Chapter 11 Employing Strategy Implementation Levers

Chapter 11Employing StrategyImplementation Levers

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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

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HUI: SUCCESS AS A JOURNEY

…. “the company of choice in all we do today and tomorrow”

– Kurt Bell of HUI

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WL GORE: A STRATEGY OF GROWTH THROUGH INNOVATION

Dental floss

Water filter systems

Guitar strings

Medical products

Gore-Tex

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FORMULATION AND IMPLEMENTATION

Strategy formulation Strategy implementationThe central, integrated, externallyoriented concept of how we willachieve our objectives

• Arenas• Staging• Vehicles• Differentiators• Economic

logic

Implementation Levers & StrategicLeadership

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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?

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HUI: A MODEL COMPANY

StructureA flat structure facilitates the flow of

information and fast decision-making.

SystemsSystems are in place to support the firm’s

growth strategy through innovation.

PeopleSelection and retention of people are rigorously

managed.

Culture Selection and retention reinforces a culture

that values innovation.

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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)

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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

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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

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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

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KEY FACETS OF STRATEGIC IMPLEMENTATION

IntendedStrategy

Deliberate &

EmergentStrategies

Implementation Levers

Strategic Leadership

Lever and resourceallocation decisions.Communicating thestrategy to stakeholders.

Organization structureSystems and processesPeople and rewards

Realized Strategy

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• Links plans to action

• Internal & external

evaluations

ORGANIZATIONAL STRUCTURE ALIGNED TO STRATEGY

• Insures formal control

• Combines people, tasks & technology

Organizational structure Strategy

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SIX FORMS OF ORGANIZATIONAL STRUCTURE

Simple

Functional

Multidivisional

Matrix

Network

Virtual

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FUNCTIONAL STRUCTURE

Corporate Office

Finance Marketing/Sales Operations 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

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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

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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

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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

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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

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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?

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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

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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

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COMMON MANAGEMENT FOLLIES IN REWARD SYSTEMS

We hope for… But we often reward for…

Long term growth Quarterly earningsTeamwork Individual effortSetting stretch goals Achieving goalsDownsizing Adding staffCandor Reporting good news (even if not true)

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STRATEGIC LEADERSHIP IS RESPONSIBLE FOR 2 KEY OBJECTIVES

Strategic Leadership

• Making substantive implementation lever and resource allocation decisions

• Communicating the strategy to key stakeholders

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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

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THREE C’S OF STRATEGY COMMUNICATION

ontactsC

ultural understandingC

redibility C

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STRUCTURAL OPTIONS

Global and Dynamic contexts

Multinationalconfiguration

Des

crip

tion

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

Exam

ples

SAP pre 1990 SAP post 1990 Japanese companies 1970s & 1980s

Transnational configuration

Structure allows dispersion, specialization, and interdependence – networked control system

McDonald’s

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FIRM RESPONSES TO DYNAMIC CONTEXTS

Global and Dynamic contexts

Challenges of dynamic, high-velocity contexts

Two common responses

• Ambidextrous organization

• Patching

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THE AMBIDEXTROUS ORGANIZATION

Global and Dynamic contexts

Corporate Office

Existing Business Emerging Business

Manu-facturing

Sales R&DManu-facturing Sales 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

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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