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 Implementation involves . . .

Why Implementing Strategy Is a 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

The Eight Components of Implementing Strategy supportive “fits” Allocating Resources Building a Capable Organization Establishing Strategy- Supportive Policies Strategy Implementer’s Action Agenda Instituting Best Practices for Continuous Improvement Exercising Strategic Leadership Shaping Corporate Culture to Fit Strategy Installing Support Systems to Carry out Strategic Roles Tying Rewards to Achievement of Key Strategic Targets

Task # 1: Building a Capable 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

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

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

The Process of Building Organizational 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

The Process of Building Organizational 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

The Process of Building Organizational 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 a distinctive competence and holds potential for competitive advantage This is the optimal outcome of the capability-building process!!

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

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

Strategy-Driven Approaches to Organization Structure Functional and process specialization Geographic organization Decentralized business units Strategic business units Matrix structures

A Traditional Functional Organizational Structure General Manager Research & Development Manufacturing Human Resources Engineering Marketing Finance & Accounting

A Process-Oriented Functional Structure General Manager Foundry & Castings Screw Machining Inspection Customer Service Milling & Grinding Finishing & Heat Treating Loading & Shipping Billing & Accounting

A Geographic Organizational Structure CEO Corporate Staff GM Europe Latin America North America Asia Pacific Central Asia & Africa Marketing & Distribution Production Engineering & Prod. Design District

A Decentralized Line-of-Business Organization Structure CEO Corporate Services GM Business B Functional/Process Departments Business A Business C

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

A Matrix Organization Structure Head Manufacture R&D Venture Manager 1 Marketing Finance Manager 2 Manager 3 Manager 4 Specialists Production General Manager

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

Characteristics of Organizations of the Future Change & Learning 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