Strategy Implementation

Prof. Rushen Chahal

Strategy Implementation - is the sum total of activities and choices required for the execution of a strategic plan.

Strategy Implementation
Most companies have strategies, but according to recent studies, between 70% and 90% of organizations that have formulated strategies fail to execute them. A Fortune Magazine study has shown that 7 out of 10 CEOs who fail, do so not because of bad strategy, but because of bad execution. In another study of Times 1000 companies, 80% of directors said they had the right strategies but only 14% thought they were implementing them well.

Strategy Implementation
10 problems to implement a strategic change: 1. Implementation took more time than originally planned. 2. Unanticipated major problems arose 3. Activities were ineffectively coordinated 4. Competing activities and crises took attention away from implementation 5. The involved employees had insufficient capabilities to perform their job

Strategy Implementation
10 problems to implement a strategic change: 6. Lower-level employees were inadequately trained 7. Uncontrollable external environmental factors created problems 8. Departmental managers provided inadequate leadership and direction 9.Key implementation tasks and activities were poorly defined 10. The information system inadequately monitored activities

7 Ways to Fail Big (by Carroll and Mui, HBR)

Siren How It Can Fail Example

The Synergy Mirage: Seeking synergies by merging with firms with complementary strengths Faulty Financial Engineering: Using overly aggressive financial practices to drive growth

Culture and systems clashes may prevent capture of synergies.

Insurers Unum and Provident (operating in the group and individual markets, respectively) merged. But the two sales forces had different skills and no desire to collaborate on cross-selling. Costs and complications raised prices. Unum undid the merger; its stock price plummeted. Green Tree Financial made a fortune offering 30-year mortgages on trailer homes. But trailers depreciate rapidly, leaving owners owing more than the trailers are worth. Defaults ultimately bankrupted the company.

Flawed offerings that prove excessively risky long-term can result.

7 Ways to Fail Big (by Carroll and Mui, HBR)

Siren Staying the Course: Sticking to your current strategy despite market changes Pseudo Adjacencies: Selling new products to existing customers, or existing products to new customers or through new channels How It Can Fail Example Executives may underestimate the significance of market changes. Companies may overestimate the transferability of their core capabilities. Eastman Kodak stuck to print photo processing in the face of a blatant danger (digital photography) because traditional processing s margins were high. The firm s delayed move into digital cost it 75% of its stock market value. School-bus operator Laidlaw bought into the ambulance business, figuring its logistics expertise would transfer. But ambulances are part of the complex, highly regulated medical business. Laidlaw struggled with negotiating contracts and collecting payments. It sold off the ambulance units at a considerable loss.

7 Ways to Fail Big (by Carroll and Mui, HBR)

Siren Wrong Technology Bets: Overrelying on technology to create the next breakthrough offering Consolidation Rush: Consolidating to reduce capacity and overhead as your industry matures How It Can Fail Technologydependent strategies may be ill-conceived from the start. Example Motorola was so enamored of its Iridium satellite- telephone technology that it failed to do objective market research. Customers rejected the system s bulky $3,000 phones and high monthly charges; the venture folded after only a year. Ames Department Stores acquired discount chain G.C. Murphy, which had no inventory-checking system. Disgruntled Murphy employees reputedly stole goods off delivery trucks, then logged complete shipments into stores. Ames lost $20 million in merchandise.

Executives may buy problems along with assets

7 Ways to Fail Big (by Carroll and Mui, HBR)

Siren How It Can Fail Example

Roll-up: Combining huge numbers of small businesses into a large one to increase purchasing or brand power

Expected gains Loewen Funeral Homes bought may never hundreds of independent funeral materialize. homes, anticipating a death- rate increase with baby-boomer aging. But the increase never happened. The cost of acquiring and integrating the homes far outweighed the slight scale gains. Loewen filed for bankruptcy.

Nature of Strategy Implementation

Formulation vs. Implementation Formulation focuses on effectiveness

Implementation focuses on efficiency

The Eight Components of Implementing and Executing Strategy (by Thompson)

Building a Capable Organization Exercising Strategic Leadership Allocating Resources Establishing StrategySupportive Policies

Strategy Implementers Action Agenda

Instituting Best Practices for Continuous Improvement

Shaping Corporate Culture to Fit Strategy

Tying Rewards to Achievement of Key Strategic Targets

Installing Support Systems

Nature of Strategy Implementation

Key questions:
Who are the people who will carry out the strategic plan? What must be done to align the companys operations in the new intended direction? How is everyone going to work together to do what is needed?

Who Implements Strategy

Shift in responsibility

Strategists

Division or Functional Managers

Who Implements Strategy



Vice-presidents of functional areas and directors of divisions work with their subordinates to put largescale implementation plan. Plant managers, project managers, and unit heads put together plans for their specific plants, departments, and units. Therefore, every operational manager down to firstline supervisor and every employee is involved in some way in implementing corporate, business and functional strategies.

What must be done

Programs: to make the strategy action-oriented.
PepsiCo made a strategic decision to grow in areas where the company could dominate. They developed program Power of One, the purpose to move Pepsi soft drinks next to Frito-Lay chips so that shoppers would be tempted to pick up both when they chose one. The results: Frito-Lay increased its market share from 54% to 56% and Pepsi-Colas volumes rose 0.6%.

What must be done

Budgets Planning a budget is the last real check a corporation has on the feasibility of its selected strategy. An ideal strategy might be found to be completely impractical only after specific implementation programs are cost in detail.

What must be done

Procedures:
Must be carried out to complete a corporations programs. Must be updated to reflect any changes in technology as well as in strategy. In the case of PepsiCos Power of One program:


sales people developed a set of procedures to persuade supermarket managers to add shelf space and displays in poorer performing locations, display snack foods with soft drinks logistics people developed procedures for the truck drivers to ensure that PepsiCo products were actually placed on the shelves as needed.

What must be done

Achieving synergy between and among functions and business units


Synergy is said to exist for a divisional corporation in the return of investment (ROI) of each division is greater than what the return would be if each division were independent business.

What must be done

Achieving synergy
     

Shared Know-How Coordinated Strategies Shared Tangible Resources Economies of Scale or Scope Pooled Negotiating Power New Business Creation

Organizing for Action

Chandlers Strategy-Structure Relationship: structure follows strategy
Organizational performance declines

New strategy Is formulated

New administrative problems emerge

Organizational performance improves

New organizational structure is established

Basic Forms of Structure

 Functional Structure  Divisional Structure  Strategic Business Unit Structure (SBU)  Matrix Structure
The role and purpose of the organization structure is to support and facilitate good strategy execution!

Organizational Life Cycle

Dominant Issue Popular Strategies

Birth
Concentration in a niche

Growth
Horizontal and vertical growth

Maturity
Concentric and conglomerate diversification

Decline
Profit strategy followed by retrenchment

Death
Liquidation or bankruptcy

Likely Structure

Entrepreneurdominated

Functional management emphasized

Decentralization into profit Investment centers

Structural surgery

Dismemberment of structure

Changing Structural Characteristics of Modern Corporations

Old Organizational Design New Organizational Design

One large corporation Vertical communication Centralized top-down decision making Vertical integration Work/quality teams Functional work teams Minimal training Specialized job design focused on individual

Mini-business units and cooperative relationships Horizontal communication Decentralized participative decision making Outsourcing and virtual organizations Autonomous work teams Cross-functional work teams Extensive training Value-chain team-focused job design

Advantages of Decentralized DecisionDecision-Making and Empowerment

y y y y

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

y y y

Organizational Structures of the Future: Requirements for Success

y y y y y y y y y y

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 Electronic information systems Accountability for results Use of e-commerce practices in daily operations

Organizing Action
Michael Hammers principles for reengineering:
 

 

Organize around outcomes, not tasks. Have those who use the output of the process perform the process. Subsume information-processing work into the real work that produces the information. Treat geographically dispersed resources as though they were centralized. Link parallel activities instead of integrating their results. Put the decision point where the work is performed, and build control into process. Capture information once at the source.

Organizing Action
Designing jobs to implement strategy Job design refers to the design of individual tasks in an attempt to make them more relevant to the company and to employees. Job design techniques: Job enlargement combining tasks to give a worker more of the same type of duties to perform. Job rotation moving workers through several jobs to increase variety Job enrichment altering the jobs by giving the worker more autonomy and control over activities

Staffing
Hiring new people with new skills Training existing employees to learn new skills Firing people with inappropriate or substandard skills

Staffing Is it possible that a current CEO may not be appropriate to implement a new strategy? Insiders or Outsiders? Only 10% of Fortune 100 companies have CEOs appointed from the outside.

Leading
Real leadership is required to compete effectively and deliver growth. Leadership is the common thread which runs through the entire process of translating strategy into results and is the key to engaging the hearts and minds of your people.

Strategy Implementation
Leading


Be a guardian of tradeoffsensuring that the organizations resources are allocated in ways consistent with the strategy. Create a sense of urgencynot allowing the organization and its members to grow slow and complacent.

Strategy Implementation
Leading


Ensure that everyone understands the strategy unless strategies are understood, the daily tasks and contributions of people lose context and purpose.

A group of US Senators were visiting NASA at the time when funding was under threat. One Senator asked a man cleaning the floor "So what are you doing here?" The man answered, "I'm here putting a man on the Moon!"

Strategy Implementation
Leading


Be a teacherit is the leaders job to teach the strategy and make it a cause. Be a great communicatorkeep the message simple and focused on the firms strategic priorities.

If your methods enable every single person to know what they are doing, and why, and to be emotionally committed to it, then the process of turning strategy into action is probably working.

Leading
Assessing Strategy-Culture Compatibility


Is the planned strategy compatible with the companys current culture? Can the culture be easily modified to make it more compatible with the new structure? Is management willing and able to make major organizational changes and accept probable delays and a likely increase in cost? Is management still committed to implement the strategy?

Building a Spirit of High Performance into the Culture



Emphasize achievement and excellence Promote a results-oriented culture Pursue practices to inspire people to excel Desired outcome

Produce extraordinary results with ordinary people

Leading
Managing Cultural Change Through Communication Communication is key to the effective management of change. Rational for strategic changes should be communicated to workers not only in newsletters and speeches, but also in training and development programs. Emotional contracting (also referred to as 'the psychological contract') is the crucial and powerful link between the organizational intent, and the motivations, values and aspirations of the people.

Action planning

   

what actions are going to be taken, by whom, during what timeframe, with what expected results.

Can Do!

Action planning
Developing the strategic thrusts and broad based action plans


What are the few important themes that need to be worked on to deliver the intent? What are the sub-themes and projects? What will success look like and how will it be measured?

Action planning
Cascading out detailed work plans
How will the projects be led and resourced? Who will be responsible for each task? Are individual work plans aligned? What is the review process?

Action planning
Action plans are important as:


Serve as a link between strategy formulation and evaluation and control. Specify what needs to be done differently from the way operations are currently carried out. Help in both the appraisal of performance and in the identification of any remedial actions, as needed.

Leading
Management by Objectives involves:


Establishing and communicating organizational objectives Setting individual objectives that help implement organizational ones Developing an action plan of activities needed to achieve objectives Periodically reviewing performance as it relates to the objectives and including the results in the annual appraisal

Leading
Total Quality Management four objectives:
Better, less variable quality of the product and service Quicker, less variable response in processes to customer needs Greater flexibility in adjusting to customers shifting requirements Lower cost through quality improvement and elimination of non-value-adding