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7-2 Chapter 7 Implementation McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

7-3 Chapter 7: Implementation Key questions answered in this chapter: –What factors are involved in successful strategy implementation? –What are the implementation challenges for online firms? –What human-assets issues must firms be concerned with? –What are the different types of processes that firms must develop? –What are the advantages of the two types of hybrid organizational structures? –What systems might online firms be concerned with? –What kind of culture is best for e-commerce companies? –Why are partnerships so prevalent for online firms?

7-4 Exhibit 7-1: Framework for Implementation Business Model Human Assets Processes Organizational Structure Systems Culture Leadership Partnerships

7-5 Why Does Implementation Matter? Inappropriate strategy can be partially offset by proper implementation, but poor implementation will usually result in a company performing poorly in the marketplace

7-6 Exhibit 7–2: Why Does Implementation Matter? Success All that can be done to assure success has been done. Success All that can be done to assure success has been done. Roulette Good execution will either mitigate poor strategy or hasten failure because strategy is not sound. Trouble Poor execution hampers good strategy. Managers may never become aware of strategic soundness because of execution inadequacies. Failure Bad strategy is difficult to diagnose because it is masked by poor execution. Two things are wrong, making problems more difficult to fix. Failure Bad strategy is difficult to diagnose because it is masked by poor execution. Two things are wrong, making problems more difficult to fix. Poor Good Appropriate Inappropriate Strategy Source: Modified version of materials in Thomas V. Bonoma, The Marketing Edge (New York: The Free Press, 1985).

7-7 Implementation Challenges for Online Firms Six implementation challenges of online firms: 1. Higher visibility to errors –Internet firms are closely monitored by the media, thus mistakes become magnified 2. Lower switching costs –It costs a consumer very little to switch from one site to another (click of the mouse) 3. More dynamic competitive environment –Low barriers to entry result in opportunities for competitors and new entrants, when implementation is poorly executed

7-8 Implementation Challenges for Online Firms (cont’d) 4. More fluid organizational boundaries –Increases contact between partnering organizations, but elevates the complexity of the interactions 5. More dynamic market environment –Companies must implement quickly in order to adjust to the changing marketplace 6. More complex linkages –Increased linkages result in a more bureaucratic process, thus slowing the decision process

7-9 Exhibit 7-3: Challenges of Online Implementation Customer Driven Organization Driven More visibility of errors = Stronger competitive implications of errors Lower switching barriers = Increased importance of good implementation More complex linkages = Increased complexity of implementation More fluid organizational boundaries = Increased complexity of implementation More dynamic competitive environment = Increased complexity of implementation

7-10 Implementation Mistakes Made by Companies Six “silent killers” of implementation –Top-down or laissez-faire senior management style –Unclear strategy and conflicting priorities –Ineffective senior management team –Poor vertical communication –Poor coordination across functions, business, or borders –Inadequate down-the-line leadership skills and development

7-11 Human Assets Recruitment –Refers to the formal task of searching for the right employees Selection –Is the process of making hiring decisions and formal job offers Development –Providing the employee a professional development plan to accentuate individual strengths and improve on weaknesses Retention –Constantly evaluating and “ranking” employees to ensure the company provides the best work environment and best total compensation packages

7-12Processes Patterns of interaction, coordination, communication, and decision-making that employees use to standardize how work is done. These must be configured by online firms during implementation: –Resource-allocation processes –Human resources management processes –Manufacturing and distribution processes –Payment and billing processes –Customer support/handling processes

7-13 Online and Offline Integration Types of Hybrid organizations: 1. Single-Organization: Advantages –Flexibility between channels –Consistent integration of online and offline customer service –Managing a consistent brand –People- employees have option of learning broader set of skills and capabilities –Taxes –Valuation –Systems

7-14 Online and Offline Integration (cont’d) 2. Dual-organization: Advantages –Coordination and cooperation processes –License to cannibalize –People- two separate organizations for recruiting –Allocations –Sales Tax exemption for Online sales

7-15 Exhibit 7-4: Single Organization versus Dual Organization CEO of company Company strategy Human assets Operations IT infrastructure Processes Culture Online and offline partnerships Single Organization Online CEO Online strategy Human assets Operations IT infrastructure Processes Culture Partnerships Offline CEO Offline strategy Human assets Operations IT infrastructure Processes Culture Partnerships Dual Organization Company CEO

7-16 Four Types of Online Supply Chains 1.Business-to-Consumer(B2C) –E-tailer has significant flexibility in its supply chains One advantage is online retailers do not have to have the physical product in stock –Four types of B2C supply-chain models: –A. Stock-it-yourself –B. Outsource warehousing –C. Drop shipping –D. Fulfillment intermediaries

7-17 Online Supply Chains (cont’d) 2. Business-to-Business(B2B) –Estimated to be 3 to 10 times larger than the B2C market –Advantages include: lower input prices, reduced inventory, reduced transaction costs, faster delivery, and better customer service 3. Consumer-to-Business(C2B) –Organize consumers together to create group- buying power in order to reduce costs 4. Consumer-to-Consumer (C2C) –Firm facilitates person-to-person interaction, e.g., Ebay

7-18 Exhibit 7-5: Four Types of Supply Chains Found Online B2C - Business to Consumer Stock it yourself. Outsource warehousing Drop shipping Fulfillment intermediaries Stock it yourself. Outsource warehousing Drop shipping Fulfillment intermediaries B2B - Business to Business Customer centric Vertical hubs Customer centric Vertical hubs C2C - Consumer to Consumer Much like a vertical hub (many websites facilitate customer-to-customer sales) Provides a forum for buyers and sellers to meet and trade directly A global marketplace with a large and interested trading company C2B - Consumer to Business Individual consumers place bids with businesses (such as Priceline) and businesses decide whether to sell

7-19 Exhibit 7-6: Generic Organizational Culture Types LowHigh Specificity External Internal EntrepreneurialAdaptive CommitmentBureaucratic - Proactively identifies issues - Good at planning and setting goals - Responsive to market changes - Outcome oriented - Emphasizes internal cohesion, participation, teamwork, and loyalty - Unbounded by rules and precedents - Willing to take risks - Flexible - Innovative - Emphasizes stability, established routines, and formal authority

7-20Leadership The Roles of Company Leadership –Responsible for building the capacities needed for strategy implementation –Designing structures and systems –Setting roles and responsibilities –Allocating resources –Assigning managers

7-21 Leadership (cont’d) The Role of Top Leadership –Think strategically –Communicate persuasively –Act decisively –Demonstrate ethical behavior and strong character –Build a sense of momentum for their firm

7-22 Leadership (cont’d) Important Abilities for Management Teams of Online Companies –Ability to keep the CEO in check –Ability to communicate the vision of the company –Experience in startups, online businesses, or catalog businesses –Experience in technology roles

7-23 Exhibit 7-7: Partnership Attributes Strategic Functional Weak Outsourcing License Agreements Cross-Promotion Link Exchanges Joint-Product Offerings Research and Development

7-24 Getting Things Done: Integrative Resource System Principle 1: Execution Is Led by Senior Management—Not the Troops Principle 2: Hold People Accountable for Meeting the Numbers Principle 3: It Is Not Just About the Numbers; It Is Also About the Process Principle 4: Continuous Improvement Is Still Relevant and Important Principle 5: The Customer Is the Starting Point Principle 6: Hire and Develop the “Doers”