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Chapter 11 Employing Strategy Implementation Levers. 2. Demonstrate how to use organizational structure as a strategy implementation levers. 3. Understand the use of systems and processes as strategy implementation levers. 4. Identify the roles of people and rewards as implementation levers. - PowerPoint PPT Presentation
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Chapter 11Employing StrategyImplementation Levers
2
OBJECTIVES
Understand the interdependence between strategy formulation and implementation
1
Demonstrate how to use organizational structure as a strategy implementation levers
2
Understand the use of systems and processes as strategy implementation levers
3
Identify the roles of people and rewards as implementation levers
4
Explain the dual roles that strategic leadership plays in strategy implementation
5
Understand how global and dynamic contexts affect the use of implementation levers
6
3
HUI: SUCCESS AS A JOURNEY
…. “the company of choice in all we do
today and tomorrow”
– Kurt Bell of HUI
4
WL GORE: A STRATEGY OF GROWTH THROUGH INNOVATION
Dental floss
Water filter systems
Guitar strings
Medical products
Gore-Tex
5
FORMULATION AND IMPLEMENTATION
Strategy formulation Strategy implementation
The central, integrated, externallyoriented concept of how we willachieve our objectives
• Arenas• Staging• Vehicles• Differentiators• Economic
logic
Implementation Levers & StrategicLeadership
6
THREE QUESTIONS
When a firm is experiencing difficulties, its good to ask three questions
Is its strategy flawed?
Is the implementation of itsstrategy flawed?
Are both strategy and imple-mentation flawed?
7
HUI: A MODEL COMPANY
StructureStructureA flat structure facilitates the flow of
information and fast decision-making.
SystemsSystemsSystems are in place to support the firm’s
growth strategy through innovation.
PeoplePeopleSelection and retention of people are rigorously
managed.
CultureCulture Selection and retention reinforces a culture
that values innovation.
8
KNOWING – DOING GAP
Percent of large companies who …
… regarded themselves as goodor excellent at generating newknowledge
… reported having launched newproducts based on the applicationof new knowledge
14% (of the same firms)
46%
Source: J. Pfeiffer and R.I. Sutton, The Knowing – Doing Gap (Boston: Harvard Business School Press, 2000)
9
CAUSES OF THE KNOWING – DOING GAP: INTERNAL & EXTERNAL RESISTANCE
External
Internal• Business
units• Culture
When Compaq tried to copy Dell’s direct-sales model, it met stiff resistance from Comp USA, Best Buy, and other retailers
SAP attempted to launch consulting service to supple-ment its core technology offering but failed to align with SAP culture
10
HOW WOULD YOU DO THAT? – SAP AMERICA
Revenue
Employees
Profitability
Customerservice
Reputation
• Cultural focuson costs
• Professionalism
• HR policies
• Account “farming”(not just growth)
• Web-basedsoftware
11
A CEO’S VIEW ON THE ROLE OF CULTURE
Source: Hambrick and Cannella, “Strategy Implementation as Substance and Selling”
“Once IBM was reminded of its core culture, it helped rally the company, bind it together in ways that had been absent for years.”
- Lou Gerstner
12
KEY FACETS OF STRATEGIC IMPLEMENTATION
IntendedStrategy
IntendedStrategy
Deliberate &
EmergentStrategies
Deliberate &
EmergentStrategies
Implementation Levers
Strategic Leadership
Lever and resourceallocation decisions.Communicating thestrategy to stakeholders.
Organization structureSystems and processesPeople and rewards
Realized StrategyRealized Strategy
13
• Links plans to action
• Internal & external
evaluations
ORGANIZATIONAL STRUCTURE ALIGNED TO STRATEGY
• Insures formal control
• Combines people, tasks & technology
Organizational structure
Strategy
14
SIX FORMS OF ORGANIZATIONAL STRUCTURE
Simple
Functional
Multidivisional
Matrix
Network
Virtual
15
FUNCTIONAL STRUCTURE
Corporate Office
FinanceMarketing/
SalesOperations R&D
Organizes activities according to the specific functions that a company performs
Platypus Technologies has 30 employees organized into small departments: finance, marketing, HR, and R&D
Example
16
MULTIDIVISIONAL STRUCTURE
One solution to problems of managing activities in multiple markets or managing multiple products
Headquarters
Business Group A Business Group B Business Group C
Finance
Marketing
Operations
Finance
Marketing
Operations
Finance
Marketing
Operations
ExampleGM is organized according to product division (GM Trucks, Chevrolet, Buick, Cadillac, Pontiac, Saturn, etc. Each maintains its own finance, marketing, and other support functions
17
MATRIX STRUCTURE
Hybrid between functional and multidivisional structure
Source: http://www.cio.com/archive/090103/hs_reload.html
R&D
Operations
Marketing
Finance
Corporate Office
Product or Region A
Product or Region B
Product or Region C
Product or Region D
18
NETWORK STRUCTURE
Small, semi-autonomous, and potentially temporary groups brought together for a specific purpose
Gore’s 6,000 employees spread across the world work in small teams and are encouraged to seek out colleagues on their own
Example
Projectgroup
Projectgroup
Indi-vidual
19
BALANCED SCORECARD IS A MEASUREMENT SYSTEM TO MANAGE STRATEGY IMPLEMENTATION
Source: Kaplan & Norton, 1996
“To succeed financially, how should we appear to our share-holders?”
FinancialObjectives Measures Targets Initiatives
“To achieve our vision, how should we appear to our customers?”
ExternalObjectives Measures Targets Initiatives
“To satisfy our shareholders and custo-mers, at what business pro-cesses must we excel?”
Internal Business ProcessObjectives Measures Targets Initiatives
“To achieve our vision, how will we sustain our ability to change and improve?”
Learning and GrowthObjectives Measures Targets Initiatives
Vision and Strategy
20
STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY
Implementation levers
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HOW WOULD I DO THAT? – BALANCED SCORECARD AT US NAVAL UNDERSEA WARFARE CENTER
Implementation levers
NUWC Vision: Be our nation’s provider of choice for undersea superiority – satisfying today’s needs and meeting tomorrow’s challenges
NUWC Mission: We provide the technical foundation which enables the conceptualization, research, development, fielding, modernization, and maintenance of systems that ensure our navy’s undersea superiority.
NUWC Vision: Be our nation’s provider of choice for undersea superiority – satisfying today’s needs and meeting tomorrow’s challenges
NUWC Mission: We provide the technical foundation which enables the conceptualization, research, development, fielding, modernization, and maintenance of systems that ensure our navy’s undersea superiority.
External: To achieve our vision and mission, how must we look to our customers on the dimensions of purpose, service, and quality?
Internal: To satisfy our customers, at what business processes must we excel in order to decrease lag time, raise productivity, and lower costs?
Employee learning and growth: To accomplish our vision and mission and support internal processes, what kind of staff and information systems do we need to foster innovation, continuous learning, and value in intellectual assets?
Financial: To succeed, how must we look to our constituents in terms of balanced budgets, revenue sources, and value?
22
PEOPLE AND REWARDS
Implementation levers
People
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 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
Rewards
Jim Collins
23
PEOPLE AND REWARDS
Implementation levers
People
Rewards
Reward systems have two components• Performance evaluation and
feedback• Compensation (e.g., salary,
bonuses, stock, promotions, coveted office space)
They can serve as a force of control over outcomes or behaviors
GE which owns several unrelated companies, links division manager pay to the performance of the unit they manage
24
COMMON MANAGEMENT FOLLIES IN REWARD SYSTEMS
We hope for… But we often reward for…
Long term growth Quarterly earnings
Teamwork Individual effort
Setting stretch goals Achieving goals
Downsizing Adding staff
Candor Reporting good news (even if not true)
25
STRATEGIC LEADERSHIP IS RESPONSIBLE FOR 2 KEY OBJECTIVES
Strategic Leadership
• Making substantive implementation lever and resource allocation decisions
• Communicating the strategy to key stakeholders
26
STRATEGIC LEADERSHIP – COMMUNICATING WITH KEY STAKEHOLDERS
Strategic Leadership
Across Outward
Managersmust sufficiently communicate in
4 directions
Upward
Downward
Convince top managementof a new strategy (e.g., Intel’s shift to microprocessors)
Enlist support of those who implement
Win cooperation of external stakeholders including customers and distributors (e.g., Compaq failed to do this with retailers)
Win support of other units within the firm
27
THREE C’S OF STRATEGY COMMUNICATION
ontactsC
ultural understandingC
redibility C
28
STRUCTURAL OPTIONS
Global and Dynamic contexts
Multinationalconfiguration
Des
crip
tio
n
Resembles a decentralized federation much like the relation-ship between US federal government and 50 states
Internationalconfiguration
Coordinated group of federations over which more administrative control is exerted by home country headquarters
Global configuration
Foreign offices are used to access customers, but demand is filled by centralized production
Exa
mp
les
SAP pre 1990 SAP post 1990Japanese companies 1970s & 1980s
Transnational configuration
Structure allows dispersion, specialization, and interdependence – networked control system
McDonald’s
29
FIRM RESPONSES TO DYNAMIC CONTEXTS
Global and Dynamic contexts
Challenges of dynamic, high-velocity contexts
Two common responses
• Ambidextrous organization
• Patching
30
THE AMBIDEXTROUS ORGANIZATION
Global and Dynamic contexts
Corporate Office
Existing Business Emerging Business
Manu-facturing
Sales R&DManu-
facturingSales R&D
Ambidextrous organizations establish units that are structurally independent from all other units. The emerging business units are to develop their own structures, processes, systems, cultures, strategies, etc. They are only integrated into the mother organization at the level of senior management
Existing organization with historic implementation levers
Structural barriers preventing interference and interactions between existing and emerging businesses
New organization develops its own levers consistent with the needs of the radical innovation
31
PATCHING
Global and Dynamic contexts
Example: HP
Patching: regularly remapping businesses in accordance with changing market conditions and restitching them into internal business ventures
Laser printingbusiness
New business unit
New technologies