Chapter 8

Implementing Strategy

Copyright 2012 Pearson Canada Inc.

LEARNING OBJECTIVES

1. Outline the interdependence between strategy formulation and

implementation.
2. Demonstrate how organizational structure serves as a lever when
implementing strategy.
3. Illustrate the use of systems as levers when implementing strategy.
4. Describe why managers need to be prepared to hold their subordinates
accountable.
5. Explain the dual roles that top management plays in strategy
implementation.
6. Explain how implementation produces a strategy that was not as
intended.

Copyright 2012 Pearson Canada Inc.

Strategy Implementation

When a firm is
experiencing
difficulties, its
good to ask
three questions

Is its strategy flawed?

Is the implementation of its
strategy flawed?
Are both the strategy and
implementation flawed?

Copyright 2012 Pearson Canada Inc.

Strategy Implementation
Strategy formulation

Strategy implementation

The central, integrated, externally

oriented concept of how we will
achieve our objectives

Arenas
Staging
Vehicles
Differentiators
Economic
logic

Strategy Implementation,
Levers & Strategic
Leadership

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Managing the Company

1. ORGANIZATIONAL ELEMENTS
Structure
Systems
Measurement Systems
Rewards System
Staffing
Fit of the Organizational Elements
Changing Organization Elements
2. CULTURE
3. PERFORMANCE CRITERIA

Copyright 2012 Pearson Canada Inc.

Managing the Company

ORGANIZATIONAL ELEMENTS

Every strategy has an economic model that explains how it is

going to make money.

Associated with the model are decisions concerning which

activities are in the value chain and how they are performed
so that they produce the desired value curve for customers.

People then have to be organized so that the business

performs the necessary work.

Copyright 2012 Pearson Canada Inc.

Managing the Company

Structure

Most new businesses start small, with an owner/manager and

a few employees.

Once a business grows beyond this basic size, top

management has to address how the work will be organized
and controlled.

Copyright 2012 Pearson Canada Inc.

Managing the Company

Systems

Organizational structure (allocation of decision rights) alone

is not enough.

Systems and their component subsystems or processes

are also needed.

These provide the means to initiate, carry forward, control,

and stop actions within the business.

Within every functional area there are specific systems that

help the functional activities add value.
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Managing the Company

Measurement Systems

Measurement systems enable managers to gather, aggregate,

disseminate, and evaluate information on activities of the
business, departments, and individuals.
Rewards System

The rewards system provides incentives that induce people to

join the organization and to make value-enhancing decisions.

Copyright 2012 Pearson Canada Inc.

Managing the Company

Staffing
Top management has the power to make the ultimate decisions about
structure systems and top managers.

Having set the structure, the right people have to be put into jobs.
The right people are those with the right skills, knowledge, and attitudes.
Staffing is increasingly important in every business because people
are an important but intangible resource.

A business is less likely to be successful today unless it has the right

people filling the jobs in the organizational structure.

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Managing the Company

Fit of the Organizational Elements

While we have described the three elements of organizational architecture
separately, they are highly interdependent in operation.

The way one element is designed has implications for how the others
are designed.

This means that they have to be designed to fit together so that they
reinforce one another.

Creating organizational fit takes years of sustained effort but pays off by
creating competitive advantages that rivals cant copy easily.

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11

Managing the Company

Changing Organization Elements

A particular organizational design is appropriate at a point in time and,
as things change both in the business and around the business,
periodic restructuring makes sense.

But changing structure or any other element requires compensating change

in the other elements because they are interdependent.

For example, a change in organizational structure will require a change

in both measurement and rewards systems, while a change in strategy
will require large-scale changes in organizational elements.

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12

Managing the Company

CULTURE
Characteristics of the formal organization associated with the
culture are:

the extent of individual initiative

the extent of risk tolerance
the clarity of direction
the degree of integration
the extent of management support
the extent of control
the granting of rewards
the tolerance of conflict
communication patterns

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13

Managing the Company

PERFORMANCE CRITERIA
Leadership also sets the goals for the business.
These provide the criteria that measure the aggressiveness and pace at
which the business pursues its vision.

Leadership can set goals that require big changes quickly or small
changes gradually.

Leadership also determines the criteria that must be satisfied to get

resources.

These criteria help ensure that resources are channelled to the activities
that support the strategy.
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14

Managing Change

STEP 1: CREATING A SENSE OF URGENCY

Before change can start, people have to feel change is
necessary. This means the first step is to build a sense of
urgency that change has to start NOW.
STEP 2: BUILDING COALITIONS
The term leadership immediately conjures up the concept of
the heroic leader, someone who gives orders and makes sure
that people obey. But businesses of today have allowed
decision rights to migrate to those of specific knowledge so
that leadership is more collaborative.

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15

Managing Change

STEP 3: DETERMINE DIRECTION

People need a sense of where change will be taking them and
the organization. As described in Chapter 2, management
uses different mechanisms to achieve this.
STEP 4: COMMUNICATE DIRECTION
The direction, once established, only serves the business
when people throughout the business know what it is,
understand it, appreciate it, and are ready to commit to
achieving it. This requires extensive, persuasive
communication.

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Managing Change

STEP 5: EMPOWER EMPLOYEES

For this step the leadership group has to make the changes to
structure, systems, and staffing. These administrative changes
should remove most barriers to change and allow employees
to develop new ideas, approaches, and the required behaviours
that support the new strategy.
STEP 6: GENERATE SMALL WINS
The argument for generating short-term wins comes from
putting together two features of change. First, achieving the full
organizational changes needed to support the strategy takes
a long time. Second, successful change creates excitement,
certainty, and momentum, and it also serves to answer critics.
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Managing Change

STEP 7: CONSOLIDATE GAINS

Continuing short-term wins add up to a long-term win. The
sequencing of the actions that produce short-term wins is
determined by management as it makes staging decisions.
STEP 8: INSTITUTIONALIZE THE NEW DESIGN
Having achieved all the changes necessary to have an
organization that supports the strategy being pursued,
leaders must ensure that the changes are permanent.

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Managing Change Sources of Deviations

Structure, Systems,
Staff, Culture, Criteria

Managing Administration
Intended
Intended
Strategy
Strategy

Realized
Realized
Strategy
Strategy
Managing Change
Urgency, Coalitions,
Direct Formulation, Direct
Communication, Empowerment,
Small Wins, Consolidation,
Institutionalization

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Intended Strategy and Realized Strategy

Neither managing administration nor managing change is a

precise process that produces the intended results.

Intended results cannot be achieved while things happen

that were not intended.

The consequence of challenges in implementation is that

the realized strategy is never quite what was intended.

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