CHAPTER 10

BUILDING AN ORGANIZATION CAPABLE

OF GOOD STRATEGY EXECUTION

Student Version
Copyright 2012 The McGraw-Hill Companies, Inc.

McGraw-Hill/Irwin

A FRAMEWORK FOR EXECUTING

STRATEGY
Committing to Executing a Strategy:

Entails figuring out the specific techniques,

actions, and behaviors necessary for a
smooth strategy-supportive operation.

Following through to get things done and

deliver results.

Making things happen (leadership) and

making them happen right (management).

102

The Eight Components of Strategy Execution

103

10-3

McKinsey 7-S framework

Figure 13.8

The McKinsey 7 Ss

Source: R. Waterman, T. Peters and J. Phillips, Structure is not organization, Business Horizons, June 1980, pp. 1426: p. 18
104

McKinsey 7S Framework
Identifies the organizational elements that
needs to addressed for strategy execution
Focus on need for alignment between the
organizational elements and strategy
Strategy execution requires a holistic
perspective not a piece- meal approach
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BUILDING AN ORGANIZATION
CAPABLE OF GOOD STRATEGY
EXECUTION: WHERE TO BEGIN
Assemble a strong management team
and a cadre of capable employees.
Renew, upgrade, and revise resources
and capabilities to match chosen strategy.
Create an organizational structure that is
strategy-supportive.
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STAFFING THE ORGANIZATION

Assemble a Strong Management Team:

Planners who ask tough questions and

figure out what needs to be done.

Implementers who can select, manage, and

lead the right people.

Executors who turn decisions into actions

that drive the changes that produce
sustainable competitive advantage.
107

BUILDING AND STRENGTHENING

CORE COMPETENCIES AND
COMPETITIVE CAPABILITIES

Approaches to Build Building

Competencies and Capabilities

Develop
capabilities
internally

Acquire capabilities
through mergers
and acquisitions

Access capabilities
via collaborative
partnerships

108

ORGANIZING THE WORK EFFORT

WITH A SUPPORTIVE
ORGANIZATIONAL STRUCTURE
Ensuring that Structure Follows Strategy By:

Deciding which value chain activities to perform

internally and which to outsource.

Aligning the firms organizational structure with

its strategy.

Determining how much authority to delegate.

Facilitating collaboration with external partners

and strategic allies.
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Aligning the Firms Organizational

Structure with Its Strategy
Organizational Structure

Comprises the formal and informal arrangement

of tasks, responsibilities, lines of authority, and
reporting relationships for the firm.

Structure Is Aligned with Strategy When:

Its design contributes to the creation of value for

customers.
Its parts are aligned with one another and also
matched to the requirements of the strategy.
It lowers operating costs through lower bureaucratic
costs and operational efficiencies.
1010

Matching Type of Organizational Structure

to Strategy Execution Requirements
Simple Structure
(Line-and-Staff)

Functional Structure
(Departmental or Unitary)

Multidivisional Structure
(Divisional or M-form)

Matrix Structure
(Composite or Combination)

Strategy
Execution
Requirements:
Chosen
Strategy
Capabilities
and
Competencies
Centralized
or
Decentralized
Control

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A functional structure

1012

Functional structures
Advantages
Chief executive in
touch with all
operations.
Reduces/simplifies
control mechanisms.
Clear definition of
responsibilities.
Specialists at senior
and middle
management levels.

Disadvantages
Senior managers
overburdened with
routine matters.
Senior managers
neglect strategic
issues.
Difficult to cope with
diversity.
Coordination between
functions is difficult.
Failure to adapt.
1013

The multidivisional structure

The multidivisional structure is built up of
separate divisions on the basis of products,
services or geographical areas.

1014

A multidivisional structure

1015

Multidivisional structures
Advantages
Flexible (add or
divest divisions).
Control by
performance.
Ownership of
strategy.
Specialisation of
competences.
Training in strategic
view.

Disadvantages
Duplication of central
and divisional
functions.
Fragmentation and
non-cooperation.
Danger of loss of
central control.

1016

The matrix structure

The matrix structure combines different
structural dimensions simultaneously, for
example product divisions and geographical
territories or product divisions and functional
specialisms.

1017

Matrix structures (1)

Figure 13.4

Two examples of matrix structures

1018

Matrix structures
Advantages
Integrated knowledge.
Flexible.
Allows for dual
dimensions.

Disadvantages
Length of time to take
decisions.
Unclear job and task
responsibilities.
Unclear cost and profit
responsibilities.
High degrees of
conflict.

1019

Determining How Much Authority to Delegate

Centralized
Decision
Making

Authority is retained
by top management

Organizational
Approach to
DecisionMaking

Decentralized
Decision
Making

Authority delegated to
lower-level managers
and employees

1020

Capturing Cross-Business Strategic Fit

in a Decentralized Structure

Capturing
Cross-Business
Strategic Fit

Enforcing close crossbusiness collaboration to

avoid duplication of effort

Centralizing related functions

requiring close coordination
at the corporate level

1021

Facilitating Collaboration with External

Partners and Strategic Allies
Creating a
Network
Structure:
Using
relationship
managers
to build and
maintain
cooperative
arrangements
of value both
parties

Strategic alliances

Outsourcing arrangements

Joint ventures

Cooperative partnerships

1022