Module 9

Implementing Strategy: Core Competencies, Reengineering, and Structure

Module Outline
Strategy Implementation Framework
Key Tasks Leading the Implementation Process

Building a Capable organization

Selecting People for Key Positions Building Core Competencies Matching Organization Structure to Strategy
Why Organization Follows Strategy Strategic Advantages and Disadvantages of Different Organization Structures Perspectives on Organizing the Work Effort

Nature of the Strategy Implementation Task

Action-oriented, operations-driven people and systems management activity involving
Leading Motivating Organization change Engineering business processes Creating strong fits between strategy and how organization does things

Implementing strategy is tougher and more time-consuming challenge than crafting strategy

The Strategy Implementers Task

To convert the strategic plan into action and get on with what needs to be done to achieve the targeted strategic and financial objectives!

Why Implementing Strategy is a Tough Management Job?

Tougher and more time-consuming than strategy-making due to
Variety of managerial activities Many different ways to tackle each activity People management skills required Perseverance and wave-making it takes to launch a variety of initiatives Number of bedeviling issues to be worked through Resistance to change to overcome

Why Implementing Strategy is a Tough Management Job?

Implementing a new strategy takes adept managerial leadership to
Overcome pockets of doubt and disagreement Build consensus of ho to proceed Secure commitment and cooperation of concerned parties Get all implementation pieces in place

Characteristics of Strategy Implementation Process

Every manager has an active role No 10-step checklist and few concrete guidelines
Its the least charted, most open-ended part of strategy management

Best evidence of dos and donts comes from personal experiences, anecdotal reports, and case studies
But wisdom yielded is inconsistent

Characteristics of Strategy Implementation Process

Each implementation situation occurs in a different context, affected by differing
Business practices and competitive situations Work environments and cultures Policies Compensations incentives Mixes of personalities and firm histories

Approach to implementation should be customized People implement strategies No companies!

What is the Goal of Strategy Implementation?

Unite total organization behind strategy See that activities are done in a manner that tightly matches requirements for first-rate strategy execution Generate such a determined commitment at all organizational levels that an enthusiastic crusade emerges to carry out strategy Create a series of strategy-supportive fits

Who are the Strategy Implementers?

Implementing strategy is a job for whole management team Persons most responsible for implementation effort
Chief Executive Officer (CEO) Heads of Major Organizational Units

Implementation involves every organization unit Top management has to orchestrate major implementation initiatives
But they must rely on middle and lower-level managers to get thins done

Strategic Management Principle

Every manager has an active role to play in implementing and executing the firms strategic plan!

8 Managerial Components of Implementing Strategy

Allocating Resources Building a Capable Organization Establishing StrategySupportive Policies

Exercising Strategic Leadership

Corporate Strategy

Instituting Best Practices for Continuous Improvement

Shaping Corporate Culture to Strategy Tying Rewards to the Achievement of Key Strategic

Installing Support Systems for Carrying Out Strategic Roles

Principal Tasks of a Strategy Implementation

Building a capable organization Allocating ample resources to strategycritical activities Establishing strategy supportive policies and procedures Instituting best practices and mechanisms for continuous improvement

Principal Tasks of Strategy Implementation

Installing support systems enabling personnel to carry out their strategic role successfully Tying rewards and incentives tightly to achievement of key objectives Creating a strategy-supportive corporate culture Exerting strategic leadership

Ways to Lead Implementation Process

Take active, visible role or low-key, behind the scenes role Make decisions on basis of consensus or authoritatively Delegate much or little Be personally involved in implementation details or coach others carrying day-to-day burden Proceed swiftly to achieve results or move deliberately, content with gradual progress over a long time frame

Factors Influencing Manager in Leading Implementation Process

His / her experience and accumulated knowledge about business Whether manager is new to job or seasoned Managers network of personal relationships Managers own diagnostic, administrative, interpersonal, and problem-solving skills Authority which manager has been given Leadership style manager is most comfortable with Managers conclusions about role he / she should play in light of what has to be done Context of organizations situation

Building a Capable Organization

Three key tasks: 1. Selecting able people for key positions 2. Developing skills, core competencies, and competitive capabilities 3. Creating strategy-supportive organization structure

Selecting People for Key Positions

Implementation Issues What kind of core management is needed to carry out strategy Finding the right people to fill each slot
Existing management team may be suitable Core executive group may need strengthening Promoting from within Bringing in skilled management talent from outside

Selecting People for Key Positions

Key Considerations Determining mix of backgrounds, experiences, know-how, values, styles of managing, and personalities to
Contribute to successful strategy execution

Putting together strong management team with right personal chemistry and mix of skills
Needs to be acted on early in implementation process

Building a Core Competence

When it is difficult to out-strategize rivals with a superior strategy
Next best avenue to industry leadership is to outexecute them Beat them with superior strategy implementation!

Building core competencies that rivals cant match is one of the best way to out-execute them

Building a Core Competence

Strategically-relevant core competencies
Greater proficiency in product development Better manufacturing know-how Superior cost-cutting skills Better marketing and merchandising skills Capability to provide better after-sale service Ability to respond quickly to changes in customer needs

Examples of Core Competencies

Honda
Expertise in gasoline engine technology and small engine design

Procter & Gamble

Superb marketing-distribution skills and R&D capabilities in five core technologies Fats, oils, skin chemistry, surfactants, emulsifiers

Examples of Core Competencies

Intel
Design of complex chips for personal computers

Sony
Expertise in electronic technology and ability to translate this expertise into developing and manufacturing innovative products Miniaturized radios and video camera and TVs and VCRs with unique features

Creating a Core Competencies

4 Traits Related to Building Core Competencies 1. Rarely consist of narrow skill or work effort of a single department 2. Typically emerge from combined efforts of different work groups and departments 3. Gaining competitive advantage entails concentrating more effort than rivals on creating or strengthening core competencies 4. Bases of competency need to be broad and flexible to react to changes in customer needs

Creating a Core Competence

Creating core competence is an exercise best orchestrated by senior managers who understand how firms core competence is created and have the clout to enforce necessary networking and cooperation among functional departments!

Value and Power of a Core Competence

Helps achieve competitive advantage Helps pave way for above-average performance over the long run Improves chances for long-term success Conscious management attention to the task of building strategically relevant internal skills and strengths into the overall organizational scheme is one of the central tasks of organization-building and effective strategy implementation!

Strategic Role of Training and Retraining

Training takes on strategic importance in efforts to build a skills-based competence Training is a strategy-critical activity in businesses where technical know-how is changing or advancing rapidly Strategy implementers ensure training function is
Adequately funded, and Effective training programs are in place

Matching Organization Structure to Strategy

Principle Design internal organization structure around tasks and activities most critical to success of firms strategy Matching structure to strategy requires making strategy-critical activities and organization units the main building blocks in the organizational structure!

Matching Organization Structure to Strategy

Guidelines 1. Pinpoint primary activities and key tasks critical to successful strategy execution 2. Establish ways to achieve necessary coordination when it doesnt make sense to group all facets of an activity under a single manager 3. Determine degree of authority each unit needs to carry out its assignment affectively 4. Determine whether non-critical activities can be outsourced more efficiently than performed internally

Pinpointing Strategy-Critical Activities

Vary according to
Particular of a firms strategy Value chain make-up Competitive requirements

Identifying a firms strategy-critical activities

1. What functions have to be performed extra well and on time to achieve sustainable competitive advantage? 2. In what value-chain activities would malperformance endanger success?

Grouping Strategy-Critical Activities into Department Units

Guidelines Make strategy-critical activities main building blocks in organizational structure Assign managers of these activities a visible, influential position in organizational pecking order Group related value-chain activities under coordinating authority of single executive

Watch Out for Work Process Fragmentation!

In traditional functionally-organized structures, the pieces of strategicallyrelevant activities often end up scattered across many departments Example: Filling customer orders accurately and promptly

Guard Against Organization Designs That Fragment Activities

May hand-off lengthen completion time Coordination fragmented pieces to avoid increasing overhead costs But come fragmentation may be necessary Keys to good organization design
Maximize how support activities contribute to performance of primary value-chain activities Contain costs of support activities

Understanding Strategic Relationships Among Activities

Strategic relationships among the value-chain activities signal
How to structure reporting relationships Where close cross-functional coordination is needed

Strategic relationships to look for are those that

Link caliber of performance of one work unit to another, and / or Can be melded into a core competence

Organization designs that fragment strategic activities must be avoided

Ways to Coordinate Fragmented Activities

Classical method of coordination activities
Related activities report to same manager

Supplemental option of coordinating activities

Coordinating teams Cross functional task forces Dual reporting relationships Informal organizational networking Incentive compensation tied to group performance Execution-level insistence on teamwork and interdepartmental cooperation

Determining Authority and Independence to Give Each Unit

Centralized organization
Top executives retain authority for most decisions

Decentralized organization
Employees empowered to exercise best judgment

Centralizing strategy-implementing authority at the corporate level has merit when related activities of related businesses need to be tightly coordinated

Determining Authority and Independence to Give Each Unit

Decentralized structure have
Fewer management layers Short response times Greater employee involvement

Trend toward leaner structure stressing employee empowerment based on 2 principles

1. Decision-making authority pushed down to lowest possible level 2. Employees empowered to exercise judgment on job-related matters

Outsourcing of Non-Critical Activities

Outsourcing non-critical strategic activities allows firm to concentrate resources on value-chain activities where it
Can create unique value Can be best in industry or in the world Needs strategic control

Outsourcing value-chain activities makes strategic sense whenever

They can be performed at lower cost and / or with higher value-added by outsiders

Outsourcing of Non-Critical Activities

Outsourcing non-crucial support activities helps
Decrease internal bureaucracies Flatten organization structure Provide heightened strategic focus Decrease competitive response times

Why Structure Follows Strategy?

Changes in strategy may require
New structure for successful implementation

Research results indicate

Organizational structure affects performance Structure merits reassessment whenever strategy changes New strategy likely entails different skills and activities

How work is structured is a means to an end Not an end in itself!

Why Structure Follows Strategy?

Structure is a tool for
Facilitating execution of strategy Helping to achieve performance targets Harnessing individual efforts Coordinating performance of diverse tasks

Strategic Management Principle

Attempting to carry out a new strategy with an old organization structure is usually unwise!

Strategy-Driven Approaches to Organization Structure

Functional specialization Geographic specialization Decentralized business divisions Strategic business units Matrix structures

Functional Organizational Structures (Traditional)

General Manager

Research & Development

Manufacturing

Human Resource

Finance & Accounting

Engineering

Marketing

Functional Organizational Structure (Process-Oriented)

General Manager

Foundry & Casting

Milling & Grinding

Screw Machining

Finishing & Heat Treating

Loading & Shipping

Inspection

Customer Service

Geographic Organizational Structure

CEO
Corporate Staff

GM West

GM South

GM Central

GM North

GM East District Staff

Engineering

Production

Marketing

A Decentralized Line-of-Business Organizational Structure

CEO Corporate Services

GM Business A

GM Business B

GM Business C

Functional Departments

Functional Departments

Functional Departments

An SBU Organizational Structure

CEO Corporate Services

Group VP SBU I

Group VP SBU II

Group VP SBU III

Strategically Related Business Unit

Strategically Related Business Unit

Strategically Related Business Unit

A Matrix Organizational Structure

General Manager

Head R&D Venture Manager I Venture Manager II Venture Manager III Venture Manager IV R&D Specialist R&D Specialist R&D Specialist R&D Specialist

Head Manufacturer Production Specialist Production Specialist Production Specialist Production Specialist

Head Marketing Marketing Specialist Marketing Specialist Marketing Specialist Marketing Specialist

Head Finance Finance Specialist Finance Specialist Finance Specialist Finance Specialist

Supplementing Formal Approaches to Organizing

Special project teams Cross-functional task forces Venture team approach Self-contained work teams Process teams Contact managers

Perspectives on Organizing Work

No such thing as an ideal organization design Each design has strategic advantages and disadvantages Matching structure to strategy involves
Picking a basic design Modifying it as needed Supplementing it with coordinating mechanisms and communication arrangements

Perspectives on Organizing Work

While practical realities often dictate considering
Existing reporting relationships Personalities Internal politics Other situational idiosyncrasies Strategy-structure factors must prevail!

Pros of Traditional Approaches to Organizing

Hierarchical structures make good strategic sense when
Activities can be divided into simple, repeatable tasks and efficiently performed in mass quantity Important benefits to deeper functional expertise exist Customer needs are standardized

Cons of Traditional Approaches to Organizing

Hierarchical structures can be a liability where
Customer preferences shifting from standardize to customized products Product life-cycle growing shorter Flexible manufacturing replacing mass production Customers want to be treated as individuals Pace of technological change accelerating

Major drawbacks
Lack of responsive customer service Slow to adapt to changing conditions

Current Trends in Organizing

Success in fast-changing markets depends on
Quick response to shifting customer preferences Short design-to-market cycles First-time quality Customer order and multi-version production Personalized customer service Accurate order filling and expedited delivery Rapid assimilation of new technologies Creativity and innovativeness Speedy reaction to competitive developments

Current Trends in Organizing

New Components of strategy are driving a revolution in organization-building
Leaner, flatter, decentralized structures Reengineering work processes to decrease fragmentation across functional lines Process teams and cross functional work groups Lean staffing of support functions Partnerships with key suppliers and outsourcing Empowerment Electronic information systems Accountability for results

Reengineering Can Promote Better Implementation

Reengineering strategy-critical processes can
Reduce fragmentation, and Cut bureaucratic overheads

Involves
Compressing formerly separate tasks into jobs performed by a single person Integrating jobs into team activities Reorganizing to link team results

Provides
Important new organization design options

Reengineering Can Promote Better Implementation

Potential outcomes
Dramatic gains in productivity and organizational creativity Flattened organization structure Responsibility and decision-making authority pushed to customer contact areas Strategy-critical processes being Unified Performed quicker and at lower cost and More responsive to customer expectations

How to Reengineering and Restructure?

Develop flow chart of total business process, including interfaces with other value-chain activities Simplify process first Determine parts of process to be automated Evaluate each activity in process to determine if it is strategy-critical or not Weigh pros and cons of outsourcing Design structure for performing remaining activities

End of Module 9