Strategy Strategy ImplementationImplementationOrganizing for Organizing for

ActionAction

STRATEGY IMPLEMENTAIONSTRATEGY IMPLEMENTAION

• Execution, not strategy per se, is primarily what Execution, not strategy per se, is primarily what differentiates the winners from the losersdifferentiates the winners from the losers

• Execution is the key to successExecution is the key to success• Execution are the ways top management Execution are the ways top management

motivates and mobilizes the company’s motivates and mobilizes the company’s managers and how management communicate managers and how management communicate with employees to achieve consensuswith employees to achieve consensus

• Why do we spend so much time analyzing the Why do we spend so much time analyzing the strategies of successful companies and so little strategies of successful companies and so little studying the execution of these strategies?studying the execution of these strategies?

Implementation QuestionsImplementation Questions

• WHO will carry out the strategic plan?WHO will carry out the strategic plan?• WHAT must be done to align the company’s WHAT must be done to align the company’s

operations in the new intended direction?operations in the new intended direction?• HOW is everyone going to do what is needed?HOW is everyone going to do what is needed?

Problems of ImplementationProblems of Implementation

• Implementation took more time than originally Implementation took more time than originally plannedplanned

• Unanticipated major problems aroseUnanticipated major problems arose• Activities were ineffectively coordinatedActivities were ineffectively coordinated• Competing activities and crises took attention Competing activities and crises took attention

away from implementationaway from implementation• The involved employees had insufficient The involved employees had insufficient

capabilities to perform their jobscapabilities to perform their jobs

• Lower level employees were inadequately trainedLower level employees were inadequately trained• Uncontrollable external environmental factors created Uncontrollable external environmental factors created

problemsproblems• Departmental managers provided inadequate leadership Departmental managers provided inadequate leadership

and directionand direction• Key implementation tasks and activities were poorly Key implementation tasks and activities were poorly

defineddefined• The information system inadequately monitored activitiesThe information system inadequately monitored activities

Who Implements Strategy?Who Implements Strategy?

• The implementers are almost everyone in the The implementers are almost everyone in the organizationorganization

• Many of the people who are crucial for the Many of the people who are crucial for the implementation of the strategy may not have implementation of the strategy may not have been involved in its formulationbeen involved in its formulation

• Therefore changes in mission, objectives and Therefore changes in mission, objectives and strategies should be clearly communicatedstrategies should be clearly communicated

StaffingStaffing

• The implementation of new strategies often calls The implementation of new strategies often calls for new human resource management priorities for new human resource management priorities and a different use of personnel:and a different use of personnel:

• hiring new people with new skillshiring new people with new skills• Firing people with inappropriate skillsFiring people with inappropriate skills• Training existing employees to learn new skillsTraining existing employees to learn new skills

Staffing Follows StrategyStaffing Follows Strategy

• Hiring and training requirements changeHiring and training requirements change• Matching the manager to the strategy : the most Matching the manager to the strategy : the most

appropriate type of general manager needed to appropriate type of general manager needed to effectively implement a new corporate or effectively implement a new corporate or business strategy depends on the strategic business strategy depends on the strategic direction of the firmdirection of the firm

Selection and Management Selection and Management DevelopmentDevelopment

• Executive succession : insiders versus outsidersExecutive succession : insiders versus outsiders• Identifying abilities and potential through :Identifying abilities and potential through :

1.1. a sound performance appraisal system to identify good a sound performance appraisal system to identify good performers with promotion potentialperformers with promotion potential

2.2. Using assessment centers to evaluate a person’s Using assessment centers to evaluate a person’s suitability for an advanced positionsuitability for an advanced position

3.3. Using job rotation to ensure that employees are gaining Using job rotation to ensure that employees are gaining the appropriate mix of experience to prepare them for the appropriate mix of experience to prepare them for further responsibilitiesfurther responsibilities

What must be Done?What must be Done?

• Developing Programs, Budgets and ProceduresDeveloping Programs, Budgets and Procedures• The Matrix of change can be used to address the The Matrix of change can be used to address the

following questions:following questions:

1.1. FeasibilityFeasibility

2.2. Sequence of executionSequence of execution

3.3. LocationLocation

4.4. Pace and nature of changePace and nature of change

5.5. Stakeholder evaluationStakeholder evaluation

The Matrix of ChangeThe

Use of the Matrix of changeUse of the Matrix of change

• Feasibility: proposed programs? Current Feasibility: proposed programs? Current activities, transition?activities, transition?

• Sequence of Execution : where should the Sequence of Execution : where should the change begin?change begin?

• Location : can we reorganize the facilities or Location : can we reorganize the facilities or should we start the new programs in another should we start the new programs in another location?location?

Achieving SynergyAchieving Synergy

• Shared know HowShared know How• Coordinated strategiesCoordinated strategies• Shared tangible resourcesShared tangible resources• Economies of Scale and ScopeEconomies of Scale and Scope• Pooled negotiating PowerPooled negotiating Power• New Business CreationNew Business Creation

How is Strategy to be How is Strategy to be Implemented : Organizing for Implemented : Organizing for

ActionAction• Structure follows strategyStructure follows strategy• Phases of corporate developmentPhases of corporate development• Organizational life cycleOrganizational life cycle• Advanced types of organizational structuresAdvanced types of organizational structures• Reengineering and strategy implementationReengineering and strategy implementation• Six sigmaSix sigma• Designing jobs to implement strategiesDesigning jobs to implement strategies

Structure Follows StrategyStructure Follows Strategy

1. 1. New strategy is created.New strategy is created.

2. 2. New administrative problems emerge.New administrative problems emerge.

3. 3. Economic performance declines.Economic performance declines.

4. 4. New appropriate structure is invented.New appropriate structure is invented.

5. 5. Profit returns to its previous level.Profit returns to its previous level.

Stages in Corporate Stages in Corporate DevelopmentDevelopment

• Successful corporations tend to follow a pattern Successful corporations tend to follow a pattern of structural development as they grow and of structural development as they grow and expandexpand

• Stage I : simple structureStage I : simple structure• Stage II : functional structureStage II : functional structure• Stage III : divisional structureStage III : divisional structure• Stage IV : beyond SBUsStage IV : beyond SBUs

Factors Differentiating Stage I, II, and III Factors Differentiating Stage I, II, and III CompaniesCompanies

Stages of Corporate Development

Function Stage 1 Stage II Stage III

1. Sizing up: Major problems

2. Objectives

3. Strategy

4. Organization: Major characteristic of structure

Survival and growth dealing with short-term operating problems.

Personal and subjective.

Implicit and personal; exploitation of immediate opportunities seen by owner-manager.

One unit, “one-man show.”

Growth, rationalization, and expansion of resources, providing for adequate attention to product problems.

Profits and meeting functionally oriented budgets and performance targets.

Functionally oriented moves restricted to “one product” scope; exploitation of one basic product or service field.

One unit, functionally specialized group.

Trusteeship in management and investment and control of large, increasing, and diversified resources. Also, important to diagnose and take action on problems at division level.

ROI, profits, earnings per share.

Growth and product diversification; exploitation of general business opportunities.

Multiunit general staff office and decentralized operating divisions.

(Continued)

Factors Differentiating Stage I, II, and III Factors Differentiating Stage I, II, and III CompaniesCompanies

Personal, subjective control based on simple accounting system and daily communication and observation.

Personal criteria, relationships with owner, operating efficiency, ability to solve operating problems.

Informal, personal, subjective; used to maintain control and divide small pool of resources to provide personal incentives for key performers.

Control grows beyond one person; assessment of functional operations necessary; structured control systems evolve.

Functional and internal criteria such as sales, performance compared to budget, size of empire, status in group, personal relationships, etc.

More structured; usually based to a greater extent on agreed policies as opposed to personal opinion and relationships.

Complex formal system geared to comparative assessment of performance measures, indicating problems and opportunities and assessing management ability of division managers.

More impersonal application of comparisons such as profits, ROI, P/E ratio, sales, market share, productivity, product leadership, personnel development, employee attitudes, public responsibility.

Allotment by “due process” of a wide variety of different rewards and punishments on a formal and systematic basis. Companywide policies usually apply to many different classes of managers and workers with few major exceptions for individual cases.

Function Stage 1 Stage II Stage III

5. (a) Measurement and control

5. (b) Key performance indicators

6. Reward-punishment system

Source: D. H. Thain, “Stages of Corporate Development,” Business Quarterly (Winter 1969), p. 37. Copyright © 1969 by Business Quarterly. Reprinted by permission.

Blocks to Changing StagesBlocks to Changing Stages

• Loyalty to comradesLoyalty to comrades• Task oriented (excessive attention to details)Task oriented (excessive attention to details)• Single mindednessSingle mindedness• Working in isolationWorking in isolation

Organizational Life CycleOrganizational Life Cycle

• Describes how organizations grow, develop, and Describes how organizations grow, develop, and eventually declineeventually decline

• Movement from growth to maturity and then Movement from growth to maturity and then decline is not inevitable.decline is not inevitable.

Organizational Life CycleOrganizational Life Cycle

Stage I Stage II Stage III1 Stage IV Stage V

Dominant Issue Birth Growth Maturity Decline Death

Popular Concentration Horizontal Concentric and Profit strategy Liquidation orStrategies in a niche and vertical conglomerate followed by bankruptcy

growth diversification retrenchment

Likely Entrepreneur- Functional Decentralization Structural DismembermentStructure dominated management into profit or surgery of structure

emphasized investment centers

Note: 1. An organization may enter a Revival Phase either during the Maturity or Decline Stages and thus extend the organization’s life.

Advanced Types of Advanced Types of Organizational StructureOrganizational Structure

• Matrix structureMatrix structure• Network Structure : The virtual OrganizationNetwork Structure : The virtual Organization• Cellular organization (self managing teams)Cellular organization (self managing teams)

Changing Structural Changing Structural Characteristics of Modern Characteristics of Modern

CorporationCorporationOld Organizational Design New Organizational Design

One large corporation Mini-business units & cooperative relationships

Vertical communication Horizontal communication

Centralized top-down decision making Decentralized participative decision making

Vertical integration Outsourcing & virtual organizations

Work/quality teams Autonomous work teams

Functional work teams Cross-functional work teams

Minimal training Extensive training

Specialized job design focused on individual Value-chain team-focused job design

Source: Adapted from B. Macy and H. Izumi, “Organizational Change, Design, and Work Innovation: A Meta-Analysis of 131 North American Field Studies—1961–1991,” Research in Organizational Change and Development, Vol. 7, JAI Press (1993), p. 298. Reprinted with permission.

Matrix StructureMatrix Structure

)

Manufacturing

Finance

Sales

Personnel

Manager: Project

A

Manufacturing Unit

Finance Unit

Personnel Unit

Manager: Project

B

Manufacturing Unit

Finance Unit

Sales Unit

Personnel Unit

Manager: Project

C

Manufacturing Unit

Finance Unit

Sales Unit

Personnel Unit

Manager: Project

D

Manufacturing Unit

Finance Unit

Sales Unit

Personnel Unit

Top Management

Sales Unit

Network StructureNetwork Structure

Packagers

Designers Suppliers

Distributors

Corporate Headquarters

(Broker)

Promotion/ Advertising Agencies

Manufacturers

Reengineering and Strategy Reengineering and Strategy ImplementationImplementation

• Reengineering is the radical redesign of Reengineering is the radical redesign of business processes to achieve major gains in business processes to achieve major gains in cost, service, or time.cost, service, or time.

• It is an effective way to implement turnaround It is an effective way to implement turnaround strategystrategy

Principles for Re-Principles for Re-engineeringengineering

• Organize around outcomes, not tasksOrganize around outcomes, not tasks

• Have those who use the output perform the processHave those who use the output perform the process

• Subsume information-processing work into the real Subsume information-processing work into the real work that produces the informationwork that produces the information

• Treat geographically dispersed resources as though Treat geographically dispersed resources as though they were centralizedthey were centralized

• Link parallel activities instead of integrating their Link parallel activities instead of integrating their resultsresults

• Put decision point where work is performed and build Put decision point where work is performed and build control into the processcontrol into the process

• Capture information once at the sourceCapture information once at the source

Six SigmaSix Sigma

• Is an analytical method for achieving near-Is an analytical method for achieving near-perfect results on a production lineperfect results on a production line

• It encompasses 5 steps It encompasses 5 steps • Six sigma reduces the defects, thus saving Six sigma reduces the defects, thus saving

money by preventing wastemoney by preventing waste

Six sigma processSix sigma process

1.1. Define the process where results are poorer than Define the process where results are poorer than averageaverage

2.2. Measure the process to determine exact current Measure the process to determine exact current performanceperformance

3.3. analyze the information to pinpoint where things analyze the information to pinpoint where things are going wrongare going wrong

4.4. Improve the process and eliminate the errorImprove the process and eliminate the error5.5. Establish controls to prevent future defects from Establish controls to prevent future defects from

occurring occurring

Lean Six SigmaLean Six Sigma

• Program which incorporates the statistical Program which incorporates the statistical approach of Six Sigma with the lean approach of Six Sigma with the lean manufacturing programmanufacturing program

• It includes the removal of unnecessary steps in It includes the removal of unnecessary steps in any process and fixing those that remainany process and fixing those that remain

Designing Jobs to Implement Designing Jobs to Implement StrategyStrategy

• Job enlargementJob enlargement• Job rotationJob rotation• Job enrichmentJob enrichment

International Issues in Strategy International Issues in Strategy ImplementationImplementation

• International strategic alliancesInternational strategic alliances• Stages of international developmentStages of international development• Centralization versus decentralizationCentralization versus decentralization

International strategic International strategic alliancesalliances

• Partners must have a shared visionPartners must have a shared vision• Alliances strategy must be derived from Alliances strategy must be derived from

corporate, business and functional strategiescorporate, business and functional strategies• It must be important for both partnersIt must be important for both partners• Partners must be mutually dependentPartners must be mutually dependent• Joint activities must have added valueJoint activities must have added value• Must be accepted by stakeholdersMust be accepted by stakeholders• Partners contribute key strengths but protect Partners contribute key strengths but protect

core competenciescore competencies

Stages of International Stages of International DevelopmentDevelopment

1. Domestic company—some exporting1. Domestic company—some exporting

2. Domestic company—export division2. Domestic company—export division

3. Domestic company—international division3. Domestic company—international division

4. Multinational corporation—multi-domestic 4. Multinational corporation—multi-domestic emphasisemphasis

5. Multinational corporation—global emphasis5. Multinational corporation—global emphasis

Geographic Area Structure for a Multinational Geographic Area Structure for a Multinational Corporation Corporation

Board of Directors

President

Corporate StaffR & D

Operating Companies

U.S.

Operating Companies

Europe*

Operating Companies

Africa

Operating Companies

Asia*

Product Group

B

Operating Companies

Latin America

Product Group

A

Product Group

C

Product Group

B

Product Group

D

*Note: Because of space limitations, product groups for only Europe and Asia are shown here.