7.

Strategy Implementation

Implementing Strategy

Operationalization strategy
Operationalization strategy is the approach adopted by

an organization to achieve operational effectiveness. When organization performs value creating activities optimally and in a way which is better than its

competitors, it results in operational effectiveness.

Implementing Strategy

Strategy Implementation
What must we do to put the strategy in

place, execute it proficiently, and produce good results?

Creating FITS between strategy and

external environment and creating FITS inside the organization

Control, coordination, and motivation

issues
5

Annual objectives
The results an organization seeks to achieve with in one

year period are annual objectives. Short-term or annual objectives involve areas similar to these entailed in long term objectives. The difference between them stem

principally from the greater specificity possible and

necessary in short term objectives.

Purpose of Annual Objectives

Basis

for resource allocation the basis for allocating resources

Represents

Mechanism
Major

for management evaluation

instrument for monitoring progress toward achieving long-term objectives

Establish

priorities (organizational, divisional, and departmental)

Ch 7 -7

Developing functional strategies

Functional strategy deals with relatively restricted plan

which provides the objectives for specific function, for the allocation of resources among different operations within that functional area and for enabling co-ordination between

them for an optimal contribution to the achievement of the

business-level and corporate objectives. Functional

strategies are derived from business and corporate strategies and are implemented through functional and operational implementation.
8

Functional strategy objectives

Profitability Market share Human Talent Financial Health Product quality Social responsibility

Monitoring Implementation: Continuous Improvement

Financial Goals/ Outcome Customer Target/ Objectives Initiative Internal Performance Indicator Growth & Development Implement
Who? What? When? Where? How?

Interpret (analyze) Application (modify/correct) Reflect (monitor)

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Nature of Strategy Implementation

SI problems can arise because of the shift in responsibility, especially if SF decisions come as a surprise to middle- and

lower-level managers. Therefore, it is essential to involve

divisional and functional managers in SF.

Shift in responsibility

Strategists

Divisional or Functional Managers

Ch 7 -11

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Figure 11.1: The Eight Components of the Strategy Execution Process

Building a Capable Organization Exercising Strategic Leadership Allocating Resources Establishing StrategySupportive Policies

Strategy Implementers Action Agenda

Instituting Best Practices for Continuous Improvement

Shaping Corporate Culture to Fit Strategy

Tying Rewards to Achievement of Key Strategic Targets

Installing Support Systems

12

Figure 11.2: The Three Components of Building a Capable Organization

A Company with the Competencies and Capabilities Needed for Proficient Strategy Execution

Staffing the Organization

Building Core Competencies Competitive Capabilities

and

Matching the Organization Structure to Strategy

13

The Politics of Leadership

Let weakly supported ideas die through inaction Establish additional hurdles or strongly supported ideas that are unacceptable but shouldnt be openly opposed Keep a low political profile on unacceptable proposals by getting subordinate managers to say no Let most negative decisions come from consensus that the manager confirms, reserving personal veto for big issues and crucial moments Lead but dont dictate strategy depend more on questions and seek to probe and clarify until consensus emerges
14

 Stay alert to symbolic impact of ones actions and statements lest a false signal stimulate action in an unwanted direction Ensure that all major power bases in the organization have representation in or access to top management Inject new faces and views into consideration of major changes to preclude those involved from stereotyped ways and then systematically screening against other views Minimize political exposure on highly controversial issues and where major opposition can trigger a shootout
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16

ALLOCATING RESOURCES TO

SUPPORT STRATEGY
IMPLEMENTATION

17

Allocating Resources to Support Strategy Execution

Resource allocation should fit strategy Changing strategy requires changes to resource

allocation process Shifting resources downsizing some areas, upsizing others, getting rid of activities no longer needed, and funding new strategically critical activities Financial and other resources (physical and human assets)

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CREATING STRATEGYSUPPORTIVE POLICIES AND

PROCEDURES

19

Fig. 12.1: How Prescribed Policies and Procedures Facilitate Strategy Execution

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INSTITUTING BEST PRACTICES AND CONTINUOUS IMPROVEMENT

21

Instituting Best Practices and Continuous Improvement

Searching out and adopting best practices

is integral to effective implementation

Benchmarking is the backbone of the

process of identifying, studying, and implementing best practices

Key tools to promote continuous improvement
Business process reengineering

TQM
Six Sigma quality control
22

INSTALLING STRATEGY-

SUPPORTIVE
INFORMATION AND OPERATING SYSTEMS
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Installing Strategy-Supportive Information and Operating Systems

Good information and operating systems are

essential for first-rate strategy execution Support systems can relate to all value-chain activities Includes all type of Computer Based Information Systems (CBISs): MIS, DBMS, TPS, DSS, E-commerce and ebusiness systems, CRM, SCM, etc Mobilizing information and creating systems to use knowledge effectively can yield Competitive advantage
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 Structure Follows Strategy:

Changes in corporate strategy

lead to changes in organizational structure

25

25

 Structure Follows Strategy:

New strategy is created New administrative problems emerge Economic performance declines New appropriate structure is invented

Profit returns to its previous levels

26

26

Stages of corporate development

Simple Structure Functional Structure Divisional Structure Beyond SBUs

27

27

Simple/Matrix Structure
The most complex of all structures

because it depends upon both vertical and horizontal flows of authority and communication.
Stage I:
Entrepreneur Decision making tightly controlled Little formal structure Planning short range/reactive Flexible and dynamic Ch 7 -28
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Matrix Structure
Advantages Flexibility of the structure and membership Minimum of direct hierarchical control Maximizes use of employees skills Motivates employees;

frees up top management Disadvantages High bureaucratic costs High costs (time and money) for building relationships Two-boss employees role conflict
29

Matrix Structure

Two-boss employee

30

Functional Structure
Groups tasks and activities by business

function (e.g., production, finance,

marketing, R&D, HR, IT, etc.).

Stage II:
Management team

Functional specialization
Delegation decision making Concentration/specialization in

industry
Ch 7 -31
31

Functional Structure
Advantages Task grouping facilitates specialization and productivity. Better monitoring of work processes, reduced costs. Greater control over organizational activities. Disadvantages Functional orientation creates communication problems. Performance and profitability measurement problems. Location versus function problems (coordination). Strategic problems due to structural (vertical and horizontal) mismatches.
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Functional Structure

33

Divisional Structure
Can be organized in one of four ways:
By geographic area By product or service By customer

By process
Stage III: Diverse product lines

Decentralized decision making

SBUs Almost unlimited resources
Ch 7 -34
34

Mutlitdivisional Structure
Advantages Enhanced corporate control by division Enhanced strategic control of each SBU in portfolio Growth is easier. New units dont have to be integrated across organization Stronger pursuit of internal efficiencies. Performance of individual units is readily measurable. Disadvantages Establishing the divisionalcorporate authority relationship Distortion of information by divisions Competition for resources by divisions Transfer pricing problems between divisions Short-term research and development focus Bureaucratic costs

35

Multidivisional Structure

36

Strategic Business Unit Structure (SBU)

Groups similar divisions into strategic business

units and delegates authority and responsibility for each unit to a senior executive who reports directly to the chief executive officer. Stage IV: Increasing environmental uncertainty Technological advances Size & scope of worldwide businesses Multi-industry competitive strategy Better educated personnel
Ch 7 -37
37

Strategy and leadership

Leadership

is

highly

significant

determinates

in

implementing managerial strategy and provides a catalyst and interpersonal focus for the execution of strategies choice within the structure and through the processes of the

organization
Strategic leadership is the ability to influence others to

voluntarily make decisions that enhance prospects for the organizations long term success, while at the same time maintaining its short term financial stability.
38

Ethical process and csr

Ethics is the study of how personal moral norms apply

to activities and goals of a commercial enterprise. It is not a separate moral standard, but the study of how the business context poses its own unique problems for the

moral person who acts as the agent of this systems.

39

Need of Ethics in Organization

Provides guidelines for employees behaviour Establish a better corporate culture Avoid conflict of interest Make proper use of company assets and property Safeguard proprietary information

40

Corporate social responsibility

SR refers of business refers to the obligation of business

to pursue those policies to make those decisions or to follow those lines of action which are desirable in terms of the objectives and values of the society

41

Reasons for growing concern for sr:

Consumerism Trade unionism Public opinion Enlightened Self-interest Professionalization Trusteeship

42

Arguments for sr:

Changed public expectations of business Better environment for business Public image Avoidance of Government Regulation Balance of responsibility with power

43

Arguments against sr:

Profit maximization Society has to pay the cost Lack of social skills Business has enough power Lack of accountability Lack of broad support Lack of social skills
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TYING REWARDS AND INCENTIVES TO GOOD

STRATEGY IMPLEMENTATION

45

Exercising Adequate Control Over Empowered Employees

Challenge Behavioral Control How to ensure actions of employees

stay within acceptable bounds Control approaches Managerial control Establish boundaries on what not to do, allowing freedom to act with limits Track and review daily operating performance Peer-based control
46

Gaining Commitment: Components of an Effective Reward System

Monetary Incentives
Base pay increases Performance bonuses Profit sharing plans Stock options Retirement packages Piecework incentives

Non-monetary Incentives
Praise
Constructive criticism Special recognition

More, or less, job security

Stimulating assignments More, or less, autonomy

Rapid promotion

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Linking the Reward System to Performance Outcomes

Rewards are the single most powerful tool to

win the commitment of company personnel to effective strategy implementation

Objectives in designing the reward system Generously reward those achieving objectives Deny rewards to those who dont Tie incentive compensation to relevant

outcomes - both strategic and financial

48

BUILDING A STRATEGY-

SUPPORTIVE CORPORATE
CULTURE

49

Defining Characteristics of Corporate Culture

Core values, beliefs, and business principles Ethical standards

Operating practices and behaviors defining

how we do things around here Approach to people management Chemistry and personality permeating work environment Often told stories illustrating Companys values Business practices Traditions
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Identifying the Key Features of Corporate Culture

A companys culture is manifested in . . .
Values, business principles, and ethical standards

preached and practiced by management

Approaches to people management and problem solving Official policies and procedures Spirit and character permeating work environment Interactions and relationships among managers and

employees
Peer pressures that exist to display core values Its revered traditions and often repeated stories Its relationships with external stakeholders
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Why is Culture Important?

Matching culture to strategy will improve

performance
A culture that promotes attitudes and behaviors that are

well-suited to strategy is a valuable ally in the strategy implementation process

Can hinder strategy implementation and

performance if not compatible with strategy

A culture where attitudes and behaviors impede good

strategy implementation is a huge obstacle to overcome

Provides another means to control, coordinate, and

motivate employees
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Grounding the Culture in Core Values and Ethics

A culture based on ethical principles is vital to

long-term strategic success Ethics programs help make ethical conduct a way of life Executives must provide genuine support of personnel displaying ethical standards in conducting the companys business Value statements serve as a cornerstone for culture-building Can be used to control employees to behave in the right way
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