1. IMPLEMENTING STRATEGY: BUILDING RESOURCE CAPABILITIES AND STRUCTURING THE ORGANISATION

2. Chief Administrative Officer
“Unless you have a trained, literate, motivated work force, and give them decision-making authority, you don’t get satisfied customers.”
Anthony Rucci
Chief Administrative Officer
Sears Roebuck

3. 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

4. Why Implementing Strategy Is a 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

5. Why Implementing Strategy Is a 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

6. 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 of “how to manage”

7. 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!

8. The Eight Components of Implementing Strategy
Allocating Resources
Building a
Capable
Organisation
Establishing Strategy-
Supportive Policies
Strategy Implementer’s Action Agenda
Instituting Best
Practices for
Continuous
Improvement
Exercising Strategic
Leadership
Shaping Corporate
Culture to Fit Strategy
Installing Support
Systems to Carry
out Strategic Roles
Tying Rewards
to Achievement
of Key Strategic Targets

9. What Is the Goal of Strategy 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”

10. Who Are the Strategy 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

11. Ways to Lead Implementation 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

12. 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 organisation’s situation

13. Task # 1: Building a Capable 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

14. 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

15. 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

16. 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

17. Strategic Management Principle
Building core competencies, resource strengths, and organisational capabilities that rivals can’t match is a sound foundation for sustainable competitive advantage !

18. 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 can’t match is one of the best ways to out-compete them!

19. Strategically-Relevant Core 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

20. Example: Intel’s Core Competence
Design of complex chips for personal computers

21. Example: Sony’s 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

22. 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

23. 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

24. Strategic Management Principle
Building core competencies, resource strengths, and organisational capabilities that rivals can’t match is a sound basis for sustainable competitive advantage.

25. 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

26. The Most Valuable Organisational Capabilities
Contribute heavily to better strategy execution
Provide a differentiating factor that 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

27. Strategy and Organisation Structure
Few hard and fast rules for organising
Main rule: Structure must support and facilitate good strategy execution
Each firm’s organisation structure is idiosyncratic, reflecting
Prior arrangements, internal politics
Executive judgments and preferences about how to arrange reporting relationships

28. Strategic Management Principle
Attempting to carry out a new strategy with an old organisational structure is usually unwise!

29. 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

30. Step 1: Pinpointing Strategy- Critical Activities
Which activities are strategy-critical depends on
Particulars of a firm’s 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?

31. 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

32. 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

33. 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
Assign
managers
key roles
Primary activities
Strategic
relation-
ships
Coordi-
nation
Valuable
capability
Support
functions

34. Strategic Management Principle
Matching structure to strategy requires making strategy-critical activities and organisational units the main building blocks in the organisation structure!

35. Guard Against Organisation Designs 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

36. 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

37. Step 5: Determining How Much Authority 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

38. 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

39. 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 don’t work well where there’s 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

40. 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

41. Step 7: Assign Responsibility for Collaboration 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

42. 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!

43. Strategy-Driven Approaches to Organisational Structure
Functional and process specialisation
Geographic organisation
Decentralised business units
Strategic business units
Matrix structures

44. A Traditional Functional Organisational Structure
General Manager
Research &
Development
Manufacturing
Human
Resources
Engineering
Marketing
Finance &
Accounting

45. A Process-Oriented Functional Structure
General Manager
Foundry &
Castings
Screw
Machining
Inspection
Customer
Service
Milling &
Grinding
Finishing &
Heat Treating
Loading &
Shipping
Billing &
Accounting

46. Geographic Organisational Structure
CEO
Corporate
Staff GM
Europe
Latin America
North America
Asia Pacific
Central Asia &
Africa
Marketing &
Distribution
Production
Engineering &
Prod. Design
District

47. A Decentralised Line-of-Business Organisation Structure
CEO
Corporate
Services GM
Business B
Functional/Process
Departments
Business A
Business C

48. 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

49. A Matrix Organisation Structure
Head
Manufacture
R&D
Venture
Manager 1
Marketing
Finance
Manager 2
Manager 3
Manager 4
Specialists
Production
General Manager

50. 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

51. 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

52. 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

53. 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

54. 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
Electronic information systems
Accountability for results