Student Version

10-2

Crafting versus Implementing Strategy

• Crafting Strategy Market-and resource-

driven activities Success depends on

Attracting and pleasing customers

Outcompeting rivals The firm’s collection of

resources and capabilities

• Implementing Strategy Execution of operations-

driven activities Successful depends on

management’s ability to Direct change Allocate resources Build capabilities Build strategy-supportive

policies and culture Deliver good results

10-3

Who Is Responsible for Implementation of the Chosen Strategy?

• The organization’s chief executive officer and other senior managers are ultimately responsible for ensuring that the strategy is executed successfully.

• It is middle and lower-level managers who must see to it that frontline employees and work groups competently perform strategy-critical activities that allow companywide performance targets to be met.

• Requires all managers thinking about: “What does my area have to do to implement its part of the

strategic plan, and what should I do to get these things accomplished effectively and efficiently?”

10-4

Building an Organization with the Capabilities, People, and Structure

Needed for Good Strategy Execution

Staffing the organization’s

workforce

Structuring the organization and

work effort

Organization building actions

Acquiring, developing, and strengthening

strategy-supportive resources and

capabilities

10-5

Staffing the Organization—Building Managerial Talent

• Assembling a capable management team is a cornerstone organization-building task: Put people with strong strategy implementation skills

and a results orientation in key managerial posts.

Replace weak executives, strengthening the skills of those who remain, and bringing in fresh outsiders.

10-6

Recruiting and Retaining a Capable Workforce

• The quality of a firm’s people is an essential ingredient of successful strategy execution. Staffing the right people at all levels is required to

ensure competent performance of value chain activities.

Find, develop, and then retain engaged employees with excellent compensation packages, opportunities for rapid advancement and professional growth, and challenging and interesting assignments.

10-7

Acquiring, Developing, and Strengthening Key Resources and Capabilities

• Good strategy execution requires: Putting key resources and capabilities into place. Refreshing and strengthening them as needed. Modifying them as market conditions evolve.

• Organization building requires deciding when and how to recalibrate competencies and capabilities.

10-8

Three Approaches to Building and Strengthening Capabilities

Become proficient in developing capabilities internally

Accessing capabilities via collaborative partnerships

Developing dynamic capabilities to manage organizational change

Acquire capabilities

through mergers and acquisitions

10-9

Accessing Capabilities Through Collaborative Partnerships

Outsource the function or activity requiring new capabilities to an outside

provider to conserve resources

Engage in a collaborative partnership to learn how the partner performs

activities, internalizing its methods, and thereby acquiring its capabilities.

Collaborate with a firm that has complementary resources and capabilities in a partnership to

achieve a shared strategic objective.

Acquiring capabilities

from an external source via

collaborative partnerships

10-10

Matching Organizational Structure to the Strategy

• Key value chain activities that deliver value to the customer are critical to its proficient strategic performance.

• Structure follows strategy—a changed strategy requires a new or different structure and new or different key activities and capabilities. Attempting a new strategy with an outdated

organizational structure is unwise.

10-11

Types of Organizational Structures

• Functional (or Departmental) Structure Organizes strategy critical activities into functional,

product, geographic, process, or customer groups

• Multidivisional (or Divisional) Structure Organizes value chain activities involved in making a

product or service available to consumers into a common (self-contained) division

• Matrix Structure Allows for dual reporting relationships between

divisional heads and departmental heads

10-12

Organizational Structure and Authority in Decision Making

• In a centralized structure: Top managers retain authority for most decisions.

• In a decentralized structure: Decision-making authority is pushed down to the

lowest organizational level capable of making timely, informed, competent decisions.

• The trend in most companies A shift from authoritarian to decentralized structures

stressing empowerment

10-13

Characteristics of Centralized Decision Making

• Retention of authority by top executives Command and control paradigm reins in lower-level managers

• Minimal discretionary authority Frontline supervisors and rank-and-file employees must seek

prior approval by their superiors for their actions

• Key advantage Easy to know who is accountable when things do not go well

• Disadvantages Bureaucracy creates sluggish response to changing conditions Large firms with widely scattered operations require that

decision making authority be granted to on-site managers

10-14

Facilitating Collaboration with External Partners and Strategic Allies

• Actively manage collaborative relationships: Appoint “relationship managers” with responsibility for

fostering strategic partnership success through: Getting the right people together Promoting good rapport Facilitating the flow of information Nurturing interpersonal communication and cooperation Ensuring effective coordination.

Adopt a network structure that links independent organizations involved in cooperative arrangements to achieve some common undertaking.

10-15

Allocating Resources to Strategy-Critical Activities

• Reasons for the allocation process include: To determine what funding is needed to execute new strategic

initiatives To bolster value-creating processes To strengthen the firm’s capabilities and competencies

• Allocating resources to support strategy execution involves: Funding promising proposals; turning down those that do not Providing the proper amount of funding to support new strategic

initiatives Reallocation of resources to support new strategies

10-16

Instituting Strategy Supportive Policies and Procedures

• Strategy execution is facilitated by policies and procedures that: Help enforce the needed consistency in how

particular strategy critical activities are performed.

Provide top-down guidance regarding how certain things need to be done.

Promote a work climate that facilitates good strategy execution.

10-17

Striving for Continuous Improvementin Processes and Activities

Business process

reengineering

Six Sigma quality control

techniques

Key tools for continuous improvement

Total quality management

(TQM) programs

10-18

The Difference between Business Process Reengineering and Continuous Improvement Programs

• Business process reengineering aims at quantum gains of 30 to 50%

• Continuous improvement programs stress incremental progress—the never-ending pursuit of inch-by-inch quality gains.

TQM

Business Process Reengineering

10-19

Installing Information and Operating Systems

• Execution of strategies and value-creating internal processes depend on a number of internal operating systems.

• Information systems are needed to track and report data on: Customers Operations Employees Suppliers Finances

10-20

Using Rewards and Incentives to Promote Better Strategy Execution

• Rewards should motivate employees to focus on what results must be achieved and not on simply performing their jobs.

• Reward systems should include both monetary and non-monetary incentives.

10-21

Guidelines for Designing Monetary Incentive Plans

Tie incentives to strategy execution and financial

performance

Set performance targets that individuals or teams

can personally affect

Keep time between achievement and reward

as short as possible

CompensationIncentives

Make performance payoff a major piece of the total compensation package

Have incentives that extend to all managers

and all workers

Administer the reward system with scrupulous objectivity and fairness

10-22

Instilling a Corporate Culture thatPromotes Good Strategy Execution

• A corporate culture : Is the firm’s organizational DNA—its approach to

people management

Is comprised of shared core values, beliefs, and business principles that are engrained in employee behaviors and attitudes

defines its operating style—the chemistry of the firm’s work environment (“how we do things around here”)

10-23

High-Performance Cultures

• Standout cultural traits include: A “can-do” spirit

Pride in doing things right

No-excuses accountability

A results-oriented work climate in which people go the extra mile to achieve performance targets.

10-24

Characteristics of High-Performance Cultures

• A strong sense of involvement by all employees

• An emphasis on individual initiative and creativity

• Clear statement of performance expectations• Prompt addressing of critical issues• Constructive pressure to achieve good results

10-25

Adaptive Cultures

• Adaptive cultures are well-suited to fast-changing industries

• Characteristics of adaptive cultures include: Willingness to accept change and embrace challenge

of introducing and executing new strategies. Internal entrepreneurship on the part of individuals

and groups is encouraged and rewarded. Adopting a proactive approach to identifying issues,

evaluating the implications and options, and quickly moving ahead with workable solutions

10-26

Unhealthy Corporate Cultures

• Highly politicized internal environment Issues are resolved on the basis of political clout

• Hostility to change Avoid risks; experimentation and efforts to alter status quo are

discouraged

• Insular, inwardly-focused “Not-invented-here” mind-set Personnel discount the need to look outside for best practices

• Disregard for high ethical standards • Presence of incompatible, clashing subcultures

10-27

Making a Compelling Case for a Culture Change

Explain how new behaviors and work practices will produce better results.

Cite reasons the current strategy has to be modified and why new strategic

initiatives are being undertaken.

Cite why and how current behavioral norms and work practices are

obstacles to new strategic initiatives

Why the need for change?

10-28

Symbolic Culture Changing Actions

• Lead by executive example–executives must be alert to the fact that company personnel will be watching their actions and decisions to see if they are walking the talk.

• Executives promote the strategy–culture fit by appearing at ceremonial functions to celebrate the culture and praise individuals and groups that get with the program.

10-29

Leading the Strategy Execution Process

• Managers at all levels of the firm must:

1. Stay on top of what is happening and closely monitoring progress by engaging in managing by walking around (MBWA)

2. Put constructive pressure on the organization to achieve good results and operating excellence.

3. Not delay in initiating corrective actions to improve strategy execution and achieve the targeted performance results.

10-30

Putting Constructive Pressure on Organizational Units to Achieve

Good Results and Operating Excellence

Focus attention on continuous improvement

Use motivation and compensation to reward

high performance

Celebrate individual, group, and company

successes

Fostering a results-

oriented, high-performance

culture

Treat employees with dignity and respect

Encourage employee initiative and creativity

Set stretch objectives and clearly communicate

expectations

10-31

Pushing Corrective Actions to Improve Both the Company’s Strategy and

Its Execution

Deciding what adjustments to

make

Deciding when adjustments are

needed

Making corrective

adjustments