Chapter 11 Employing Strategy Implementation Levers

1. Chapter 11Employing StrategyImplementation Levers

2. 2 • Demonstrate how to use organizational structure as a strategy implementation lever 3 • Understand the use of systems and processes as strategy implementation levers 4 • Identify the roles of people and rewards as implementation levers 5 • Explain the dual roles that strategic leadership plays in strategy implementation OBJECTIVES 1 • Understand the interdependence between strategy formulation and implementation

3. FORMULATION AND IMPLEMENTATION • Strategy formulation • Strategy implementation • The central, integrated, externallyoriented concept of how we willachieve our objectives • Arenas • Staging • Vehicles • Differentiators • Economiclogic • Implementation Levers & StrategicLeadership

4. 1 • Is its strategy flawed? • When a firm is experiencing difficulties, it’s good to ask three questions • Is the implementation of itsstrategy flawed? 2 • Are both strategy and • implementation flawed? 3 PERFORMANCE PROBLEMS

5. 3 KNOWING – DOING GAP • Percentage of executives at large companies who … • … regarded their companies as • good or excellent at generating • new knowledge • 46% • … reported having launched newproducts based on the applicationof new knowledge • 14% (of the same firms) • Source: J. Pfeffer and R.I. Sutton, The Knowing – Doing Gap (Boston: Harvard Business School Press, 2000)

6. CAUSES OF THE KNOWING – DOING GAP: INTERNAL & EXTERNAL RESISTANCE • When Compaq tried to copy Dell’s direct-sales model, it met stiff resistance from Comp USA, Best Buy, and other retailers • External • Internal • Businessunits • Culture • SAP attempted to launch a consulting service to supplement its core technology offering, but failed to align with SAP culture

7. CEO CHALLENGE – IMPLEMENTATION [T]he strategist will not be able to nail down every action step when the strategy is first crafted, nor should this even be attempted. However, he or she must have the ability to look ahead at the major implementation obstacles and ask, “Is this strategy workable? Can I make it happen?” • Source: Hambrick and Canella (1989), “Strategy Implementation as Substance and Selling”

8. KEY FACETS OF STRATEGY IMPLEMENTATION • Organization structureSystems and processesPeople and rewards IntendedStrategy Realized & EmergentStrategies Implementation Levers Strategic Leadership • Lever and resourceallocation decisionsCommunicating thestrategy to stakeholders

9. ORGANIZATIONAL STRUCTURE ALIGNED TO STRATEGY • Organizational structure • Strategy • Ensures control • Coordinates information,decisions, andactivities

10. 1 • Functional 2 • Multidivisional 3 • Matrix 4 • Network 5 • Partnerships 6 • Franchises FORMS OF ORGANIZATIONAL STRUCTURE

11. FUNCTIONAL STRUCTURE • Corporate Office • Organizes activities according to the specific functions that a company performs • Marketing/Sales • Finance • Operations • R&D • Example • Platypus Technologies has 30 employees organized into small departments: finance, marketing, HR, and R&D

12. MULTIDIVISIONAL STRUCTURE Headquarters Business Group A Business Group B Business Group C • One solution to problems of managing activities in multiple markets or managing multiple products Finance Finance Finance Marketing Marketing Marketing Operations Operations Operations • Example • GM is organized according to product division - GMC Trucks, Chevrolet, Buick, Cadillac, Pontiac, Saturn, etc. Each maintains its own finance, marketing, and other support functions.

13. MATRIX STRUCTURE Corporate Office Product or Region A Product or Region B Product or Region C Product or Region D R&D • Hybrid between functional and multidivisional structures Operations Marketing Finance

14. Indi-vidual • Projectgroup • Projectgroup • Example NETWORK STRUCTURE • Small, semi-autonomous, and potentially temporary groups brought together for a specific purpose • Gore’s 7,400 employees spread across the world work in small teams and are encouraged to seek out colleagues on their own

15. Vision and Strategy BALANCED SCORECARD IS A MEASUREMENT SYSTEM TO MANAGE STRATEGY IMPLEMENTATION • Source: Kaplan & Norton, 1996

16. STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY

17. PEOPLE AND REWARDS • Successful CEOs “attended to people first [and] strategy second. They got the right people on the bus, moved the wrong people off, ushered the right people to the right seats – and then they figured out where to drive it” • JetBlue and Southwest Airlines both expend considerable effort making sure new hires will fit the firm • People Jim Collins • Rewards

18. PEOPLE AND REWARDS • People • Two components of reward systems • Performance evaluation and feedback • Compensation (e.g., salary, bonuses, stock, promotions, coveted office space) • They can be used to exert control over outcomes or behaviors • GE, which owns many unrelated companies, links division managers’ pay to the performance of the units they manage • Rewards

19. Making substantive implementation lever and resource allocation decisions • Communicating the strategy to key stakeholders STRATEGIC LEADERSHIP: KEY OBJECTIVES

20. Upward • Managersmust communicate in 4 directions • Across • Outward • Downward COMMUNICATING WITH KEY STAKEHOLDERS • Convince top managementof a new strategy • Win cooperation of external stakeholders including customers and distributors • Win support of other units within the firm • Enlist support of those who implement

21. C • C • C • ontacts • ultural understanding • redibility THREE C’S OF STRATEGY COMMUNICATION

22. STRUCTURAL OPTIONS IN GLOBAL CONTEXTS Transnational configuration • Global configuration • Multinationalconfiguration • Internationalconfiguration • Coordinated group of federations over which more administrative control is exerted by home country headquarters • Resembles a decentralized federation much like the relation-ship between US federal government and 50 states • Description • Foreign offices are used to access customers, but demand is filled by centralized production Structure allows dispersion, specialization, and interdependence – networked control system • Examples • Japanese companies 1970s & 1980s • SAP pre-1990 • SAP post-1990 McDonald’s

23. Two common responses • Ambidextrous organization • Patching STRUCTURAL OPTIONS IN DYNAMIC CONTEXTS • Challenges of dynamic, high-velocity contexts

24. THE AMBIDEXTROUS ORGANIZATION Structural barriers preventing interference and interactions between existing and emerging businesses Corporate Office Existing Business Emerging Business Manu- facturing Sales R&D Manu- facturing Sales R&D New organization develops its own levers consistent with the needs of the radical innovation Existing organization with historic implementation levers Ambidextrous organizations establish units that are structurally independent from other units. The emerging business units develop their own structures, processes, systems, cultures, strategies, etc. They are integrated into the parent organization only at the level of senior management.

25. Example: HP • Laser printingbusiness • Patching: regularly remapping businesses in accordance with changing market conditions and restitching them into internal business ventures • New technologies • New business unit PATCHING

26. 1 • Understand the interdependence between strategy formulation and implementation 2 • Demonstrate how to use organizational structure as a strategy implementation lever 3 • Understand the use of systems and processes as strategy implementation levers 4 • Identify the roles of people and rewards as implementation levers 5 • Explain the dual roles that strategic leadership plays in strategy implementation 6 • Understand how global and dynamic contexts affect the use of implementation levers SUMMARY