chap009 - strategic mgmt [compatibility mode]

8/8/2019 Chap009 - Strategic MGMT [Compatibility Mode]

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Strateg y Implem entation:Strateg y Implem entation:Strateg y Implem entation:Strateg y Implem entation:

9999

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rg an z ng or c onrg an z ng or c onrg an z ng or c onrg an z ng or c on

The best game plan inThe best game plan in

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the world never blockedthe world never blocked

or tackled anybody.or tackled anybody.

Vince Lombardi

A secondA second--rate strategyrate strategy

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per ec y execu e w eaper ec y execu e w ea

a firsta first--rate strategy poorlyrate strategy poorly

executed every time.executed every time.

Richard M. Kovacevich


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Chapter GuidelinesChapter GuidelinesChapter GuidelinesChapter Guidelines

A Framework for Executing Strategy

The Principal Managerial Components of the StrategyExecution Process

Buildin an Or anization Ca able of Good Strate

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Execution

Staffing the Organization

Building Core Competencies and Competitive Capabilities

Execution-Related Aspects of Organizing the Work Effort

Current Organizational Trends

Crafting the Strategy

Primarily a market-drivenactivity

Successful strategy makingdepends on

Business vision

Executing the Strategy

Primarily an operations-drivenactivity

Successful strategy executiondepends on

Doin a ood ob of workin

Formulation vs. Executing StrategyFormulation vs. Executing StrategyFormulation vs. Executing StrategyFormulation vs. Executing Strategy

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conditions and companycapabilities

Attracting and pleasingcustomers

Outcompeting rivals

Using company capabilitiesto forge a competitiveadvantage

through others

Good organization-building

Building competitivecapabilities

Creating a strategy-supportive culture

Getting things done anddelivering good results

Anaction-oriented, make-things happen taskinvolvingmanagements ability to

Direct organizational change

Achieve continuous improvement in

Implementationinvolves . . .

Implementing the StrategyImplementing the StrategyImplementing the StrategyImplementing the Strategy

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operations and business processes

Move toward operating excellence

Create and nurture a

strategy-supportive culture

Consistently meet or beat performance targets

Tougher and more time-consuming than crafting strategy


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Implementing a New StrategyImplementing a New StrategyRequires Adept LeadershipRequires Adept Leadership

Implementing a New StrategyImplementing a New StrategyRequires Adept LeadershipRequires Adept Leadership

Implementinganew strategytakes adept leadershipto

Convincingly communicate

reasons for the new strate

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Overcome pockets of doubt

Secure commitment of concerned parties

Build consensus and enthusiasm

Get all implementation pieces in place and coordinated

Why Executing Strategy IsWhy Executing Strategy Isa Tough Management Joba Tough Management JobWhy Executing Strategy IsWhy Executing Strategy Isa Tough Management Joba Tough Management Job

Overcoming resistance to change

Wide array of demanding managerial

activities to be performed

Numerous ways to tackle each activity

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Number of bedeviling issues to be worked out

Demands good people management skills

Requires launching and managing

a variety of initiatives simultaneously

Hard to integrate efforts of many different work groups into asmoothly-functioning whole

Who Are the StrategyWho Are the StrategyImplementers?Implementers?

Who Are the StrategyWho Are the StrategyImplementers?Implementers?

Implementing and executing strategy involves a companyswhole management teamandall employees

Just as every part of a watch plays a role in making the watchfunction properly, it takes all pieces of an organization working

cohesively for a strategy

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to be well-executed

Top-level managersmust leadtheprocess and orchestrate major initiatives

Butthey must rely on cooperation of

Middle and lower-level managers to see things go well in variousparts of an organization and

Employees to perform their roles competently


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Goals of the StrategyGoals of the StrategyImplementing ProcessImplementing ProcessGoals of the StrategyGoals of the StrategyImplementing ProcessImplementing Process

Unitetotal organizationbehindstrategy

See that activitiesaredonein a manner that is conducive tofirst-rate strate execution

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Generate commi tmentso an enthusiasticcrusade emerges to carry out strategy

Fithow organization conducts itsoperationstostrategy requirements

Every manager has an active role

No proven formula for implementing

particular types of strategies

Characteristics of the StrategyCharacteristics of the StrategyImplementation ProcessImplementation Process

Characteristics of the StrategyCharacteristics of the StrategyImplementation ProcessImplementation Process

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,

absolute rules and must do it

this way rules

Many ways to proceed that are

capable of working

Cuts across many aspects of how to manage

Each implementation situation occurs in a different context,

affected by differing

Business practices and competitive situations

Work environments and cultures

Characteristics of the StrategyCharacteristics of the StrategyImplementation ProcessImplementation Process (continued)(continued)Characteristics of the StrategyCharacteristics of the Strategy

Implementation ProcessImplementation Process (continued)(continued)

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Policies

Compensation incentives

Mix of personalities and firm histories

Approach to implementation/executionhas be customized to fit the situation

People implement strategies - Not companies!


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The Eight Components of the Strategy Execution ProcessThe Eight Components of the Strategy Execution Process

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Communicatethe case for change

Buildconsensuson how to proceed

Arouseenthusiasmfor the strategy to turn implementation processinto a companywide crusade

What Top Executives Have to Do inWhat Top Executives Have to Do inLeading the Implementation ProcessLeading the Implementation ProcessWhat Top Executives Have to Do inWhat Top Executives Have to Do inLeading the Implementation ProcessLeading the Implementation Process

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mpowersu or naes o eep process movng

Establish measuresof progress and deadlines

Rewardthose who achieveimplementation milestones

Direct resourcesto the right places

Personally leadstrategic change processand the drive for operating excellence

BUILDING A CAPABLEBUILDING A CAPABLE

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INVOLVED?INVOLVED?


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The Three Components of Bui lding anThe Three Components of Bui lding anOrganization Capable of Profic ient Strategy ExecutionOrganization Capable of Profic ient Strategy Execution

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Assembling a capable management team is a cornerstone of

the organization-building task

Find the right people to fill each slot

Putting Together aPutting Together aStrong Management TeamStrong Management Team

Putting Together aPutting Together aStrong Management TeamStrong Management Team

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Existing management team

may be suitable

Core executive group

may need strengthening

Promote from within

Bring in skilled outsiders

Selecting the Management Team:Selecting the Management Team:Key ConsiderationsKey Considerations

Selecting the Management Team:Selecting the Management Team:Key ConsiderationsKey Considerations

Determine mix of

Backgrounds

Experiences and know-how

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Styles of managing and personalities

Personal chemistry must be right

Talent base needs to be appropriate

Picking a solid management team needs to be acted on early

in implementation process


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The quality of a companys people is an essential ingredient of

successful strategy execution

Biggest challenge facing companies

How to recruit and retain the best

Recruiting and Retaining TalentedRecruiting and Retaining TalentedEmployees: Implementation IssuesEmployees: Implementation IssuesRecruiting and Retaining TalentedRecruiting and Retaining TalentedEmployees: Implementation IssuesEmployees: Implementation Issues

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and brightest talent with strong

skill sets and management potential

Intellectual capital, not tangible assets, is increasingly being

viewed as the most important investment

Talented people are a prime source of competitive advantage

Key Human Resource Practices toKey Human Resource Practices toAttract and Retain Talented EmployeesAttract and Retain Talented Employees

Key Human Resource Practices toKey Human Resource Practices toAttract and Retain Talented EmployeesAttract and Retain Talented Employees

Spend considerable effort in screening job applicants, selecting

only those with

Suitable skill sets

Energy and initiative

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Judgment and aptitudes for learning

Ability to adapt to firms work

environment and culture

Put employees through training

programs throughout their careers

Give promising employees challenging, interesting, and skills-stretching assignments

Rotate employees through jobs with great content, spanning

functional and geographic boundaries

Encourage employees to

Be creative and innovative

Key Human Resource Practices toKey Human Resource Practices to Attract and Retain Talented Employees Attract and Retain Talented Employees

(continued)(continued)

Key Human Resource Practices toKey Human Resource Practices to Attract and Retain Talented Employees Attract and Retain Talented Employees

(continued)(continued)

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Challenge existing ways of

doing things and offer better ways

Submit ideas for new products or businesses

Foster a stimulating work environment

Exert efforts to retain high-potential employees with excellent

salary and benefits

Coach average employees to improve their skills


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Building Core CompetenciesBuilding Core Competenciesand Competitive Capabilitiesand Competitive CapabilitiesBuilding Core CompetenciesBuilding Core Competenciesand Competitive Capabilitiesand Competitive Capabilities

Craftingthestrategyinvolves

Identifyingthe desiredcompetenciesandcapabilitiesto build into the strategy to helpachieve a competitive advantage

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Goodstrategy executionrequires

Puttingdesiredcompetenciesandcapabilities in place,

Upgradingthem as needed, and

Modifyingthem as marketconditions evolve

Example: Intels CoreExample: Intels CoreCompetenceCompetence

Example: Intels CoreExample: Intels CoreCompetenceCompetence

Design and mass production

of complex chips

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Example: Procter & GamblesExample: Procter & GamblesCore CompetenciesCore Competencies

Example: Procter & GamblesExample: Procter & GamblesCore CompetenciesCore Competencies

Superb marketing-distribution skills and R&D

capabilities in five core technologies - fats,

oils, skin chemistry, surfactants, emulsifiers

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Example: General ElectricsExample: General ElectricsCore CompetenciesCore Competencies

Example: General ElectricsExample: General ElectricsCore CompetenciesCore Competencies

Developing professional managers with broad

problem-solving skills andproven ability to grow

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g o a usnesses

Example: Disneys CoreExample: Disneys CoreCompetenciesCompetencies

Example: Disneys CoreExample: Disneys CoreCompetenciesCompetencies

Theme park operation and

famil entertainment

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Example: Dells CoreExample: Dells CoreCompetenciesCompetencies

Example: Dells CoreExample: Dells CoreCompetenciesCompetencies

Capabilities to deliver state-of-the-art

products to customers within days of next-

generation components coming available and

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Example: Toyotas CoreExample: Toyotas CoreCompetenceCompetence

Example: Toyotas CoreExample: Toyotas CoreCompetenceCompetence

Legendary production system giving it

the capability to produce high-quality

vehicles at relativel low costs

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1. Developabilityto do something

2. As experience builds,

abilit can translateinto a

ThreeThree--Stage Process of DevelopingStage Process of DevelopingCompetencies and CapabilitiesCompetencies and Capabilities

ThreeThree--Stage Process of DevelopingStage Process of DevelopingCompetencies and CapabilitiesCompetencies and Capabilities

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competence or capability

3. Ifabilitycontinues to be polished and refined, it canbecome adistinctive competence, providing a path to

competitive advantage!

Develop abilityto do something

Select people with relevant skills/experience

Step 1 in DevelopingStep 1 in DevelopingCompetenciesCompetencies


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Broaden or expand individual abilities as needed

Mold efforts and work products of

individuals into a cooperative effort

to createorganizational ability


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As experience builds and company learns how to perform the

activity consistently well and at acceptable cost, the ability

evolvesinto acompetenceorcapability Typically, a capability or competence emerges from



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between

Individuals and groups in different departments and/or

A company and its external allies

If company masterstheactivity, performingit better thanrivals, the capability orcompetencebecomes a

Distinctive competenceand



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Holds potential for

competitive advantage

This is the optimal outcomeof the process

of building capabilities-competencies!

1. Competencies are bundles of skillsandknow-howgrowing fromcombined effortsof cross-functionaldepartments

2. Normally, competencies emerge incrementallyfrom

Managing the Process of BuildingManaging the Process of BuildingCompetences: Four Key TraitsCompetences: Four Key Traits

Managing the Process of BuildingManaging the Process of BuildingCompetences: Four Key TraitsCompetences: Four Key Traits

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3. Leveraging competencies into competitive advantagerequires concentrating more effortand talentthanrivals on strengthening competenciesto createvaluable capabilities

4. Sustaining competitive advantage requires adjustingcompetencies to new conditions


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Internal developmentinvolves either

Strengthening the companys base of skills, knowledge, andintellect or

Coordinating and networking the efforts

Approaches to Developing Approaches to DevelopingCompetenciesCompetencies

Approaches to Developing Approaches to DevelopingCompetenciesCompetencies

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Partnering with key suppliers,forming strategic alliances, or maybeeven outsourcing certain activities tospecialists

Buying a companythat has the required capabilities andintegrating these competences into the firms value chain

Competencies and capabilities must

continuously be modifiedand perhapseven replaced with new onesdue to

New strategic requirements

Updating Competencies andUpdating Competencies andCapabilities as Conditions ChangeCapabilities as Conditions Change

Updating Competencies andUpdating Competencies andCapabilities as Conditions ChangeCapabilities as Conditions Change

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Evolving market conditions

Changing customer expectations

Ongoing effortsto keep core competencies up-to-datecanprovide a basis forsustainingboth

Effective strategy execution and

Competitive advantage

Training plays a critical role in implementation when a firm

shifts to a strategy requiring different

Skills or core competences

Competitive capabilities

Strategic Role of EmployeeStrategic Role of EmployeeTrainingTraining

Strategic Role of EmployeeStrategic Role of EmployeeTrainingTraining

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Managerial approaches

Operating methods

Types of training approaches

Internal universities

Orientation sessions for new employees

Tuition reimbursement programs

Online training courses


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Competitive Advantage PotentialCompetitive Advantage Potentialof Competencies and Capabilitiesof Competencies and CapabilitiesCompetitive Advantage PotentialCompetitive Advantage Potential

of Competencies and Capabilitiesof Competencies and Capabilities

When it is difficultto outstrategizerivals with a

superior str ategy . . .

. . . Best avenue to industr

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leadershipis to out-competerivalswith

superior strategy execution!

Building competencies and capabilitiesrivals cant match is one of the

best ways to out-compete them!

ExecutionExecution--Related AspectsRelated Aspectsof Organizing Work Effortsof Organizing Work EffortsExecutionExecution--Related AspectsRelated Aspectsof Organizing Work Effortsof Organizing Work Efforts

Few hard and fast rules for organizing

One Big Rule: Role and purpose of organization structure isto support and facilitate good strategy execution!

Each firms structure is reflecting

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Prior arrangements and internal politics

Executive judgments and preferences about how to arrange

reporting relationships

How best to integrate and coordinate work effort of different work

groups and departments

Vice Pre sident Vice Pre siden t Vice Pr esiden t

CEO

Structuring the Work EffortStructuring the Work Effortto Promote Successful Strategy Implementationto Promote Successful Strategy Implementation

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Step 1Step 1: Decide Which Value Chain Activities: Decide Which Value Chain Activitiesto Perform Internally and Which toto Perform Internally and Which to

OutsourceOutsource

Step 1Step 1: Decide Which Value Chain Activities: Decide Which Value Chain Activitiesto Perform Internally and Which toto Perform Internally and Which to

OutsourceOutsource

Involves decidingwhichactivitiesareessentialtostrategic success

Most strategies entail certain crucial business processes or

activities that must be performed exceedingly well or in closely

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coor nae as on e s raegy s

to be executed with real proficiency

These processes/activities usually

need to be performed internally

Other activities, such as routine

administrative housekeeping and

some support functions, may be

candidates for outsourcing

Criticalactivities

Determining StrategyDetermining Strategy--Critical Activities:Critical Activities:Issues to ConsiderIssues to Consider

Determining StrategyDetermining Strategy--Critical Activities:Critical Activities:Issues to ConsiderIssues to Consider

1. What functions or business processes

have to be performed extra well or in

timely fashion to achieve competitive advantage?

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2. In what value-chain activities would

poor execution seriously impair

strategic success?

A company improves its chances for outclassing rivals in

Performing strategy-critical activities and

Turning a core competence into a distinctive competence

Streamlining of internal operations that flows from outsourcing acts to

Potential Advantages ofPotential Advantages ofOutsourcing NonOutsourcing Non--Critical ActivitiesCritical Activities

Potential Advantages ofPotential Advantages ofOutsourcing NonOutsourcing Non--Critical ActivitiesCritical Activities

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Decrease internal bureaucracies

Flatten organization structure

Speed decision-making

Increase competitive responsiveness

Partnerships can add to a companys arsenal of capabilities and

contribute to better strategy execution


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Appeal of Outsourcing Appeal of Outsourcing Appeal of Outsourcing Appeal of Outsourcing

Outsourcing non-critical activities allows a firm to concentrateits energies and resourceson those value-chain activities

where it

Can create unique value

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Can be best in the industry

Needs direct control to

Build core competencies

Achieve competitive advantage

Manage key customer-supplier-distributor relationships

Potential Advantages ofPotential Advantages ofPartneringPartnering

Potential Advantages ofPotential Advantages ofPartneringPartnering

By building, improving, and then leveraging partnerships, a firm

enhances its overall capabilities and builds resource strengths

that

Deliver value to customers

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Rivals cant quite match

Consequently pave the way

for competitive success

Partnering makes strategic sensewhen the

result is to enhance a companys competenciesand competitive capabilities.

Dangers of OutsourcingDangers of OutsourcingDangers of OutsourcingDangers of Outsourcing

A company must guard against hollowing out its knowledge

base and capabilities

Way to guard against pitfalls of outsourcing

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Avoid sourcing key components from a single supplier

Use two or three suppliers to minimize

dependence on any one supplier

Regularly evaluate suppliers

Work closely with key suppliers


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Assignmanagers of strategy-critical activities a visible,influential position

Avoidfragmenting responsibility for strategy-critical activities

Step 2: Make StrategyStep 2: Make Strategy--Crit icalCritical Activities the Main Building Blocks Activities the Main Building Blocks

Step 2: Make StrategyStep 2: Make Strategy--Crit icalCritical Activities the Main Building Blocks Activities the Main Building Blocks

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Providecoordinating linkagesbetween related work groups

Meld into a valuable

competitive capability

Assignmanagerskey roles

Primaryactivities

Strategicrelation-

ships

Coordi-nation

Valuablecapability

Supportfunctions

What Types of OrganizationalWhat Types of OrganizationalStructures Fit Which Strategies?Structures Fit Which Strategies?

What Types of OrganizationalWhat Types of OrganizationalStructures Fit Which Strategies?Structures Fit Which Strategies?

A company operating in one business

Functional department structure

A company withoperations in various parts of the world

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Avertically integratedcompany

Divisional organizational structure

Adiversifiedcompany

Individual businesses, with each business unit operating as

independent profit center

In a centralized structure

Top managers retain authority

for most decisions

Step 3: Determine How MuchStep 3: Determine How Much Authority to Delegate to Whom Authority to Delegate to Whom

Step 3: Determine How MuchStep 3: Determine How Much Authority to Delegate to Whom Authority to Delegate to Whom

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Managers and employees are

empowered to make decisions

Trendin most companies

Shift from authoritarian to decentralized

structures stressing empowerment


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Characteristics ofCharacteristics ofCentralized Decision MakingCentralized Decision Making

Characteristics ofCharacteristics ofCentralized Decision MakingCentralized Decision Making

Top executives retain authority

For most strategic and operating decisions and

Keep a tight rein on lower-level managers

Minimal discretionary authority is granted to

Frontline supervisors

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Rank-and-file employees

Key advantage Tight control by top

managers fixes accountability

Disadvantages

Lengthens response time to changing conditions

Does not encourage responsibility among lower-level managers and

employees Discourages lower-level managers and employees from exercising

initiative

Advantages of a DecentralizedAdvantages of a DecentralizedStructureStructure

Advantages of a DecentralizedAdvantages of a DecentralizedStructureStructure

Creates a more horizontal structure with fewer management layers

Managers and employees develop their own answers and action plans

Make decisions in their areas of responsibility

Held accountable for results

Shortens organizational response times and spurs

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New ideas

Creative thinking and innovation

Greater involvement of managers and employees

Jobs can be defined more broadly

Fewer managers are needed

Electronic communication systems provide quick, direct access to data

Genuine gains in morale and productivity


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Examples of FragmentedExamples of FragmentedStrategyStrategy--Critical ActivitiesCritical ActivitiesExamples of FragmentedExamples of FragmentedStrategyStrategy--Critical ActivitiesCritical Activities

Filling customer orders

Speeding new products to market

Improving product quality

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Supply chain management

Building capability to conduct business via the Internet

Obtaining feedback from customers, making product

modifications to meet their needs

Cross-functional task forces

Dual reporting relationships

Informal networking

Coordinating Mechanisms to Supplement theCoordinating Mechanisms to Supplement theBasic Organization StructureBasic Organization Structure

Coordinating Mechanisms to Supplement theCoordinating Mechanisms to Supplement theBasic Organization StructureBasic Organization Structure

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Voluntary cooperation

Incentive compensation tied

to group performance

Teamwork and cross-

departmental cooperation

Step 5: Provide forStep 5: Provide forCollaboration With OutsidersCollaboration With Outsiders

Step 5: Provide forStep 5: Provide forCollaboration With OutsidersCollaboration With Outsiders

Need multiple tiesat multiple levelsto ensure

Communication

Coordination and control

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Find ways to produce collaborativeeffortstoenhancefirms capabilitiesand resource strengths

While collaborative relationships present opportunities, nothingvaluable is realized until the relationship develops into anengine for better organizational performance


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Get right people together

Promote good rapport

See plans for specific activities

Roles of Relationship ManagersRoles of Relationship ManagersWith Strategic PartnersWith Strategic Partners

Roles of Relationship ManagersRoles of Relationship ManagersWith Strategic PartnersWith Strategic Partners

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are developed and implemented

Help adjust internal procedures

and communication systems to

Iron out operating dissimilarities

Nurture interpersonal ties

Current Organizational TrendsCurrent Organizational TrendsCurrent Organizational TrendsCurrent Organizational Trends

Numerous companies have completed the task of remodeling

traditional, hierarchical structures built on

Functional specializationand

Centralized authorit

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Corporate downsizing movement in the

late 1980s and early 1990s was aimed at

Recasting authoritarian, pyramidal

organizational structures

Into flatter, decentralized structures

Centralized or authoritarian structureshave often turned outto be a liabilitywhere

Customer preferences shift from

standardized to customized products

Drawbacks of CentralizedDrawbacks of CentralizedAuthoritarian StructuresAuthoritarian StructuresDrawbacks of CentralizedDrawbacks of CentralizedAuthoritarian StructuresAuthoritarian Structures

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Product life-cycles grow shorter

Flexible manufacturing replaces

mass production

Customers want to be treated as individuals

Pace of technological change accelerates

Market conditions are fluid


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Organizational Structures ofOrganizational Structures ofthe Future: Overall Themesthe Future: Overall ThemesOrganizational Structures ofOrganizational Structures ofthe Future: Overall Themesthe Future: Overall Themes

Revolutionarychangesinhow workisorganizedhave beentriggered by

New strategic priorities

Rapidly shifting competitive conditions

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Toolsoforganizational designinclude

Empowered managers and workers

Reengineered work processes

Self-directed work teams

Rapid incorporation of Internet

technology

Networking with outsiders

The future

structure

will be . . .

Characteristics ofCharacteristics ofOrganizations of the FutureOrganizations of the Future

Characteristics ofCharacteristics ofOrganizations of the FutureOrganizations of the Future

ExtensiveuseofInternet technologyande-commercebusiness practices

Fewer barriersbetween

Different vertical ranks Change &Learnin

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Functions and disciplines

Units in different geographic locations

Company and its suppliers, distributors,

strategic allies, and customers

Capacityforchangeand rapid learning

Collaborative effortsamong people in differentfunctions and geographic locations

chap009 - strategic mgmt [compatibility mode]

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