1 Strategy Implementation What must we do to put the strategy in place, execute it proficiently, and produce good results? Creating FITS between strategy.

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Strategy Implementation

What must we do to put the strategy in place, execute it proficiently, and produce good results?

Creating FITS between strategy and external environment and creating FITS inside the organization

Control, coordination, and motivation issues

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Figure 10.1: The Eight Componentsof the Strategy Execution Process

The Action Agenda for Executing

Strategy

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Figure 10.2: The Three Components of Building a Capable Organization

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Matching Organization Structure to Strategy

Few hard and fast rules for organizing The One Big Rule: The role and purpose of the

organization structure is to support and facilitate good strategy execution!

Each firm’s structure is idiosyncratic, reflecting Prior arrangements and internal politics Executive judgments and preferences about how to

arrange reporting relationships How best to integrate and coordinate work effort of

different work groups and departments

Vice President Vice President Vice President

CEO

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What is Structure?

How the firm is organized? Includes

Reporting relationshipsHow coordination is achievedAuthorityDegree of centralizationDegree of integrationFormalization

Used to control, coordinate, and motivate employees and the activities they perform

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Figure 10.3: Structuring the Work Effort to Promote Successful Strategy Execution

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Important Implications of Structure

Appropriate structure depends on the firm’s strategy

Changes in strategy typically require a new structure New strategy often involves different skills,

different key activities, different staffing and organizational requirements

Hence, a new strategy signals a need to reassess the organization structure

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Perspectives on Organizing

All basic organization designs have strategy-related strengths and weaknesses

No ideal organization design exists To do a good job of matching structure to

strategy Pick a basic design Modify as needed Supplement with appropriate coordinating,

networking, and communication mechanisms to support effective execution of the strategy

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Structural Arrangements: The Basics

Simple

Functional and process specialization

Geographic organization

Multidivisional

Strategic business units

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A Traditional FunctionalOrganizational Structure

General Manager

Research &Development

ManufacturingHuman

Resources

Engineering MarketingFinance &

Accounting

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A Process-Oriented Functional Structure

General Manager

Foundry &Castings

ScrewMachining

InspectionCustomer

Service

Milling &Grinding

Finishing &Heat Treating

Loading &Shipping

Billing &Accounting

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Functional Structure for Cost Leadership Strategy

General ManagerGeneral Manager

Centralized StaffCentralized Staff

MarketingMarketing PersonnelPersonnel

EngineeringEngineering OperationsOperations AccountingAccounting

• Operations is main functionOperations is main function

• Process engineering is Process engineering is emphasized over R&Demphasized over R&D

• Large centralized staffLarge centralized staff

• Formalized proceduresFormalized procedures

• Structure is mechanical, job Structure is mechanical, job roles highly structuredroles highly structured

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OperationsOperations HumanHumanResourcesResources

Functional Structure for Differentiation Strategy

General Manager andGeneral Manager andLimited StaffLimited Staff

MarketingMarketing

New ProductNew ProductR&DR&D

• Marketing is the main function for tracking new product ideasMarketing is the main function for tracking new product ideas• New product R&D is emphasizedNew product R&D is emphasized• Most functions are decentralizedMost functions are decentralized• Formalization is limited to foster change and promote new ideasFormalization is limited to foster change and promote new ideas• Overall structure is organic; job roles are less structuredOverall structure is organic; job roles are less structured

R&DR&D

FinanceFinanceMarketingMarketing

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A GeographicOrganizational Structure

CEO

CorporateStaff

GMEurope

GMLatin America

GMNorth America

GMAsia Pacific

GMCentral Asia &

Africa

Marketing &Distribution

ProductionEngineering &Prod. Design

DistrictStaff

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A Multidivisional Organizational Structure

CEO

CorporateServices

GMBusiness B

Functional/ProcessDepartments

GMBusiness A

Functional/ProcessDepartments

GMBusiness C

Functional/ProcessDepartments

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An SBU Organization Structure

CEO

CorporateServices

Group VPSBU II

Strategically RelatedBusiness Units

Group VPSBU I

Strategically RelatedBusiness Units

Group VPSBU III

Strategically RelatedBusiness Units

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Options to Supplement theBasic Organization Structure

Coordinating mechanisms

Cross-functional task forces, special project teams, self-contained work teams, etc…

Instituting networking and communications arrangements that support implementation