Chapter 11
Employing Strategy
Implementation Levers
OBJECTIVES
1 Understand the interdependence between
strategy formulation and implementation
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
5 Explain the dual roles that strategic leadership
plays in strategy implementation
6 Understand how global and dynamic contexts
affect the use of implementation levers
1
HUI: SUCCESS AS A JOURNEY
…. “the company of choice in all we do
today and tomorrow”
– Kurt Bell of HUI
2
WL GORE: A STRATEGY OF GROWTH THROUGH INNOVATION
Medical products
Guitar strings
Gore-Tex
Dental floss
Water filter systems
3
FORMULATION AND IMPLEMENTATION
Strategy formulation
Strategy implementation
The central, integrated, externally
oriented concept of how we will
achieve our objectives
•
•
•
•
•
Arenas
Staging
Vehicles
Differentiators
Economic
logic
Implementation
Levers & Strategic
Leadership
4
THREE QUESTIONS
Is its strategy flawed?
When a firm is
experiencing
difficulties, its
good to ask
three questions
Is the implementation of its
strategy flawed?
Are both strategy and implementation flawed?
5
HUI: A MODEL COMPANY
Structure
A flat structure facilitates the flow of
information and fast decision-making.
Systems
Systems are in place to support the firm’s
growth strategy through innovation.
People
Selection and retention of people are rigorously
managed.
Culture
Selection and retention reinforces a culture
that values innovation.
6
KNOWING – DOING GAP
Percent of large companies who …
… regarded themselves as good
or excellent at generating new
knowledge
… reported having launched new
products based on the application
of new knowledge
46%
14% (of the same firms)
Source: J. Pfeiffer and R.I. Sutton, The Knowing – Doing Gap (Boston: Harvard Business School Press, 2000)
7
CAUSES OF THE KNOWING – DOING GAP: INTERNAL & EXTERNAL RESISTANCE
When Compaq tried to copy
Dell’s direct-sales model, it met
stiff resistance from Comp USA,
Best Buy, and other retailers
External
SAP attempted to launch
consulting service to supplement its core technology
offering but failed to align
with SAP culture
Internal
• Business
units
• Culture
8
HOW WOULD YOU DO THAT? – SAP AMERICA
• Cultural focus
Profitability
on costs
• Professionalism
Revenue
Customer
service
• HR policies
• Account “farming”
(not just growth)
Employees
Reputation
• Web-based
software
9
A CEO’S VIEW ON THE ROLE OF CULTURE
“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
Source: Hambrick and Cannella, “Strategy Implementation as Substance and Selling”
10
KEY FACETS OF STRATEGIC IMPLEMENTATION
• Organization structure
Systems and processes
People and rewards
Implementation Levers
Realized
&
Emergent
Strategie
s
Intended
Strategy
Strategic Leadership
• Lever and resource
allocation decisions
Communicating the
strategy to stakeholders
11
ORGANIZATIONAL STRUCTURE ALIGNED TO STRATEGY
Organizational
structure
Strategy
• Insures control
• Coordinates
information,
decisions, and
activities
12
HOW STRUCTURE INFLUENCES STRATEGY – AIR LIQUIDE
Structure
Strategy
Air Liquide decides to locate
personnel at client sites
Air Liquide pursues a wealth of
new-business opportunities
Customer-site employees receive
more decision-making autonomy
Higher-margin services improve
firm performance
Customer-site employees see
new services Air Liquide could
offer (e.g., hazardous material
handling, inventory management
13
SIX FORMS OF ORGANIZATIONAL STRUCTURE
Functional
Multidivisional
Matrix
Network
Partnerships
Franchises
14
FUNCTIONAL STRUCTURE
Corporate Office
Organizes
activities
according to the
specific functions
that a company
performs
Finance
Marketing/
Sales
Operations
R&D
Example
Platypus Technologies has 30 employees
organized into small departments: finance,
marketing, HR, and R&D
15
MULTIDIVISIONAL STRUCTURE
Headquarters
Business Group A
Business Group B
Business Group C
Finance
Finance
Finance
Marketing
Marketing
Marketing
Operations
Operations
Operations
One solution
to problems of
managing
activities in
multiple
markets or
managing
multiple
products
Example
GM is organized according to product division
(GM Trucks, Chevrolet, Buick, Cadillac,
Pontiac, Saturn, etc. Each maintains its own
finance, marketing, and other support functions
16
MATRIX STRUCTURE
Corporate Office
Product or
Region A
Product or
Region B
Product or
Region C
Product or
Region D
R&D
Operations
Hybrid between
functional and
multidivisional
structure
Marketing
Finance
Source: http://www.cio.com/archive/090103/hs_reload.html
17
NETWORK STRUCTURE
Individual
Project
group
Project
group
Small, semiautonomous,
and potentially
temporary
groups brought
together for a
specific purpose
Example
Gore’s 6,000 employees spread across the
world work in small teams and are encouraged
to seek out colleagues on their own
18
PARTNERSHIPS AND FRANCHISES
Partnerships
Franchises
The company is organized
as a group of partners
who own shares or units
in the corporation
Company not only transfers ownership of local
facilities to franchisees,
but license all local management responsibility
Example
Most law firms
Example
Burger King
19
BALANCED SCORECARD IS A MEASUREMENT SYSTEM TO MANAGE STRATEGY IMPLEMENTATION
“To succeed Financial
financially, Objectives
how should
we appear
to our
shareholders?”
“To achieve
our vision,
how should
we appear to
our
customers?”
Measures
Targets
Initiatives
“To satisfy our Internal Business Process
shareholders Objectives Measures Targets
and customers, at what
business processes must
we excel?”
External
Objectives
Measures
Targets
Initiatives
Vision and
Strategy
“To achieve
our vision,
how will we
sustain our
ability to
change and
improve?”
Source: Kaplan & Norton, 1996
Learning and Growth
Objectives Measures
Targets
Initiatives
Initiatives
20
STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY
Implementation levers
21
HOW WOULD I DO THAT? – BALANCED SCORECARD AT US NAVAL UNDERSEA WARFARE CENTER
NUWC
NUWC Vision:
Vision: Be our nation’s provider of choice
for
forundersea
undersea superiority
superiority ––satisfying
satisfying today’s
today’s needs
needs
and
andmeeting
meeting tomorrow’s
tomorrow’schallenges
challenges
NUWC
NUWC Mission:
Mission: We provide the technical
foundation
foundationwhich
whichenables
enables the
theconceptualization,
conceptualization,
research,
research, development,
development, fielding,
fielding, modernization,
modernization, and
maintenance
and maintenance
of systems
of systems
that ensure
that ensure
our navy’s
our navy’s
undersea
undersea superiority.
superiority.
Financial: To succeed, how must we
look to our constituents in terms of
balanced budgets, revenue sources,
and value?
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?
Implementation levers
22
PEOPLE AND REWARDS
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”
Jim Collins
JetBlue and Southwest Airlines both
expend considerable effort making
sure new hires will fit the firm
Rewards
Implementation levers
23
PEOPLE AND REWARDS
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
Implementation levers
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 new (even
if not true)
25
STRATEGIC LEADERSHIP IS RESPONSIBLE FOR 2 KEY OBJECTIVES
• Making substantive implementation
lever and resource allocation decisions
• Communicating the strategy to key
stakeholders
Strategic Leadership
26
STRATEGIC LEADERSHIP – COMMUNICATING WITH KEY STAKEHOLDERS
Convince top management
of a new strategy (e.g., Intel’s
shift to microprocessors)
Upward
Win support of other
units within the firm
Across
Managers
must sufficiently
communicate in
4 directions
Outward
Win cooperation of
external stakeholders
including customers
and distributors (e.g.,
Compaq failed to do
this with retailers)
Downward
Enlist support of
those who implement
Strategic Leadership
27
THREE C’S OF STRATEGY COMMUNICATION
C
ontacts
C ultural understanding
C
redibility
28
Examples
Description
STRUCTURAL OPTIONS
Multinational
configuration
Resembles a
decentralized
federation much
like the relationship between US
federal
government and
50 states
SAP pre 1990
International
configuration
Coordinated group
of federations over
which more
administrative
control is exerted
by home country
headquarters
SAP post 1990
Transnational
configuration
Global
configuration
Foreign offices
are used to
access
customers, but
demand is filled
by centralized
production
Structure allows
dispersion,
specialization,
and
interdependence
– networked
control system
Japanese companies
1970s & 1980s
McDonald’s
Global and Dynamic contexts
29
FIRM RESPONSES TO DYNAMIC CONTEXTS
Challenges
of dynamic,
high-veto city
contexts
Two common
responses
• Ambidextrous
organization
• Patching
Global and Dynamic contexts
30
THE AMBIDEXTROUS ORGANIZATION
Corporate Office
Existing Business
Manufacturing
Sales
Existing organization with historic
implementation levers
Structural barriers preventing
interference and interactions
between existing and emerging
businesses
Emerging Business
R&D
Manufacturing
Sales
R&D
New organization develops its own levers
consistent with the needs of the radical
innovation
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
Global and Dynamic contexts
31
PATCHING
Example: HP
Laser printing
business
Patching: regularly
remapping businesses in
accordance with
changing market
conditions and restitching
them into internal
business ventures
New technologies
New business unit
Global and Dynamic contexts
32