Strategy Implementation Organising

Strategy Implementation Strategy implementation is the sum total of the activities and choices required for the execution of the strategic plan Process by which objectives, strategies and policies are put into action thru the development of programmes, budgets and procedures.

Implementation a key part of strategic management Poor implementation can be blamed for a number of strategic failures 3 questions to consider: Who are the people who carry out the strategic plan? What must be done to align the co.’s operations in the new direction? How is everyone going to work together to do what is needed?

Problems encountered when attempting to implement a strategic change: Implementation took more time than initially planned Unanticipated major problems arose Activities ineffectively coordinated Competing activities and crises took attention away from implementation Involved employees have insufficient capabilities Lower level employees inadequately trained Uncontrollable external environmental factors Departmental managers provided inadequate leadership and direction Key implementation tasks and activities poorly defined Information system inadequately monitored activities

Who Implements Strategy? More people typically involved in the implementation of strategy than in the formulation Heads of functional areas, directors of divisions or strategic business units (SBUs) along with their subordinates Plant managers,project managers, unit heads Operational managers, first line supervisors down to every employee

What Must Be Done? Establishing programmes to create a series of new organisational activities, budgets to allocate funds to the new activities and procedures to handle the day to day details The purpose of a programme is to make the strategy action oriented. A matrix of change helps managers decide how quickly change should proceed, in what order change should take place, whether the proposed systems are stable and coherent.

A matrix of change can address the following questions: Feasibility – Is transition likely to be difficult? Sequence of execution – Where should change begin? Does sequence affect success? Are there reasonable stopping points? Location – Should programme be instituted at new site or should reorganise existing facilities at reasonable cost? Pace and nature of change – Should change be slow/fast, incremental or radical? Stakeholder evaluations – Which new programmes and current activities offer the greatest sources of value?

After programmes have been developed, the budget process begins An ideal strategy might be found to be completely impractical after specific implementation programmes are costed in details After the programme, corporate and divisional budgets are approved, procedures must be developed. Procedures are the primary means by which organisations accomplish much of what they do.

Achieving Synergy Synergy is said to exist if the return on investment (ROI) of each division is greater than what the return would be if each division were an independent business Synergy can take place in 6 forms: Shared know-how : benefit from sharing knowledge or skills Coordinated strategies : aligning business strategies and developing a coordinated response to common competitors (horizontal strategy) Shared tangible resources : e.g manufacturing facility or R&D lab

Achieving Synergy Economies of scale or scope : coordinating activities can reduce inventory, increase capacity utilisation, improve market access Pooled negotiating power : combine purchasing to gain bargaining power over common suppliers to reduce costs and improve quality as well as with distributors New business creation : establishing joint ventures among internal business units

How Is Strategy to Be Implemented? Should activities be grouped differently? Should decision making be centralised? Should corporation have a “tall” structure with a narrow span of control or a “flat” structure with a wide span of control?

Stages of Corporate Development Stage I : Simple Structure Typified by entrepreneur founds a co. to promote an idea Tend to make all important decisions Little formal structure Entrepreneur supervises employees himself Strenghts : Flexibilty and Dynamism Weakness : Crisis of leadership

Stage II : Functional Structure Entrepreneur replaced by a team of managers who have functional specialisations Entrepreneur must learn to delegate Corporate strategy- dominance of the industry often thru vertical and horizontal growth Strengths : Concentration and specialisation in industry Weakness : All eggs in one basket Next step is diversification and Crisis of Autonomy

Stage III : Divisional Structure Typified by corporation managing diverse product lines in numerous industries Decentralise decision making Expand to cover wider geographic areas Divisional structure with central headquarters and decentralised operating divisions or conglomerate Crisis of control can develop

Evolution towards SBUs The units are not tightly controlled but are held responsible for their own performance results Strength : Much more resources Weakness : so large and complex that tends to become relatively inflexible

Stage IV : Beyond SBUs Use of SBUs may result in red tape Crisis New structures emerging under conditions of Increasing environmental uncertainty Greater use of sophisticated technologies Increasing size and scope of worldwide business corporations Emphasis on multi-industry competitive strategy More educated cadre of managers and employees

Organisational Life Cycle The organisational life cycle describes how organisations grow, develop and eventually decline The stages are: Stage I – Birth Stage II – Growth Stage III – Maturity Stage IV – Decline Stage V - Death

Movement from growth to maturity to decline and finally death is not however inevitable A revival phase may occur sometime during the maturity or decline stages The corporation’s life cycle may be extended by managerial and product innovations e.g implementation of a turnaround strategy

Advanced Types of Organisational Structures 2 forms stand out : matrix structure network structure Matrix structure - functional and product forms are combined simultaneously at the same level of the organisation

Matrix Structure Manager Project A Sales Finance Personnel Manager Manufacturing Sales Finance Personnel Manager Project B Manufacturing Sales Finance Personnel

Useful when external environment is complex and changeable Matrix structure developed to combine stability of functional structure with flexibility of product form Useful when external environment is complex and changeable But produces conflicts revolving around duties, authority and resource allocation Matrix structure when 3 conditions exist: ideas need to be cross fertilized resources are scarce abilities to process information and to make decisions need to be improved

Temporary cross functional tasks – initially used when a new product line is being introduced. Project manager in charge Mature matrix – true dual authority structure. Both functional and product structures are permanent e.g Boeing

Network Structure – Virtual Organisation Packagers Suppliers Designers Corporate Headquarters Advertising Agencies Distributors Manufacturers

Network structure is could be termed a “non structure” because of virtual elimination of in house business functions Many activities are outsourced Virtual organisation composed of a series of project groups or collaborations linked by constantly changing non hierarchical cobweb like electronic networks Useful when environment unstable and expected to remain so – strong need for innovation and quick response

Network structure provides organisation with increased flexbility and adaptability to cope with rapid technological change and shifting patterns of trade and competition Allows company to concentrate on its distinctive competencies while gathering efficiencies from other firms in their areas of expertise Criticisms : Instable structure and subject to tensions Prevent internal synergies Overspecialisation

Cellular Organisation: A new type of structure A cellular organisation is composed of cells (self-managing teams, autonomous business units) which can operate alone but which can also interact with other cells to produce a more potent and competent business mechanism Combination of independence and interdependence to generate and share knowledge and expertise for continuous innovation

Trend of using internal joint ventures to temporarily combine specialised expertise and skills within corporation to accomplish task that individual units alone could not accomplish Cellular form adds value by keeping the firm’s knowledge assets more fully in use than any other type of structure Beginning to appear in firms that are focused on rapid product and service innovation –providing unique or state of the art offerings