1. MODULE 9 IMPLEMENTING STRATEGY : CORE COMPETENCIES, REENGINEERING, AND STRUCTURE

2. MODULE OUTLINE Strategy Implementation Framework Key Tasks Leading the Implementation Process Building a Capable Organization Selecting People for Key Positions Building Core Competencies Matching Organization Structure to Strategy Why Structure Follows Strategy Strategic Advantages & Disadvantages of Different Organization Structures Perspectives on Organizing the Work Effort

3. NATURE OF THE STRATEGY IMPLEMENTATION TASK Action-oriented, operations-driven people & systems management activity involving Leading Motivating Organization change Engineering business processes Creating strong fits between strategy & how organization does things Implementing strategy is tougher & more time consuming challenge than crafting strategy

4. THE STRATEGY IMPLEMENTER ’ S TASK To convert the strategic plan Into action and get on with What needs to be done to achieve the targeted strategic And financial objectives!

5. WHY IMPLEMENTING STRATEGY IS A TOUCH MANAGEMENT JOB Tougher & more time-consuming than strategy-making due to Variety of managerial activity People management skills required Perseverance & wave-making it takes to launch a variety of initiatives Number of bedeviling issues to be worked through Resistance to change to overcome

6. WHY IMPLEMENTING STRATEGY IS A TOUCH MANAGEMENT JOB Implementing a NEW STRATEGY takes adapt managerial leadership to Overcome pockets of doubt & disagreement Build consensus for how to proceed Secure commitment & cooperation of concerned parties Get all implementation pieces in place

7. CHARACTERISTICS OF STRATEGY IMPLEMENTATION PROCESS Every manager has an active role No 10 – step checklists & few concrete guidelines It ’ s the least charted, most open-ended part of strategy management Best evidence of do ’ s & don ’ t comes from personal experiences, anecdotal reports, & case studies But wisdom yielded is inconsistent

8. CHARACTERISTICS OF STRATEGY IMPLEMENTATION PROCESS Each implementation situation occurs in a different context, affected by differing Business practices & competitive situations Work environments & cultures policies Compensation incentives Mixes of personalities & firm histories Approach to implementation should be customized People implement strategies – Not companies!

9. WHAT IS THE GOAL OF STRATEGY IMPLEMENTATION? Unite total organization behind strategy See that activities are done in a manner that tightly matches requirements for first – rate strategy execution Generate such a determined commitment at all organizational levels that an enthusiastic crusade emerges to carry out strategy Create a series of strategy-supportive “ fits ”

10. WHO ARE THE STRATEGY IMPLEMENTERS?

11. Implementing strategy is a job for whole management team Persons most responsible for implementation effort Chief Executive Officer Heads of major organizational units Implementation involves every organization unit Top management has to orchestrate major implementation initiatives But they must rely on middle & lower-level managers to get things done

12. STRATEGIC MANAGEMENT PRINCIPLE Every manager has an Active role to play in Implementing and executing the firm’s strategic plan!

13. EIGHT MANAGERIAL COMPONENTS OF IMPLEMENTING STRATEGY Corporate Strategy Allocating Resources Building a Capable organization Exercising strategic leadership Shaping Corporate Culture strategy Trying Rewards To the Achievement Of key Strategic Targets Installing Support Systems for Caring Out Strategic Roles Instituting Best Practices for Continuous Improvement Establishing Strategy Supportive Policies

14. PRINCIPAL TASKS OF STRATEGY IMPLEMENTATION Building a capable organization Allocating ample resources to strategy-critical activities Establishing strategy supportive policies & procedures Instituting best practices & mechanisms for continuous improvement

15. PRINCIPAL TASKS OF STRATEGY IMPLEMENTATION Installing support systems enabling personnel to carry out their strategic roles successfully Trying rewards & incentives tightly to achievement of key objectives Creating a strategy- supportive corporate culture Exerting strategic leadership

16. WAYS TO LEAD IMPLEMENTATION PROCESS Take active, visible role OR low-key, behind the scenes role Make decisions on basis of consensus OR authoritatively Delegate much OR little Be personally involved in implementation details OR coach others carrying day-to-day burden proceed swiftly to achieve results OR move deliberately, content with gradual progress over a long time frame

17. FACTORS INFLUENCING MANAGER IN LEADING IMPLEMENTATION PROCESS His/her experience & accumulated knowledge about business Whether manager is new to job or seasoned Manager ’ s network of personal relationships Manager ’ s own diagnostic, administrative, interpersonal, & problem-solving skills Authority which manager is most comfortable with manager ’ s conclusions about role he/she should play in light of what has to be done Context of organization ’ s situation

18. BUILDING A CAPABLE ORGANIZATION Three key tasks : Selecting able people for key positions Developing skills, & competitive capabilities Creating strategy-supportive Organization structure

19. SELECTING PEOPLE FOR KEY POSITIONS Implementation Issues What kind of core management team is needed to carry out Strategy Finding the right people to fill each slot Existing management team may be suitable Core Executive group may need strengthening Promoting from within Bringing in skilled management talent from outside

20. SELECTING PEOPLE FOR KEY POSITIONS Key Considerations Determining mix of backgrounds, experiences, know-how, Values, styles of managing, & personalities to Contribute to successful strategy execution Putting together strong management team with right personal “ chemistry” & mix of skills Needs to be acted on early in implementation process

21. BUILDING A CORE COMPETENCE When it is difficult to out strategize rivals with a superior strategy – Next best avenue to industry leadership is to out execute them — Beat them with superior strategy implementation! Building core competencies that rivals can ’ t match is one of the best ways to out execute them

22. BUILDING A CORE COMPETENCE Strategically-relevant core competencies Greater proficient in product development development Better manufacturing know-how Superior cost-cutting skills Better marketing & merchandising skills Capability to provide better after-sale service Ability to respond quickly to changes in customer needs

23. EXAMPLES OF CORE COMPETENCIES Honda Expertise in gasoline engine technology & small engine design Procter & Gamble Superb marketing-distribution skills and R&D capabilities in Five core technologies—Fats oils, chemistry,surfactants, emulsifiers

24. EXAMPLES OF CORE COMPETENCIES Intel Design of complex chips for personal computers Sony Expertise in electronic technology & ability to translate this Expertise into developing & manufacturing innovative products-- Miniaturized radios & video camera and TVs & VCRs with unique feature

25. CRAFTING A CORE COMPETENCE Rarely consist of narrow skill or work efforts of a Single department! Typically emerge from combined efforts of different work groups & departments Gaining competitive advantage entails concentrating more effort than rivals on creating or strengthening core competencies Bases of competency need to be broad & flexible to react to changes in customers ’ needs

26. CREATING A CORE COMPETENCE Creating core competencies is an exercise best Orchestrated by senior managers who understand how firm ’ s core competence is created and have the clout to enforce necessary networking and cooperation among functional departments!

27. VALUE & POWER OF A CORE COMPETENCE Helps achieve competitive advantage Helps pave way for above – average performance Over the long run improves chances for long- term success Conscious management attention to the task of building strategically relevant internal skills and strengths into the overall Organizational scheme is one of the central tasks of Organization-building and effective strategy implementation!

28. STRATEGIC ROLE OF TRAINING & RETRAINING Training takes on strategic importance in effort to build a skills-based competence I Training is a strategy-critical activity in businesses where technical know-how is changing or advancing rapidly Strategy implementers ensure training function is Adequately funded and Effective training programs are in place

29. MANAGING ORGANIZATION STRUCTURE TO STRATEGY Principle Design internal organization structure around structure around Tasks & activities most critical to success of a firm’s strategy Matching structure to strategy requires making strategy -critical activities and organization units the main building blocks in the organization structure

30. MATCHING ORGANIZATION STRUCTURE TO STRATEGY Guidelines Pinpoint primary activities & key tasks critical to successful strategy execution Establish ways to achieve necessary coordination when it doesn’t Make sense to group all facets of an activity under a single Manager Determine degree of authority each unit needs to carry out its Assignment effectively Determine whether non-critical activities can be outsourced more more efficiently than performed internally.

31. PINPOINTING STRATEGY CRITICAL ACTIVITIES Vary according to Particulars of firm ’ s strategy Value chain make-up Competitive requirements Identifying a firm ’ s strategy-critical activities What functions have to be performed extra well & on time to achieve sustainable competitive advantage? In what value-chain activities would ma l performance endanger success?

32. GROUPING STRATEGY-CRITICAL ACTIVITIES INTO DEPARTMENT UNITS Make strategy-critical activities main building in organizational structure Assign managers of these activities a visible, influential position in organizational pecking order Group related value-chain activities under coordinating authority of single executive Guidelines

33. WATCH OUT FOR WORK PROCESS FRAGMENTATION! Filling customer orders Accurately & promptly In traditional functionally – organized structures,the pieces of Strategically relevancies activities often end up scattered across many departments

34. GUARD AGAINST ORGANIZATION DESIGNS THAT FRAGMENT ACTIVITIES Many hand-offs lengthen completion time Coordinate fragmented pieces to avoid increasing overhead costs BUT some fragmentation may be necessary Keys to good organization design Maximize how support activities contribute to performance of primary value-chain costs of support activities

35. UNDERSTANDING STRATEGIC RELATIONSHIPS AMONG ACTIVITIES Strategic relationships among value-chain activities signal How to structure reporting relationships Where close cross-functional coordination is needed Strategic relationships to look for are those that link caliber of performance of one work unit to another and/or Can be melded into a core competence organization designs that fragment strategic activities must be avoided

36. WAYS TO COORDINATE FRAGMENTED ACTIVITIES Classical method of coordinating activities Related activities report to same manager Supplemental options of coordinating activities Coordinating teams Cross-functional task forces Dual reporting relationships Informal organizational networking Incentive compensation tied to group performance Executive-level insistence on teamwork & interdepartmental cooperation

37. DETERMINING AUTHORITY & INDEPENDENCE TO GIVE EACH UNIT Centralized organization- Top executives retain authority for most decisions Decentralized organization-Employee empowered to exercise best judgment Centralizing strategy-implementing authority at the corporate level has merit When related activities of related businesses need to be tightly Businesses need to be tightly coordinated

38. DETERMINING AUTHORITY & INDEPENDENCE TO GIVE EACH UNIT Decentralized structures have Fewer management layers Short response times Greater employee involvement Trend toward leaner structures stressing employee empowerment based on 2 principles Decision – making authority pushed down to lowest possible level Employees empowered to exercise judgment on job- related matters

39. OUTSOURCING OF NON-CRITICAL ACTIVITIES Outsourcing non-critical STRATEGIC ACTIVITIES allows firm to concentrate resources on value-chain activities where it Can create unique value Can be best in industry or in the world Needs strategic control Outsourcing value-chain activities makes strategic sense whenever They can be performed at lower cost and/or with higher value-added by outsiders

40. OUTSOURCING OF NON-CRITICAL ACTIVITIES Outsourcing non-crucial support activities helps Decrease internal bureaucracies Flatten organization structure Provide heightened strategic focus Decrease competitive response times

41. WHY STRUCTURE FOLLOWS STRATEGY Changes in strategy may require New structure for successful implementation Research results indicate Organizational structure affects performance structure merits reassessment whenever strategy changes New strategy likely entails different kills & key activities How work is structured is a means to an end – Not an end itself!

42. WHY STRUCTURE FOLLOWS STRATEGY Structure is a tool for Facilitating execution of strategy Helping to achieve performance targets “ Harnessing “ Individual efforts Coordinating performance of diverse tasks

43. STRATEGIC MANAGEMENT PRINCIPLE Attempting to carry out a new strategy with an old organization structure is usually unwise!

44. STRATEGIC MANAGEMENT PRINCIPLE Attempting to carry out a new strategy with an old organization structure is usually unwise!

45. STRATEGY-DRIVEN APPROACHES TO ORGANIZATION STRUCTURE Functional specialization Geographic organization Decentralized business divisions Strategic business units Matrix structures

46. FUNCTIONAL ORGANIZATIONAL STRUCTURES ( TRADITIONAL ) General Manager Manufacturing Research & Development Human Resources EngineeringMarketing Finance & Accounting

47. FUNCTIONAL ORGANIZATIONAL STRUCTURES ( Process-Oriented ) General Manager Screw machining Foundry & Casting Inspection Milling & Grinding Finishing & Heat Treating Loading & Shipping Customer Service Billing & Accounting

48. GEOGRAPHIC ORGANIZATIONAL STRUCTURES CEO GM South GM West GM Central Engineering Production GM East Corporate Staff District Staff Marketing

49. A DECENTRALIZED LINE-OF-BUSINESS ORGANIZATIONAL STRUCTURES CEO Group VP SBUI Corporate Services Strategically Related Business Units Strategically Related Business Units Strategically Related Business Units Group VP SBUI Group VP SBUI

50. A MATRIX ORGANIZATION STRUCTURE Head R&D Head Manufacture Head Marketing Head Finance Venture Manager 1 General Manager R&D Specialized Production Specialists Marketing Specialists Finance Specialists Venture Manager 2 Venture Manager 3 Venture Manager 4 R&D Specialized R&D Specialized R&D Specialized Production Specialists Production Specialists Production Specialists Marketing Specialists Marketing Specialists Marketing Specialists Finance Specialists Finance Specialists Finance Specialists

52. SUPPLEMENTING FORMAL APPROACHES TO ORGANIZING Special project teams Cross-functional task forces Venture team approach Self-contained work teams Process teams Contact managers

53. PERSPECTIVES ON ORGANIZING WORK No such thing as an ideal organization design Each design has strategic advantages & disadvantages Matching structure to strategy involves Picking a basic design Modifying it as needed Supplementing it with coordinating mechanisms & communication arrengements

54. PERSPECTIVES ON ORGANIZING WORK While practical realities often dictate considering Existing reporting relationships personalities Internal politics Other situation idiosyncrasies Strategy-structure factors must prevail!

55. “ PROS “ OF TRADITIONAL APPROACHES TO ORGANIZING Hierarchical structures make good strategic sense when Activities can be divided into simple, repeatable tasks & efficiently performed in mass quantity Important benefits to deeper functional expertise exist Customer needs are standardized

56. “ CONS ” OF TRADITIONAL APPROACHES TO ORGANIZING Hierarchical structures can be a liability where Customer preferences shifting from standardized to customized products Product life-cycles growing shorter Flexible manufacturing replacing mass production Customers want to be treated as individuals pace of technological change accelerating Major drawbacks Lack of responsive customer service Slow to adapt to changing conditions

57. CURRENT TRENDS IN ORGANIZING Success in fast-changing markets depends on Quick response to shifting customer preferences First-time quality Custom order & multi-version production Personalized customer service Accurate order filling & expedited delivery Rapid assimilation of new technologies Creativity & innovativeness Speedy reaction to competitive developments

58. CURRENT TRENDS IN ORGANIZING New Components of strategy are driving a revolution organization-building Leaner,flatter,decentralized structures fragmentation across functional lines Process teams & cross functions Partnerships with key suppliers & outsourcing Empowerment Electronic information systems Accountability for results

59. REENGINEERING CAN PROMOTE BETTER IMPLEMENTATION Reengineering strategy-critical processes can Reduce fragmentation and Cut bureaucratic overheads involves Compressing formerly separate tasks into team activities reorganizing to link team results provides Important new organization design options

60. REENGINEERING CAN PROMOTE BETTER IMPLEMENTATION Potential outcomes Dramatic gains in productivity & organizational creativity Flattened organization structure Responsibility & decision – making authority pushed to customer contact areas Strategy-critical processes being unified Performed quickly & at lower cost and More responsive to customer expectations

61. HOW TO REENGINEER & RESTRUCTURE Develop flow chart of total business process, including interfaces with other value-chain activities Simplify process first Determine if it is strategy-critical or not weigh pros & cons of outsourcing Design structure for performing remaining activities