Student Version
Crafting versus Implementing Strategy
• Crafting Strategy
• Implementing Strategy
 Market-and resource-
 Execution of operations-
driven activities
 Success depends on
driven activities
 Successful depends on
management’s ability to
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Attracting and pleasing
customers
Outcompeting rivals
The firm’s collection of
resources and
capabilities
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Direct change
Allocate resources
Build capabilities
Build strategy-supportive
policies and culture
Deliver good results
10-2
Who Is Responsible for Implementation
of the Chosen Strategy?
• The organization’s chief executive officer and other
senior managers are ultimately responsible for
ensuring that the strategy is executed successfully.
• It is middle and lower-level managers who must see
to it that frontline employees and work groups
competently perform strategy-critical activities that
allow companywide performance targets to be met.
• Requires all managers thinking about:
 “What does my area have to do to implement its part of the
strategic plan, and what should I do to get these things
accomplished effectively and efficiently?”
10-3
Building an Organization with the
Capabilities, People, and Structure
Needed for Good Strategy Execution
Organization
building actions
Staffing the
organization’s
workforce
Acquiring, developing,
and strengthening
strategy-supportive
resources and
capabilities
Structuring the
organization and
work effort
10-4
Staffing the Organization—
Building Managerial Talent
• Assembling a capable management team is a
cornerstone organization-building task:
 Put people with strong strategy implementation skills
and a results orientation in key managerial posts.
 Replace weak executives, strengthening the skills
of those who remain, and bringing in fresh outsiders.
10-5
Recruiting and Retaining
a Capable Workforce
• The quality of a firm’s people is an essential
ingredient of successful strategy execution.
 Staffing the right people at all levels is required to
ensure competent performance of value chain
activities.
 Find, develop, and then retain engaged employees
with excellent compensation packages, opportunities
for rapid advancement and professional growth, and
challenging and interesting assignments.
10-6
Acquiring, Developing, and Strengthening
Key Resources and Capabilities
• Good strategy execution requires:
 Putting key resources and capabilities into place.
 Refreshing and strengthening them as needed.
 Modifying them as market conditions evolve.
• Organization building requires deciding
when and how to recalibrate competencies
and capabilities.
10-7
Three Approaches to Building and
Strengthening Capabilities
Developing dynamic
capabilities to manage
organizational change
Become proficient
in developing
capabilities
internally
Acquire
capabilities
through mergers
and acquisitions
Accessing
capabilities via
collaborative
partnerships
10-8
Accessing Capabilities Through
Collaborative Partnerships
Outsource the function or activity
requiring new capabilities to an outside
provider to conserve resources
Acquiring
capabilities from
an external
source via
collaborative
partnerships
Collaborate with a firm that has
complementary resources and
capabilities in a partnership to
achieve a shared strategic objective.
Engage in a collaborative partnership
to learn how the partner performs
activities, internalizing its methods,
and thereby acquiring its capabilities.
10-9
Matching Organizational Structure
to the Strategy
• Key value chain activities that deliver value
to the customer are critical to its proficient
strategic performance.
• Structure follows strategy—a changed
strategy requires a new or different structure
and new or different key activities and
capabilities.
 Attempting a new strategy with an outdated
organizational structure is unwise.
10-10
Types of Organizational Structures
• Functional (or Departmental) Structure
 Organizes strategy critical activities into functional,
product, geographic, process, or customer groups
• Multidivisional (or Divisional) Structure
 Organizes value chain activities involved in making a
product or service available to consumers into a
common (self-contained) division
• Matrix Structure
 Allows for dual reporting relationships between
divisional heads and departmental heads
10-11
Organizational Structure and
Authority in Decision Making
• In a centralized structure:
 Top managers retain authority for most decisions.
• In a decentralized structure:
 Decision-making authority is pushed down to the
lowest organizational level capable of making timely,
informed, competent decisions.
• The trend in most companies
 A shift from authoritarian to decentralized structures
stressing empowerment
10-12
Characteristics of
Centralized Decision Making
• Retention of authority by top executives
 Command and control paradigm reins in lower-level managers
• Minimal discretionary authority
 Frontline supervisors and rank-and-file employees must seek
prior approval by their superiors for their actions
• Key advantage
 Easy to know who is accountable when things do not go well
• Disadvantages
 Bureaucracy creates sluggish response to changing conditions
 Large firms with widely scattered operations require that decision
making authority be granted to on-site managers
10-13
Facilitating Collaboration with External
Partners and Strategic Allies
• Actively manage collaborative relationships:
 Appoint “relationship managers” with responsibility for
fostering strategic partnership success through:
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Getting the right people together
Promoting good rapport
Facilitating the flow of information
Nurturing interpersonal communication and cooperation
Ensuring effective coordination.
 Adopt a network structure that links independent
organizations involved in cooperative arrangements
to achieve some common undertaking.
10-14
Allocating Resources to
Strategy-Critical Activities
• Reasons for the allocation process include:
 To determine what funding is needed to execute new strategic
initiatives
 To bolster value-creating processes
 To strengthen the firm’s capabilities and competencies
• Allocating resources to support strategy execution
involves:
 Funding promising proposals; turning down those that do not
 Providing the proper amount of funding to support new strategic
initiatives
 Reallocation of resources to support new strategies
10-15
Instituting Strategy Supportive
Policies and Procedures
• Strategy execution is facilitated by policies
and procedures that:
 Help enforce the needed consistency in how
particular strategy critical activities are performed.
 Provide top-down guidance regarding how certain
things need to be done.
 Promote a work climate that facilitates good strategy
execution.
10-16
Striving for Continuous Improvement
in Processes and Activities
Key tools for continuous
improvement
Business
process
reengineering
Total quality
management
(TQM) programs
Six Sigma
quality control
techniques
10-17
The Difference between
Business Process Reengineering and
Continuous Improvement Programs
• Business process reengineering aims at
quantum gains of 30 to 50%
• Continuous improvement programs stress
incremental progress—the never-ending
pursuit of inch-by-inch quality gains.
Business Process Reengineering
TQM
10-18
Installing Information and
Operating Systems
• Execution of strategies and value-creating
internal processes depend on a number of
internal operating systems.
• Information systems are needed to track and
report data on:
 Customers
 Operations
 Employees
 Suppliers
 Finances
10-19
Using Rewards and Incentives to
Promote Better Strategy Execution
• Rewards should motivate employees to
focus on what results must be achieved and
not on simply performing their jobs.
• Reward systems should include both
monetary and non-monetary incentives.
10-20
Guidelines for Designing
Monetary Incentive Plans
Tie incentives to strategy
execution and financial
performance
Make performance payoff
a major piece of the total
compensation package
Have incentives that
extend to all managers
and all workers
Administer the reward
system with scrupulous
objectivity and fairness
Compensation
Incentives
Set performance targets
that individuals or teams
can personally affect
Keep time between
achievement and reward
as short as possible
10-21
Instilling a Corporate Culture that
Promotes Good Strategy Execution
• A corporate culture :
 Is the firm’s organizational DNA—its approach to
people management
 Is comprised of shared core values, beliefs, and
business principles that are engrained in employee
behaviors and attitudes
 defines its operating style—the chemistry of the firm’s
work environment (“how we do things around here”)
10-22
High-Performance Cultures
• Standout cultural traits include:
 A “can-do” spirit
 Pride in doing things right
 No-excuses accountability
 A results-oriented work climate in which people go
the extra mile to achieve performance targets.
10-23
Characteristics of
High-Performance Cultures
• A strong sense of involvement by all
employees
• An emphasis on individual initiative and
creativity
• Clear statement of performance expectations
• Prompt addressing of critical issues
• Constructive pressure to achieve good results
10-24
Adaptive Cultures
• Adaptive cultures are well-suited to fastchanging industries
• Characteristics of adaptive cultures include:
 Willingness to accept change and embrace challenge
of introducing and executing new strategies.
 Internal entrepreneurship on the part of individuals
and groups is encouraged and rewarded.
 Adopting a proactive approach to identifying issues,
evaluating the implications and options, and quickly
moving ahead with workable solutions
10-25
Unhealthy Corporate Cultures
• Highly politicized internal environment
 Issues are resolved on the basis of political clout
• Hostility to change
 Avoid risks; experimentation and efforts to alter status quo are
discouraged
• Insular, inwardly-focused “Not-invented-here” mindset
 Personnel discount the need to look outside for best practices
• Disregard for high ethical standards
• Presence of incompatible, clashing subcultures
10-26
Making a Compelling Case
for a Culture Change
Cite reasons the current strategy has
to be modified and why new strategic
initiatives are being undertaken.
Why the
need for
change?
Cite why and how current behavioral
norms and work practices are
obstacles to new strategic initiatives
Explain how new behaviors and work
practices will produce better results.
10-27
Symbolic Culture Changing Actions
• Lead by executive example–executives must
be alert to the fact that company personnel
will be watching their actions and decisions
to see if they are walking the talk.
• Executives promote the strategy–culture fit
by appearing at ceremonial functions to
celebrate the culture and praise individuals
and groups that get with the program.
10-28
Leading the Strategy Execution Process
• Managers at all levels of the firm must:
1. Stay on top of what is happening and closely
monitoring progress by engaging in managing by
walking around (MBWA)
2. Put constructive pressure on the organization to
achieve good results and operating excellence.
3. Not delay in initiating corrective actions to improve
strategy execution and achieve the targeted
performance results.
10-29
Putting Constructive Pressure on
Organizational Units to Achieve
Good Results and Operating Excellence
Focus attention on
continuous improvement
Treat employees with
dignity and respect
Encourage employee
initiative and creativity
Set stretch objectives
and clearly communicate
expectations
Fostering
a resultsoriented, highperformance
culture
Use motivation and
compensation to reward
high performance
Celebrate individual,
group, and company
successes
10-30
Pushing Corrective Actions to Improve
Both the Company’s Strategy and
Its Execution
Deciding when
adjustments are
needed
Making
corrective
adjustments
Deciding what
adjustments to
make
10-31