Strategy Implementation

Business Strategy 1 Lesson 8, Part 1 Prof. Arul Lawrence

Strategy Implementation

Good strategic planning is not enough Process by which strategies are put into action Process details are unique to each organization and each strategy Sub-strategies, programs, action plans, policies, procedures, resource allocations, budgets, authority/responsibility delegation, teams and task forces, reward and control systems, and individual assignments

Keys to Strategy Implementation

Resources and competencies Functional area sub-strategies Specific decisions and actions

Resources and Competencies

Strategy implementation depends on resources and competencies possessed by the firm These include:

Money in certain amounts Physical space of certain dimensions Particular types of equipment Specified numbers of people with Certain skills, capabilities, and competencies Control and reporting systems Attitude, intuition, and imagination

Resources and Competencies: Systems

Collections of policies, procedures, and protocols, backed by EDP and communications equipment, and people who work with them Purpose is to simplify and regularize the performance of routine, high-volume tasks Producing results that are as uniform and predictable as possible Modern business organizations depend on them

Examples of Organizational Systems

Accounting and budgeting system Management information system Manufacturing control system Compensation and reward system Planning system

Resources and Competencies: Human Resources

People possess competencies and carry out details of strategic plans Personnel costs are high proportion of operating budget in health care organizations Ensure enough people in the right places with the right competencies Balance operational and strategic duties Think of strategic human resource management

Resources and Competencies: Organizational Structure

Taken for granted and assumed immutable Formal framework of departments, units, and groups into which people and the activities they perform are organized Some structures are better suited to certain strategies than other structures A carefully chosen structure can give an organization a sustainable competitive advantage

Organizational Structure
Organizational

design

Selecting the structure and control systems that are most strategically effective for pursuing sustainable competitive advantage.

The

role of structure and control

To coordinate strategy implementation. To motivate and provide incentives for superior performance.

The Role of Organizational Structure

Building

blocks of organizational structure

Differentiation in the allocation of people and resources to create value.

Vertical differentiation in the distribution of decision-making authority. Horizontal differentiation in dividing up people and tasks into functions and divisions.
The means used in coordinating people and functions to accomplish organizational tasks.

Integration

Differentiation, Integration, Bureaucratic Costs

Bureaucratic

costs and strategy implementation:

Bureaucratic costs increase with organizational complexity. More differentiation = more managers. More integration = more coordination. Better strategy implementation = better bottom-line performance and profitability.

Vertical Differentiation
Span

of control (division of authority)

The number of subordinates that a single manager directly manages.

Organizational

hierarchy choices

Flat structures

Few organizational levels Wide spans of control Many organizational levels Narrow spans of control

Tall structures

Tall and Flat Structures

Problems with Tall Structures

Principle

of minimum chain of command

Maintaining a hierarchy with the least number of levels of authority needed to achieve a strategy.

Sources

of bureaucratic costs:

Centralization or Decentralization
Authority

patterns in organizations:

Centralized
Decision making retained in the hands of upper-level managers.

Decentralized
Decisions delegated to lower levels in the organization.

Centralization (Structural) Choice?

Advantages

of decentralization
Reduced information overload on upper managers. Increased motivation and accountability throughout organization. Fewer managers; lower bureaucratic costs.

Advantages

of

centralization

Easier coordination of organizational activities. Decisions fitted to broad organizational objectives. Exercise of strong leadership in crisis. Faster decision making and response.

Horizontal Differentiation
Focus

is on division and grouping of tasks to meet business objectives. Simple structure:

Characteristic of small entrepreneurial companies. Entrepreneur takes on most managerial roles. No formal organization arrangements. Horizontal differentiation is low.

Structure Follows Strategy:

Changes in corporate strategy lead to changes in organizational structure

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Structure Follows Strategy:

New strategy is created New administrative problems emerge Economic performance declines New appropriate structure is invented Profit returns to its previous levels

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Stages of corporate development Simple Structure Functional Structure Divisional Structure Beyond SBUs

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Simple Structure:

Stage I:

Entrepreneur

Decision making tightly controlled Little formal structure Planning short range/reactive Flexible and dynamic

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Functional Structure:

Stage II:

Management team Functional specialization Delegation decision making Concentration/specialization in industry

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Divisional Structure:

Stage III:

Diverse product lines Decentralized decision making SBUs Almost unlimited resources

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Beyond SBUs:

Stage IV:

Increasing environmental uncertainty Technological advances Size & scope of worldwide businesses Multi-industry competitive strategy Better educated personnel

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Functional Structure
Advantages

Disadvantages

Task grouping facilitates specialization and productivity. Better monitoring of work processes, reduced costs. Greater control over organizational activities.

Functional orientation creates communication problems. Performance and profitability measurement problems. Location versus function problems (coordination). Strategic problems due to structural (vertical and horizontal) mismatches.

Functional Structure

Multidivisional Structure
Advantages

Disadvantages

Enhanced corporate control by division Enhanced strategic control of each SBU in portfolio Growth is easier. New units dont have to be integrated across organization Stronger pursuit of internal efficiencies. Performance of individual units is readily measurable.

Establishing the divisionalcorporate authority relationship Distortion of information by divisions Competition for resources by divisions Transfer pricing problems between divisions Short-term research and development focus Bureaucratic costs

Multidivisional Structure

Matrix Structure
Advantages

Flexibility of the structure and membership Minimum of direct hierarchical control Maximizes use of employees skills Motivates employees; frees up top management High bureaucratic costs High costs (time and money) for building relationships Two-boss employees role conflict

Disadvantages

Matrix Structure
Two-boss employee

Network Structure:

non structure elimination of in-house business functions Termed virtual organization

Useful in unstable environments Need for innovation and quick response

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Network Structure

Packagers Designers Corporate Headquarters (Broker) Manufacturers Promotion/ Advertising Agencies Distributors Suppliers

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Effective implementation requires:

Leadership

Leading people to use their abilities and skills most effectively and efficiently to achieve organizational objectives

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Strategy Implementation Actions (I)

Overall strategy broken down into manageable parts Scope of each part defined in detail Goals and deadlines set for accomplishment Appropriate resources allocated

Strategy Implementation Actions (II)

Right numbers and types of people assigned Policies and procedures to guide their actions One person assigned overall responsibility for each part Progress measured and tracked Changes and adjustments when appropriate

Examples of Strategy Implementation Actions (I)

Marketing campaigns new, refocus, expand or contract, discontinue, different media, test pilots Facilities new, expand, repurpose, close Products/services new (create, develop, invent), redesign, add new features, discontinue Product prices raise, lower, bundle or unbundle products

Examples of Strategy Implementation Actions (II)

Operating processes reengineer, tasks (new, reorder, combine, separate, perform differently or less expensively) Departments, offices, teams new, refocus, discontinue, expand, split up Employees new, transfer, retrain or develop, lay off New systems for monitoring and measuring operating performance

Elements in a Strategy Action Plan

Policies Procedures Methods Rules Objectives Time deadlines Personnel assignments

Strategic Objectives and Deadlines

Long and short-term objectives Accompanied by dates for achievement Purposes served:

Guide and motivate employees Basis for measuring progress and evaluating employees, particularly managers Establish priorities for each unit or subunit Basis for allocating resources

Examples of Strategic Objectives

May be applied to market segments, geographic areas, products/services, facilities, operating unit May be stated in terms of sales, profits, market share, patient volume, employees hired/trained, or other metrics showing strategic progress Good objectives are measurable, challenging, achievable, publicized, consistent, time-based

Potential Implementation Problems (I)

Original plan poorly conceived Took more time than planned Unanticipated internal/external problems arose Poor coordination of activities Crises or competing activities diverted attention Assigned employees lacked necessary skills

Potential Implementation Problems (II)

Assigned employees were inadequately trained Insufficient allocation of resources Uncontrollable external environmental factors Inadequate lower-level leadership and direction Poorly defined key tasks and activities Inadequate monitoring of activities and progress