IMPLEMENTING STRATEGY: BUILDING RESOURCE CAPABILITIES AND STRUCTURING THE ORGANISATION

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• IMPLEMENTING STRATEGY BUILDING RESOURCE
  CAPABILITIES AND STRUCTURING THE ORGANISATION
  

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• Unless you have a trained, literate, motivated
  work force, and give them decision-making
  authority, you dont get satisfied customers.
• Anthony Rucci
• Chief
  Administrative Officer
• Sears Roebuck

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The Task of Implementing Strategy

• An action-oriented, operations-driven activity
  revolving around managing people and business
  processes
• Tougher and more time-consuming than crafting
  strategy
• Success depends on doing a good job of
• Leading
• Motivating
• Working with others to create fits between
  strategy and how organisation does things

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Why Implementing Strategy Isa Tough
Management Job

• The demanding variety of managerial activities
  that have to be performed
• Numerous ways to tackle each activity
• People management skills required
• Perseverance to launch a variety of initiatives
• Number of bedeviling issues to be worked out
• Battling resistance to change
• Difficulties of integrating efforts of work
  groups into a smoothly-functioning whole

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Why Implementing Strategy Isa Tough
Management Job

• Implementing a new strategy takes adept
  leadership to
• Overcome pockets of doubt
• Build consensus
• Secure commitment of concerned parties
• Get all implementation pieces in place and
  coordinated

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Characteristics of the Strategy Implementation
Process

• Every manager has an active role
• No 10-step checklists
• Few concrete guidelines
• Least charted, most open-ended part of strategy
  management
• Cuts across many aspects ofhow to manage

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Characteristics of the Strategy Implementation
Process (cont.)

• Each implementation situation occurs in a
  different context, affected by differing
• Business practices and competitive situations
• Work environments and cultures
• Policies
• Compensation incentives
• Mix of personalities and organisational histories
• Approach to implementation has be customised to
  fit the situation
• People implement strategies - Not companies!

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The Eight Components ofImplementing Strategy
Allocating Resources
Building a Capable Organisation
Establishing Strategy- Supportive Policies
Strategy Implementers Action Agenda
Instituting Best Practices for Continuous Improvem
ent
Exercising Strategic Leadership
Installing Support Systems to Carry out Strategic
Roles
Shaping Corporate Culture to Fit Strategy
Tying Rewards to Achievement of Key Strategic
Targets
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What Is the Goal ofStrategy Implementation?

• Unite total organisation behind strategy
• See that activities are done in a manner tightly
  matching first-rate strategy execution
• Generate commitment so an enthusiastic crusade
  emerges to carry out strategy
• Create a series of strategy-supportive fits

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Who Are theStrategy Implementers?

• Implementation involves the whole management team
  
• Every organisation unit and all employees have a
  role and need to be committed
• CEO, other senior executives and heads of major
  organisational units must lead the process and
  orchestrate major initiatives
• But they must rely on middle and lower-level
  managers to push things on the front line and see
  that strategy is well-executed on a daily basis

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Ways to LeadImplementation Process

• Take active, visible role or low-key, behind the
  scenes role
• Make decisions authoritatively or based on
  consensus
• Delegate much or little
• Be personally involved in details or coach others
  to carry day-to-day burden
• Proceed swiftly to achieve results or move
  deliberately, content with gradual progress

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Factors Influencing Managers in Leading
Implementation Process

• Experience and knowledge of business
• New to job or seasoned
• Network of personal relationships
• Diagnostic, administrative, interpersonal, and
  problem-solving skills
• Authority given manager
• Leadership style most comfortable with
• View of role to get things done
• Context of organisations situation

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Task 1 Building aCapable Organisation
Select able people
for key positions
Develop skills, core competencies, managerial
talents, competitive capabilities
Organise business processes, value chain
activities, and decision-making to promote
successful strategy execution
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Selecting People for Key Positions
Implementation Issues

• Type of core management team needed to carry out
  strategy
• Find the right people to fill each slot
• Existing management team may be suitable
• Core executive group may need strengthening
• Promote from within
• Bring in skilled outsiders

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Selecting People for Key Positions Key
Considerations

• Determine mix of
• Backgrounds
• Experiences and know-how
• Beliefs and values
• 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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Key Organisation-Building Objectives

• Staff organisational units with the specialised
  talents, skills, and technical expertise needed
  to develop and build core competencies
• Build competitively valuable organisational
  capabilities

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Strategic Management Principle

• Building core competencies, resource strengths,
  and organisational capabilities that rivals cant
  match is a sound foundation for sustainable
  competitive advantage !

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Power of Unique Competencies and Capabilities
When it is difficult to outstrategise rivals with
a superior strategy . . .
. . . Best avenue to industry leadership is to
out-compete rivals with superior strategy
execution!
Building competencies and capabilities rivals
cant match is one of the best ways to
out-compete them!
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Strategically-RelevantCore or Distinctive
Competencies

• Greater proficiency in product development
• Better manufacturing know-how
• Capability to provide better after-sale service
• Faster response to changing customer needs
• Superior cost-cutting skills
• Capacity to speed new products to market
• Superior inventory management systems
• Better marketing and merchandising skills
• Specialised depth in unique technologies
• Greater effectiveness in promoting
  union-management cooperation

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Example Intels Core Competence
Design of complex chips for personal computers
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Example Sonys Core Competence

• Expertise in electronic technology and ability to
  translate the expertise into innovative products
  - Miniaturised radios and video cameras TVs and
  VCRs with unique features attractively designed
  PCs

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Building Core Competencies The Necessary
Understanding

• 1. Core competencies are rarely grounded in
  skills or know-how of a single department
• Typically emerge from collaborative efforts of
  different work groups
• 2. Leveraging competencies into competitive
  advantage requires concentrating more effort and
  more talent than rivals on strengthening
  competencies and creating valuable organisational
  capabilities
• 3. Sustaining competitive advantage requires
  adapting competencies to new conditions

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Building Competitively Valuable Competencies
and Capabilities

• Involves
• Managing human skills, knowledge bases, and
  intellect
• Coordinating efforts of related work groups
• Collaborative networking among internal groups
  and with external partners
• Achieving dominating depth
• Senior managers have to guide the process
• The Ongoing Challenge Broaden, deepen, or modify
  competencies and capabilities in response to
  customer/market changes

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Strategic Management Principle

• Building core competencies, resource strengths,
  and organisational capabilities that rivals
  cant match is a sound basis for sustainable
  competitive advantage.

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Building Competencies and Capabilities The
Keys to Success

• Superior selection
• Training
• Cultural influences
• Cooperative networking
• Motivation

• Empowerment
• Attractive incentives
• Organizational flexibility
• Short deadlines
• Good databases

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The Most Valuable Organisational Capabilities

• Contribute heavily to better strategy execution
• Provide a differentiating factorthat customers
  can see and that customers value
• Are hard for rivals to match
• Time consuming to build
• Hard to replicate or imitate
• Difficult to obtain from others

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Strategy and Organisation Structure

• Few hard and fast rules for organising
• Main rule Structure must support and facilitate
  good strategy execution
• Each firms organisation structure is
  idiosyncratic, reflecting
• Prior arrangements, internal politics
• Executive judgments and preferences about how to
  arrange reporting relationships

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Strategic Management Principle
Attempting to carry out a new strategy with an
old organisational structure is usually unwise!
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Matching Organisation Structure to Strategy
The Steps to Take

• 1. Pinpoint critical activities and capabilities
• 2. Decide which activities to outsource
• 3. Decide which activities require partners
• 4. Make primary, internally-performed activities
  the main building blocks
• 5. Determine degree of authority to delegate
• 6. Establish ways to achieve coordination
• 7. Assign responsibility for managing
  relationships with outsiders

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Step 1 Pinpointing Strategy-Critical
Activities

• Which activities are strategy-critical depends
  on
• Particulars of a firms strategy
• Value-chain make-up
• Competitive requirements
• Identify strategy-critical activities
• 1. What functions have to be performed extra well
  and on time to produce strategic success and gain
  competitive advantage?
• 2. In what value-chain activities would poor work
  performance endanger success?

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Step 2 Looking for Outsourcing Opportunities

• Potential advantages of outsourcing
• Decrease internal bureaucracies
• Flatten organisation structure
• Provide firm with heightened strategic focus
• Increase competitive responsiveness
• Makes strategic sense when outsiders can perform
  certain activities
• At a lower cost and/or
• With higher value-added

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Step 3 Deciding Which Activities Require
Partners

• The advantages partnering may offer
• Speed new technology/products to market
• Quicker delivery or lower inventories of parts
• Help provide better/faster technical assistance
  to customers via
• Geographically wider distribution
• Economical custom manufacture
• More extensive after-sale support services
• Partnering makes strategic sense when result is
  to enhance organisational capabilities

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Step 4 Making Strategy-Critical Activities
the Main Building Blocks

• Assign managers of strategy-critical activities a
  visible, influential position
• Avoid fragmenting responsibility for
  strategy-critical activities across many
  departments
• Provide coordinating linkages between related
  work groups
• Meld into a valuable competitive capability

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Strategic Management Principle
Matching structure to strategy requires making
strategy-critical activities and organisational
units the main building blocks in the
organisation structure!
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Guard Against OrganisationDesigns That
Fragment Activities

• Parceling critical work across specialised
  departments contributes to many hand-offs which
• Lengthens completion time
• Increases overhead costs
• Obsession with activity rather than result
• Solution Pull critical processes from
  functional silos and create process-complete
  departments
• However, some fragmentation is often advantageous
  for certain support activities

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Examples of Strategy-Critical Activities That
Are Often Fragmented

• Filling customer orders
• Customer service
• Obtaining feedback from customers
• New product development
• Improving product quality
• Managing relationships with key suppliers
• Building capability to conduct business via the
  Internet

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Step 5 Determining How MuchAuthority to
Delegate to Whom

• Centralised structure
• Top managers retain authority for most decisions
• Decentralided structure
• Managers and employees are empowered to make
  decisions
• Trend
• Shift from authoritarian to decentralised
  structures emphasising empowerment

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Advantages of Decentralised Decision-Making
and Empowerment

• Fewer management layers
• Less bureaucracy
• Shorter response times
• More creativity and new ideas
• Better motivation of employees
• Greater employee involvement
• Increased organisational capability

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The Global Trend Toward Decentralisation
Empowerment

• Three beliefs are driving company preferences for
  flatter, more decentralised structures
• 1. Traditional hierarchical structures based on
  functional specialisation dont work well where
  theres a big need for cross-functional
  competitive capabilities
• 2. Decisions are best made at the lowest
  organisational level capable of making competent,
  timely, informed decisions
• 3. Empowering employees to exercise judgment on
  job-related matters improves motivation and job
  performance

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Step 6 Reporting Relationships and Cross-Unit
Coordination

• Classic method of coordinating activities is to
  have related units report to single manager
• Managers higher up in the pecking order have the
  clout to coordinate and unify the efforts of the
  units under their supervision
• Support activities should be woven into the
  structure in whatever ways that
• Maximize performance of primary activities
• Contain costs of support activities
• Formal reporting relationships often need to be
  supplemented

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Step 7 Assign Responsibility
forCollaboration With Outsiders

• Need multiple ties at multiple levels to ensure
• Communication
• Coordination and control
• Must find ways to produce collaborative efforts
  that enhance capabilities and resource strengths
• While forming alliances and collaborative
  partnerships presents opportunities, nothing
  valuable is realised until the relationship with
  outsiders grows and develops into an engine for
  better organisational performance

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Why Structure Follows Strategy

• Changes in strategy typically require a new
  structure for implementation to be successful
• Research indicates
• Structure affects performance
• Structure merits reassessment whenever strategy
  changes
• New strategy involves different skills and key
  activities
• How work is structured is a means to an end - not
  an end in itself!

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Strategy-Driven Approachesto Organisational
Structure

• Functional and process specialisation
• Geographic organisation
• Decentralised business units
• Strategic business units
• Matrix structures

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A Traditional FunctionalOrganisational
Structure
General Manager
Research Development
Manufacturing
Human Resources
Engineering
Marketing
Finance Accounting
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A Process-Oriented Functional Structure
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GeographicOrganisational Structure
CEO
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A Decentralised Line-of-Business Organisation
Structure
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An SBU Organisation Structure
CEO
Corporate Services
Group VP SBU I
Group VP SBU II
Group VP SBU III
Strategically Related Business Units
Strategically Related Business Units
Strategically Related Business Units
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A Matrix Organisation Structure
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Options for Supplementing the Basic
Organisation Structure

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

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Perspectives on Organising

• All the basic organisation structures have
  strategic advantages and disadvantages
• There is no ideal organisation design
• To do a good job of matching structure to
  strategy
• Pick a basic design
• Modify as needed
• Supplement with coordinating mechanisms and
  communication arrangements

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When Do Traditional Hierarchical Structures
Make Strategic Sense?

• When activities can be divided into simple,
  repeatable tasks and efficiently performed in
  mass quantity
• There are important benefits to deep functional
  expertise
• Customer needs are standardised

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Organisational Structures of the Future
Success Depends On . . .

• Quick response to shifting customer preferences
• Short design-to-market cycles
• First-time quality
• Custom order and multi-version production
• Expedited delivery and accurate order filling
• Personalised customer service
• Rapid assimilation of new technologies
• Creativity and innovativeness
• Speedy reaction to competitive developments

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Organisational Structures of the Future
Meeting the New Requirements

• Decentralised structures with fewer managers
• Small-scale business units
• Reengineering to decrease fragmentation
• Development of stronger and newer capabilities
• Collaborative partnerships with outsiders
• Empowerment and self-directed work teams
• Lean staffing of corporate support functions
• Open communications via e-mail
• Electronic information systems
• Accountability for results

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