IMPLEMENTING STRATEGY: BUILDING RESOURCE CAPABILITIES AND STRUCTURING THE ORGANIZATION

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CHAPTER 9

• IMPLEMENTING STRATEGY BUILDING RESOURCE
  CAPABILITIES AND STRUCTURING THE ORGANIZATION
  

Screen graphics created by Jana F. Kuzmicki,
PhD, Indiana University Southeast
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Chapter Outline

• Strategy Implementation Framework
• Key Tasks
• Leading the Implementation Process
• Building a Capable Organization
• Selecting People for Key Positions
• Building Core Competencies and Competitive
  Capabilities
• Matching Organization Structure to Strategy
• Why Structure Follows Strategy
• Strategic Advantages and Disadvantages of
  Different Organization Structures
• Organizational Structures of the Future

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The Task of Implementing Strategy

• An action-oriented, operations-driven activity
  revolving around managing people and business
  processes
• Tougher and more time-consuming than crafting
  strategy
• Success depends on doing a good job of
• Leading
• Motivating
• Working with others to create fits between
  strategy and how organization does things

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Why Implementing Strategy Isa Tough
Management Job

• The demanding variety of managerial activities
  that have to be performed
• Numerous ways to tackle each activity
• People management skills required
• Perseverance to launch a variety of initiatives
• Number of bedeviling issues to be worked out
• Battling resistance to change
• Difficulties of integrating efforts of work
  groups into a smoothly-functioning whole

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Why Implementing Strategy Isa Tough
Management Job

• Implementing a new strategy takes adept
  leadership to
• Overcome pockets of doubt
• Build consensus
• Secure commitment of concerned parties
• Get all implementation pieces in place and
  coordinated

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The Eight Components ofImplementing Strategy
Allocating Resources

• supportive fits

Building a Capable Organization
Establishing Strategy- Supportive Policies
Strategy Implementers Action Agenda
Instituting Best Practices for Continuous Improvem
ent
Exercising Strategic Leadership
Installing Support Systems to Carry out Strategic
Roles
Shaping Corporate Culture to Fit Strategy
Tying Rewards to Achievement of Key Strategic
Targets
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Ways to LeadImplementation Process

• Take active, visible role or low-key, behind the
  scenes role
• Make decisions authoritatively
  or based on consensus
• Delegate much or little
• Be personally involved in details or
  coach others to carry day-to-day burden
• Proceed swiftly to achieve results or move
  deliberately, content with gradual progress

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Factors Influencing Managers in Leading
Implementation Process

• Experience and knowledge of business
• New to job or seasoned
• Network of personal relationships
• Diagnostic, administrative, interpersonal,
  and problem-solving skills
• Authority given manager
• Leadership style most comfortable with
• View of role to get things done
• Context of organizations situation

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Task 1 Building aCapable Organization
Select able people
for key positions
Develop skills, core competencies, managerial
talents, competitive capabilities
Organize business processes, value chain
activities, and decision-making to promote
successful strategy execution
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Building Core Competencies The Necessary
Understanding

• 1. Core competencies are rarely grounded in
  skills or know-how of a single department
• Typically emerge from collaborative efforts of
  different work groups
• 2. Leveraging competencies into competitive
  advantage requires concentrating more effort and
  more talent than rivals on strengthening
  competencies and creating valuable organizational
  capabilities
• 4. Sustaining competitive advantage requires
  adapting competencies to new conditions

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Building Competitively Valuable Competencies
and Capabilities

• Involves
• Managing human skills, knowledge bases, and
  intellect
• Coordinating efforts of related work groups
• Collaborative networking among internal groups
  and with external partners
• Achieving dominating depth
• Senior managers have to guide the process
• The Ongoing Challenge Broaden, deepen, or modify
  competencies and capabilities in response to
  customer/market changes

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Building Competencies and Capabilities The
Keys to Success

• Superior selection
• Training
• Cultural influences
• Cooperative networking
• Motivation

• Empowerment
• Attractive incentives
• Organizational flexibility
• Short deadlines
• Good databases

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The Process of BuildingOrganizational
Capabilities Step 1

• Step one is to
• Select people with relevant skills/experience
• Broaden or deepen individual abilities as needed
• Mold the energies and work products of
  individuals into a cooperative group effort
• to create organizational ability

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The Process of BuildingOrganizational
Capabilities Step 2

• As experience builds, such that the organization
  learns to accomplish the activity consistently
  well and at acceptable cost, the ability
  translates into a competence and an
  organizational capability
• Capabilities emerge from establishing and
  nurturing collaborative working relationships
  between individuals and groups in departments and
  between a company and its external allies

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The Process of BuildingOrganizational
Capabilities Step 3

• If mastery is achieved to the point where the
  organization has the capability to perform the
  activity better than rivals, the capability
  becomes adistinctive competence and holds
  potential forcompetitive advantage
• This is the optimal outcomeof the
  capability-building process!!

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Strategy and Organization Structure

• Few hard and fast rules for organizing
• Main rule Structure must support and facilitate
  good strategy execution
• Each firms organization structure is
  idiosyncratic, reflecting
• Prior arrangements, internal politics
• Executive judgments and preferences about how to
  arrange reporting relationships

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Matching Organization Structure to Strategy
The Steps to Take

• 1. Pinpoint critical activities and capabilities
• 2. Decide which activities to outsource
• 3. Decide which activities require partners
• 4. Make primary, internally-performed activities
  the main building blocks
• 5. Determine degree of authority to delegate
• 6. Establish ways to achieve coordination
• 7. Assign responsibility for managing
  relationships with outsiders

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Advantages of Decentralized Decision-Making
and Empowerment

• Fewer management layers
• Less bureaucracy
• Shorter response times
• More creativity and new ideas
• Better motivation of employees
• Greater employee involvement
• Increased organizational capability

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The Global Trend Toward Decentralization and
Empowerment

• Three beliefs are driving company preferences for
  flatter, more decentralized structures
• 1. Traditional hierarchical structures based on
  functional specialization dont work well where
  theres a big need for cross-functional
  competitive capabilities
• 2. Decisions are best made at the lowest
  organizational level capable of making competent,
  timely, informed decisions
• 3. Empowering employees to exercise judgment on
  job-related matters improves motivation and job
  performance

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Uniting Efforts of Interrelated
Organizational Units The Options

• Coordinating teams
• Cross-functional task forces
• Dual reporting relationships
• Informal networking
• Incentive compensation tied to group performance
• Teamwork and interdepartmental cooperation

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Why Structure Follows Strategy

• Changes in strategy typically require a new
  structure for implementation to be successful
• Research indicates
• Structure affects performance
• Structure merits reassessment whenever strategy
  changes
• New strategy involves different skills and key
  activities
• How work is structured is a means to an end --
  not an end in itself!

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Strategy-Driven Approachesto Organization
Structure

• Functional and process specialization
• Geographic organization
• Decentralized business units
• Strategic business units
• Matrix structures

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A Traditional FunctionalOrganizational
Structure
General Manager
Research Development
Manufacturing
Human Resources
Engineering
Marketing
Finance Accounting
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A Process-Oriented Functional Structure
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A GeographicOrganizational Structure
CEO
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A Decentralized Line-of-Business Organization
Structure
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An SBU Organization Structure
CEO
Corporate Services
Group VP SBU I
Group VP SBU II
Group VP SBU III
Strategically Related Business Units
Strategically Related Business Units
Strategically Related Business Units
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A Matrix Organization Structure
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Options for Supplementing the Basic
Organization Structure

• Cross-functional task forces
• Self-contained work teams
• Special project teams
• Venture team approach
• Process teams
• Contact managers
• Relationship managers

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Perspectives on Organizing

• All the basic organization structures have
  strategic advantages and disadvantages
• There is no ideal organization design
• To do a good job of matching structure to
  strategy
• Pick a basic design
• Modify as needed
• Supplement with coordinating mechanisms and
  communication arrangements

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When Do Traditional Hierarchical Structures
Make Strategic Sense?

• When activities can be divided into simple,
  repeatable tasks andefficiently performed in
  mass quantity
• There are important benefits to deep functional
  expertise
• Customer needs are standardized

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Organizational Structures of the Future
Success Depends On . . .

• Quick response to shifting customer preferences
• Short design-to-market cycles
• First-time quality
• Custom order and multi-version production
• Expedited delivery and accurate order filling
• Personalized customer service
• Rapid assimilation of new technologies
• Creativity and innovativeness
• Speedy reaction to competitive developments

The future structure will be . . .
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Organizational Structures of the Future
Meeting the New Requirements

• Decentralized structures with fewer managers
• Small-scale business units
• Reengineering to decrease fragmentation
• Development of stronger and newer capabilities
• Collaborative partnerships with outsiders
• Empowerment and self-directed work teams
• Lean staffing of corporate support functions
• Open communications via e-mail
• Electronic information systems
• Accountability for results

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Characteristics ofOrganizations of the Future

• Fewer boundaries between
• Different vertical ranks
• Functions and disciplines
• Units in different geographic locations
• Firm and its suppliers, distributors, strategic
  allies, and customers
• Capacity for change and learning
• Collaborative efforts among people in different
  functions and geographic locations
• Extensive use of digital technology