative

s

To satisfy

our

shareholder

s and custo-

mers, at

what

business

pro-cesses

must we

excel?

Internal Business ProcessObjective

s

Measure

s Targets

Initiative

s

To achieve

our vision,

how will we

sustain our

ability to

change andimprove?

Learning and Growth

Objective

s

Measure

s

Target

s

Initiative

s

Visionand

Strategy


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STRATEGY MAPS HELP LINK ALL PERFORMANCE

METRICS TO STRATEGY

34Implementation levers


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Sustaining an Effective Organizational

Culture

An organizational culture consists of a complexset of ideologies, symbols, and core values thatis shared throughout the firm and influences theway it conducts business

Shaping the firms culture is a central task ofeffective strategic leadership


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Culture

An appropriate organizational cultureencourages the development of anentrepreneurial orientation among employeesand an ability to change the culture as

necessary Reengineering can facilitate this process


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Culture

Changing Culture and BusinessReengineering

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


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Culture

Changing Culture and BusinessReengineering

Constant learning is a vital part of every

persons job Teamwork is essential to successful

implementation

Problems are solved only when teams accept

the responsibility for the solution


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Generic Organizational

Culture Types

Low High

Specificity

External

Internal

Entrepreneurial Adaptive

Commitment Bureaucratic

- Proactively identifies

issues

- Good at planning and

setting goals

- Responsive to market

changes

- Outcome oriented

- Emphasizes internal

cohesion, participation,

teamwork, and loyalty

- Unbounded by rules

and precedents

- Willing to take risks

- Flexible

- Innovative

- Emphasizes stability,

established routines,

and formal authority


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Human Assets

Recruitment

Refers to the formal task of searching for the rightemployees

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


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Processes Patterns of interaction, coordination,

communication, and decision-making thatemployees use to standardize how work isdone.

These must be configured by firms duringimplementation: Resource-allocation processes

Human resources management processes

Manufacturing and distribution processes

Payment and billing processes

Customer support/handling processes


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PEOPLE AND REWARDS


People

Successful CEOs attended topeople first [and] strategy second.They got the right people on thebus, moved the wrong people off,ushered the right people to rightseats and then they figured out

where to drive it

JetBlue and Southwest Airlinesboth expend considerable effortmaking sure new hires will fit thefirm

Rewards

Jim Collins


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PEOPLE AND REWARDS


People

Rewards

Reward systems have twocomponents Performance evaluation and

feedback Compensation (e.g., salary,

bonuses, stock, promotions,coveted office space)

They can serve as a force of controlover outcomes or behaviors

GE which owns several unrelatedcompanies, links division managerpay to the performance of the unit

they manage


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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


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Leadership (contd)

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


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STRATEGIC LEADERSHIP IS RESPONSIBLE

FOR 2 KEY OBJECTIVES

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Making substantive implementationlever and resource allocation

decisions

Communicating the strategy to keystakeholders

STRATEGIC LEADERSHIP


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STRATEGIC LEADERSHIP

COMMUNICATING WITH KEY STAKEHOLDERS

47Strategic Leadership

Across Outward

Managersmust

sufficientlycommunicate

in 4

directions

Upward

Downward

Convince top management

of a new strategy (e.g.,Intels shift tomicroprocessors)

Enlist support of

those whoim lement

Win cooperation ofexternalstakeholdersincluding customersand distributors(e.g., Compaq failed

to do this withretailers)

Win support ofother units withinthe firm


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THREE CS OF STRATEGY COMMUNICATION

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ontactsC

ultural understandingC

redibilityC


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STRUCTURAL OPTIONS

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Global and Dynamiccontexts

Multinationalconfiguration

D

escriptio

n

Resembles adecentralized

federation muchlike the relation-ship between USfederalgovernment and50 states

Internationalconfiguration

Coordinatedgroup of

federations overwhich moreadministrativecontrol is exertedby home countryheadquarters

Globalconfiguration

Foreign officesare used to

accesscustomers, butdemand is filledby centralizedproduction

Exa

mples

SAP pre 1990 SAP post 1990Japanesecompanies 1970s &1980s

Transnationalconfiguration

Structureallowsdispersion,specialization,andinterdependence networked

control systemMcDonalds


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FIRM RESPONSES TO DYNAMIC CONTEXTS

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Global and Dynamiccontexts

Challenges ofdynamic, highvelocitycontexts

Two commonresponses

Ambidextrousorganization

Patching


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THE AMBIDEXTROUS ORGANIZATION

51Global and Dynamiccontexts

Corporate Office

Existing BusinessEmergingBusiness

Manufacturing Sales R&DManufacturing Sales R&D

Ambidextrous organizations establish units that are structurally independent from all other units. Theemerging business units are to develop their own structures, processes, systems, cultures, strategies, etc.They are only integrated into the mother organization at the level of senior management

Existing organization with historic

implementation levers

Structural barriers preventinginterference and interactions betweenexisting and emerging businesses

New organization develops its own levers

consistent with the needs of the radicalinnovation


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PATCHING

52Global and Dynamiccontexts

Example: HP

Patching: regularly

remapping businessesin accordance withchanging marketconditions andrestitching them intointernal business

ventures

Laser printingbusiness

New business unit

New technologies


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SUMMARY

Understand the interdependence betweenstrategy formulation and implementation

1

Demonstrate how to use organizationalstructure as a strategy implementationlevers

2

Understand the use of systems andprocesses as strategy implementationlevers

3

Identify the roles of people and rewards asimplementation levers

4

Explain the dual roles that strategic

leadership plays in strategyimplementation

5

Understand how global and dynamiccontexts affect the use of implementationlevers

6

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SM 8 Strategy Implementation

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