1. University of Cagliari, Faculty of Economics, 2011-12 Business Strategy and Policy A course within the II level degree in Managerial Economics year II, semester I, 9 credits Lecturer: Dr Alberto Asquer aasquer@unica.it Phone: 070 6753399

2. Introduction 0. Strategy implementation 1. Executing business strategy 2. Issues related to strategy execution 3. The role of corporate culture 4. The role of leadership - - - - - - - - - - - - - 5. Summary

3. 0. Strategy implementation Overview: Strategy making Strategy implementation Strategic control Strategy evaluation Problem framing Diagnosis Alternatives generation Strategy formulation

4. 1. Executing business strategy A framework: Action agenda (policy orientation) Building competences, capabilities, resources Installing IT and operating systems Instilling a favourable corporate culture Institute policies and procedures Marshalling resources Exercising strong leadership Tying rewards and incentives to results Seeking best practices and continuous improvement

5. 1. Executing business strategy The importance of staffing It is important to fill key managerial positions with smart people who are clear thinkers, good at figuring out what needs to be done, skilled in 'making it happen' and delivering good results “Get the right executives on the bus – and the wrong executives off the bus” The quality of an organisation's people is always an essential ingredient of successful strategy execution – knowledgeable, engaged employees are a company's best source of creative ideas for the nuts-and-bolts operating improvements that lead to operating excellence

6. 1. Executing business strategy The importance of core competences and capabilities Building core competences and capabilities (CC&C): Stage 1: develop the ability to do something, somehow Stage 2: learn how to perform activities consistently well and at acceptable cost to form core competences Stage 3: if becoming better than rivals, the core competence becomes a distinctive competence – this a path to competitive advantage CC&C typically develop incrementally, out of interrelationships between activities within the value chain, through focused efforts and talent on strengthening them, and by occasionally adjusting the portfolio of intellectual capital

7. 2. Issues related to strategy execution Make or buy? Outsourcing: allows the firm to focus its efforts and resources on the most competently performing activities within the value chain; but too much outsourcing makes the firm less 'unique' 'In house' activities: allow the firm to strengthen more activities within the value chain; streamlining internal operations and decision making; and – if partnering with other firms – learning from others

8. 2. Issues related to strategy execution What organisational structure? Recall that firms may organise according to different structural models Examples: Simple structure Machine bureaucracy Professional bureaucracy Ad-hocracy Divisionalised form

9. 2. Issues related to strategy execution What degree of centralisation (or decentralisation) of decision- making power? Centralised decision making: Top executives retain authority for most strategic and operating decisions and keep a tight rein on business unit heads, department heads, and the managers of key operating units Tight control, but also lot of information needed and slowness of response Decentralised decision making: Decision-making authority is pushed down to the lowest organisational level capable of making timely, informed, competent decisions Leverage on detailed information and judgement, but also skills needed

10. 2. Issues related to strategy execution How to coordinate internal units? Close cross-unit collaboration is generally needed, for example: To fill customers' order accurately and promptly To introduce new products quickly To improve product quality To enhance efficiency of supply chain management To build the capability to conduct business via the Internet To get feedback from customers and adjust the products to their needs Also, how to collaborate with outside suppliers and partners? Skilled 'business diplomacy' (“relationship managers”) is needed

11. 3. The role of corporate culture Key features of a firm's corporate culture Values, principles, ethical standards that are preached and practiced The approach to people management and official HR policies The work climate The management style – including stimulation of teamwork The strength of peer pressure The company 'mythology' The approach towards external stakeholders

12. 3. The role of corporate culture Unhealthy cultures Highly politicised cultures (empire-building managers, partisan goals, intestine strife) Change-resistant cultures (skepticism, conservatism, perpetuation of established rent positions) Insular, inwardly focused cultures (disregard towards customers, prejudices, presumption of uniqueness) Unethical and greed-driven cultures

13. 3. The role of corporate culture Favourable culture traits Inspiring and motivating stories Careful selection of applicants Tolerance towards other cultures Consistent over time and different context conditions Adaptive A big issue: Is it possible to 'manage' culture? Relatedly, how can managers design effective interventions intended to change organisational culture?

14. 4. The role of leadership Leadership The process through which one individual intentionally exerts influence over others to organise the relationships and direct the behaviour within a group or organisation Originally, leadership was primarily related to leaders' traits, either psychological or physical Other studies highlighted the kind of behaviour of leaders – either relationship oriented or task oriented Other studies focused on the contingent features of situations where leadership can be exercised (e.g., position power, structures for participation, kind of tasks, etc.) Other studies focused on transactional vs. transformational leadership (e.g., “charismatic leadership”, whose effectiveness is questioned, anyway)

15. 4. The role of leadership Leadership and the design of 'good strategy' (Rumelt, 2011) “Leadership and strategy may be joined in the same person, but they are not the same thing. Leadership inspires and motivates self-sacrifice. … Strategy is the craft of figuring out which purposes are both worth pursuing and capable of being accomplished” (66) “Any coherent strategy pushed resources toward some ends and away from others. These are the inevitable consequences of scarcity and change. Yet this channeling of resources away from traditional uses is fraught with pain and difficulty” (63) “The kernel of strategy contains three elements: - a diagnosis that defines or explains the nature of the challenge. … - a guiding policy for dealing with the challenge. … - a set of coherent actions that are designed to carry out the guiding policy.” (77)

16. 5. Summary Main points Strategy execution requires the careful performance of several activities – including staffing and developing core competences and capabilities Issues related to strategy execution include make or buy decisions, designing organisational structure, allocating decision-making powers, setting the policies for coordinating internal units and dealing with external stakeholders Corporate culture may be more or less supportive to the selected strategy and related policies Leadership is important to execute strategy, although it is not a substitute for 'good strategy' design and formulation