Strategy Implementation

Dr. M Manjunath Shettigar

 STRATEGY IMPLEMENTATION

1. Introduction

2. Interrelationship Between Strategy Formulation and

Implementation

3. Issues in Strategy Implementation

4. Organization and Strategy Implementation

5. Leadership and Strategic Implementation

6. Building Strategy and Supportive Corporate Culture

 1. Introduction

Implementation of strategy is the process through which a chosen strategy

is put into action. It involves the design and management of systems to
achieve the best integration of people, structure, processes and resources in
achieving organizational objectives.

Implementation of Strategy affects an organization from top to bottom, it

affects all the functional and divisional areas of business.
Institutionalization of strategy

Setting Proper Organizational Climate

Developing Appropriate Operating Plans

Developing Appropriate Organization Structures

Review of Implemented Strategy

2. Interrelationship between Strategy Formulation
& Implementation
Strategy implementation
means putting chosen
strategic decision into
action (strategic choice).

Allocation of resources to
new course of action
needs to be undertaken,
besides the need to adapt
organizations structure to
the chosen strategy.
 Strategy Formulation Implementation:
Interrelationship

Strategy formulation and

Strategy Implementation are B

SOUND
different and it needs to be A

STRATEGY FORMULATION
sound and excellent. success
Strategy fails because of
failed implementation and
not because of strategy FLAWED
model. C D
The matrix shows various
combination of strategy WEAK EXCELLENT
formulation and STRATEGY IMPLEMENTATION
implementation.
 Strategy Formulation Implementation:
Interrelationship
Square A shows formulation of competitive strategy but has difficulties in
implementing it successfully. This may be due to various factors like lack of
experience, lack of resources, missing leadership etc. Companies like to move from
square A to square B by realizing their implementation difficulties.

Square D shows formulation of flawed strategy but company has excellent

implementation skills. Thus they should redesign their strategy before
implementation.

Square C shows neither the sound strategy formulation nor is effective in strategy
implementation. They should redesign business model by implementation execution
readjustment.

Square B is ideal situation where company has succeeded in designing a sound

competitive strategy besides effectively implementing it.
 Strategy Formulation Implementation:
Interrelationship
Strategy is not a long term plan but rather consists of organizations attempt
to reach some future state by adapting its competitive position as
circumstances change.

In organizations that lack strategic direction there is tendency to look

inwards at time of stress, management to cut costs and shedding
unprofitable division. This means that focus is on efficiency (relationship
between inputs and outputs in short time horizon) rather than effectiveness
(attainment of desired competitive position).

Efficiency is introspective whereas effectiveness highlights the links between

the organization and its environment.
 Strategy Formulation Implementation:
Interrelationship

In cell 1 organization thrives, since it is

achieving what it aspires to achieve.

Efficient
Whereas in cell 2 and cell 4 2. Die
1. Thrive
Slowly

Operational Management
organization is doomed unless it can
establish strategic direction. In cell 3
strategic direction is present to ensure
effectiveness even if rather too much
Inefficient
4. Die
input is being used to generate 3. Survive
Quickly
outputs. Thus to be effective is to
survive whereas efficiency is not Effective Ineffective

sufficient for survival. Strategic Management

 Strategy Formulation Implementation:
Interrelationship

STRATEGY FORMULATION STRATEGY IMPLEMENTATION

It is positioning forces before action. It is managing forces during action.

It focuses on effectiveness. It focuses on efficiency.

It is an intellectual process It is primarily and operational process.

It requires good intuitive and It requires special motivational and

analytical skills. leadership skills.

It requires coordination among few It requires combination of many

individuals. individuals.

Concepts and tools do not differ Concepts and tools varies substantially
greatly for small, large, profit or non among small, large, profit or non profit
profit organization. organization.
 Strategy Formulation Implementation:
Interrelationship
Implementing strategy requires altering sales territories, adding new
departments, closing facilities, hiring new employees, changing
organizational pricing strategy, developing financial budgets, developing
new employee benefits, establishing cost control procedures, changing
advertising strategies, building new facilities, training new employees,
building MIS etc.

These types of activities differ greatly between manufacturing, service, and

governmental organizations.

Two types of linkage exists between tow phases of strategic management.

Forward linkage deals with impact of formulation and implementation

Backward linkage is concerned with impact in the opposite direction.

 Strategy Formulation Implementation:
Interrelationship
Forward Linkage - Different elements in strategy formulation (objective
setting, environmental and organizational appraisal, strategic alternatives
and choice to strategic plan) determines the course that organization adopts
itself. Formulation and reformulation is continuous process.

Backward Linkage While dealing with strategic choice past strategic

actions also determine choice of strategy. Organizations tends to adopt
those strategies which can be implemented with the help of present
structure of resources combined with some additional effort. Such
incremental changes over a period of time take the organization from where
it is to where it wishes to be.
 3. Issues in Strategy Implementation

Implementation task tests strategy makers ability to allocate resources,

design structures, formulate functional policies, identify leadership styles etc.

Strategies have to be activated through implementation and realize the

intent.

Strategies leads to plans. Plans result in different kinds of programmes which

includes goals, policies, procedures, rules and steps to be taken in putting
them into action.

Programs leads to formulation of the project which is time scheduled and

costs are predetermined. It requires allocation of funds based on capital
budgeting of the organization.

Projects create need for infrastructure for day to day operations in

organization. Resource allocation is key to successful projects.
 Issues in Strategy Implementation

The key processes in strategy implementation include:

Project Implementation

Procedural Implementation

Resource Allocation

Structural Implementation

Functional Implementation

Behavioral Implementation

Transition from strategy formulation to strategy implementation requires

shift in responsibility from strategist to divisional and functional managers
and their involvement should be maximum during strategy formulation.
 Issues in Strategy Implementation

Management issues central to strategy implementation include: establishing

annual objectives, devising policies, allocating resources, altering an existing
organizational structure, restructuring, reengineering, revising rewards and
incentive plans, minimizing resistance to change, matching manager with
strategy, developing strategy supportive culture, adapting production and
operation processes, developing effective human resource function and
even downsizing to give firm a new direction.
 4. Organization and Strategy Implementation

Strategic change requires change in structure of organization.

Structure largely dictates how objectives and policies will be established and can
significantly impact all other strategy implementation activities.
Structure dictates how major resources will be allocated.
There is no optimal organizational design or structure for a given strategy or
the type of organization and what is appropriate for one organization may
not work for other organization even though industry is organized in same
way.
For example consumer good companies tend to emulate the divisional structure
by product form or organization.
Small firms are functionally structured (centralized)
Medium sized firms are divisionally structured (decentralized)
Large firms are structured on basis of SBU (Strategic Business Unit / Matrix
Structure).
With growth of organization, structure usually changes from simple to
complex as a result of linking of several basic strategies.
 Organization and Strategy Implementation

With change in firms strategy existing organizational structure may become

ineffective. For example Too many levels of management, too many
meetings attended by too many people, interdepartmental conflict
resolution, large span of control, and too many unachieved objectives.

Then it becomes necessary that organizational structural changes are

introduced so that proper strategy and structure fit is achieved.
Strategy Structure Relationship: Chandlers
Schema

New Administrative
Problem Emerges

New Strategy is Organizational

Formed Performance Declines

A New Organizational
Organizational
Structure is
Performance Improves
Established
 Organization and Strategy Implementation

The organizational structures studied are :

A. Functional Structure,

B. Divisional Structure,

C. Strategic business unit (SBU) Structure,

D. matrix Structure, &

E. Network structure
 A. The Functional Structure

The most common structure found within organizations, functional

structure consists of units or departmental groups identified by specialty,
such as engineering, development, marketing, finance, sales or human
resources that are controlled from the top level of management.

Advantages: Functional structure promotes specialization of labour,

encourages efficiency, minimizes the need for an elaborate control system,
and allows rapid decision making.

Disadvantages: It forces accountability at the top, minimize career

development opportunities, low employee morale, line/staff conflicts, poor
delegation of authority, inadequate planning for products and markets.
Mostly it is abandoned in favour of decentralization and improved
accountability.
 The Functional Structure

CEO

Corporate
Corporate Corporate Strategic Corporate
Human
R&D Finance Planning Marketing
Resources

Sales and Human

Finance Production Engineering Accounting
Marketing Resources

Proper match between strategy and structure gives competitive edge or else it
will result into failure.
Companies must be flexible, innovative, and creative in global economy to
exploit their core competencies. Useful Information contributes the for the
formation and use of effective structures and controls, which yield improved
decision making.
 The Functional Structure

With growth of companies in size, and level of diversification, new strategies

my be required. Organizational structure is companies formal configuration
of its intended roles, procedures, governance mechanism, authority and
decision making processes etc. The structure adopted must fit with the
companies strategy.
Simple organization structure offers little specialization of tasks, few rules,
little formalization, direct involvement of owner-manager in all operations
and decision making.
Functional structure is used by large companies and companies having low
level of diversification. It also impedes communication and coordination and
have narrow view.
Use of multidivisional structure where each division represents separate
business entity, each division would house its own functional hierarchy,
divisional managers will be responsible to manage day to day responsibility
besides a small corporate office that would determine long term strategic
direction and exercise overall financial control over semi-autonomous
divisions.
 B. The Divisional Structure

When a company expands to supply goods or services to a variety of

customers, offers a variety of different products or are engaged in business
in several different markets, the company could adopt a divisional
organizational structure.
A divisional structure groups its divisions according to the specific demands
of products, markets or customers. Unlike the functional organizational
structure, where the different organizational functions of the company
conduct activities satisfying all customers, markets and products, the
divisional structure focuses on a higher degree of specialization within a
specific division, so that each division is given the resources, and autonomy,
to swiftly react to changes in their specific business environment. Therefore,
each division often has all the necessary resources and functions within it to
satisfy the demands put on the division
Each division will likely be structured as a functional structure. A company
with a divisional structure therefore has a subset of different and
specialized SBU's satisfying the demands of different customers, markets or
products.
 The Divisional Structure
In divisional structure, the
organization is organized into
various divisions based on
basically three criteria product,
market of geographical
structures.
Advantages:
Market Information
Management Motivation
Management Development
Specialist Knowledge
Timely Decisions
Allowing Strategic roles for Top
Management
 The Divisional Structure

The benefit of this organizational structure is that companies are able to

specialize its activities into self-reliant divisions, each capable of satisfying
e.g. customer demands and changes within the business environment.
 C. The Strategic Business Unit (SBU) Structure

Large, diversified companies organize themselves into divisions to break the

management of the company into smaller, organizationally cohesive parts.
The company headquarters still gives the divisions strategic direction.
Strategic Business Units, or SBUs, are organizationally complete and
separate units that develop their own strategic direction. They still report
back to company headquarters but operate as independent businesses
organized according to their target markets. They are often large enough to
have their own internal organizational divisions.
SBU advantages
SBU supports cooperation between the departments of the company which has a
similar range of activities;
Improvement of strategic management
Improvement of accounting operations,
Easier planning of activities
 The Strategic Business Unit (SBU) Structure

SBU Disadvantages
Difficulty with contact with higher management
May cause of internal tension due to difficult access to internal and external sources of funding,
May be the cause of the unclear situation with regard to the management activities.
 D. The Matrix Structure

The matrix structure is an organizational design that groups employees by

both function and product. The organizational structure is very flat, and the
structure of the matrix is differentiated into whatever functions are needed
to accomplish certain goals. Each functional worker usually reports to the
functional heads, but do not normally work directly under their supervision.
Instead, the worker is controlled by the membership of a certain project,
and each functional worker usually works under the supervision of a project
manager. This way, each worker has two superiors, who will jointly ensure
the progress of the project. The functional head may be more interested in
developing the most exiting products or technologies, whereas the project
manager may be more concerned with keeping deadlines and controlling
product costs.
When work is accomplished, the project team may get dissolved, and
workers from different functional areas may get reassigned to other projects
and tasks.
Matrix Structure
 The Matrix Structure

The peculiarities or characteristics a matrix organization are:-

Hybrid Structure : It combines functional organization with a project organization.
Functional Manager : The Functional Manager has authority over the technical
(functional) aspects of the project.
Project Manager : The Project manager has authority over the administrative aspects
of the project. He has full authority over the financial and physical resources which he
can use for completing the project.
Problem of Unity of Command This is so, because the subordinates receive orders
from two bosses viz., the Project Manager and the Functional Manager.
Specialization : In a Matrix organization, there is a specialization. The project manager
concentrates on the administrative aspects of the project while the functional
manager concentrates on the technical aspects of the project.
Suitability : Matrix organization is suitable for multi-project organizations. It is mainly
used by large construction companies, that construct huge residential and commercial
projects in different places at the same time. Each project is looked after (handled) by
a project manager. He is supported by many functional managers and employees of
the company.
 Advantages of Matrix Structure

The advantages of a matrix organization are:-

Sound Decisions : In a Matrix Organization, all decisions are taken by experts.
Development of Skills : It helps the employees to widen their skills.
Top Management can concentrate on Strategic Planning : They can delegate all
the routine, repetitive and less important work to the project managers.
Responds to Changes in Environment : because it takes quick decisions.
Specialization : In a matrix organization, there is a specialization.
Optimum Utilization of Resources : In the matrix organization, many projects are
run at the same time. Therefore, it makes optimum use of the human and physical
resources.
Motivation : In a matrix organization, the employees work as a team. So, they are
motivated to perform better.
Higher Efficiency : The Matrix organization results in a higher efficiency. It gives
high returns at lower costs.
 Limitations of Matrix Organization

The limitations of a matrix organization are:-

Increase in Work Load : In a matrix organization, work load is very high.
High Operational Cost : In a matrix organization, the operational cost is very high.
This is because it involves a lot of paperwork, reports, meetings, etc.
Absence of Unity of Command : In a matrix organization, there is no unity of
command. This is because, each subordinate has two bosses, viz., Functional
Manager and Project Manager.
Difficulty of Balance : It is also difficult to balance the authority & responsibilities
of the project manager and functional manager.
Power Struggle : In a matrix organization, there may be a power struggle
between the project manager and the functional manager. Each one looks after
his own interest, which causes conflicts.
Morale : In a matrix organization, the morale of the employees is very low. This is
because they work on different projects at different times.
Complexity : Matrix organization is very complex and the most difficult type of
organization.
Shifting of Responsibility : If the project fails, the project manager may shift the
responsibility on the functional manager.
 Old New Organization Design

Old Organization Design New Organization Design

One large corporation Mini business units and cooperative

relationships

Vertical Communication Horizontal Communication

Centralized Top Down Decision Making Decentralized Participative Decision Making

Vertical Integration Outsourcing and Virtual Organizations

Work Quality Teams Autonomous Work Teams

Functional Work Teams Cross Functional Work Teams

Minimal Training Extensive Training

Specialized Job Design Focused on Value chain Team Focused Job Design
Individual
 E. Network Structure

A group of legally independent companies or subsidiary business units that

use various methods of coordinating and controlling their interaction
in order to appear like a larger entity. In a business context, three
main types of network organizations are typically seen:
Internal where a large company has separate units acting as profit centers
Stable where a central company outsources some work to others, and
Dynamic where a network integrator outsources heavily to other companies.
A corporation organized in this manner is often called a virtual organization
because it is composed of a series of project groups or collaborations linked
by constantly changing non-hierarchical, cobweb like networks.
This structure is important in unstable conditions where regular employees
are replaced with contract laborer or suppliers contracts are for specific
project and length of time etc.
The 'wiring' of information-age organizations needs to be different and
more complex. This has given rise to the concept of the Network
Organization.

 Network Structure

A joint venture of companies for sharing skill or core competencies to

manufacture a product or provide a service. The companies rely on
relationships between people across structural, temporal and geographic
boundaries.
It is more than outsourcing and has flexibility as in a network structure
there is a continuous change in partners and the arrangements are goal
oriented and loose. All efforts are made to bring about new products and
services. The process changes more quickly for innovative products.
The characteristics of a network organization are:
Independent teams
Departments which share common values
Projects which support each other
Multiple links between projects
Information and Communications Technology is used to connect the projects.
There is a key coordinating role for the Chief Executive to construct the teams and
manage the interrelationship of projects (a kind of 'air traffic control').
 Network Structure

An example of a networked organization is

Asea Brown Boveri. This giant corporation split
its business into 1,300 companies as separate
and distinct business units. All the energy and
resources of the corporate centre are then
geared to facilitating cross-company co-
operation, with computer networks and
knowledge sharing being at the centre of this
process.
 5. Leadership and Strategic Implementation

Businesses today face change on all fronts economic, regulatory,

competitive, customer, and access to resources. Consequently, every
company is adjusting its strategy and that implies change. The success of
your strategy depends on your people will they be able to implement the
strategy and achieve the goals?
Strategic leadership provides the vision, direction, the purpose for growth,
and context for the success of the corporation. It also initiates "outside-the-
box" thinking to generate future growth. Strategic leadership is not about
micromanaging business strategies. Rather, it provides the umbrella under
which businesses devise appropriate strategies and create value.
If you are a leader at any level, your people look to you for guidance on
what needs to be done, and how. The key requirements of leaders are to:
Set the strategy
Communicate the strategy
Implement the strategy through people
Get results
 Roles to Play For Good Strategy Execution

Staying on top of what is happening, closely monitoring progress, fretting out issues,
learning what obstacle lie in path of good strategic implementation.

Promoting the culture of Esprit de corps that mobilizes and energizes organizational
members to execute strategy in competent fashion and perform at high level.

Keeping organizations responsive to changing conditions, alert for new

opportunities, innovative ideas, ahead of rivals in developing competitively valuable
competencies and capabilities.

Exercising ethics leadership and model conduct and Pushing corrective actions to
improve strategy execution and overall performance.

The role of leader is Introducing Change, Integrating Conflicting Interests,

Developing Leadership Effectiveness of Managers, Developing Appropriate
Organizational Climate, Motivational system, Clarity of goals, Relationships,
Involvement, Interest, Monitoring, Change as and when required.
 Leadership Role in Implementation

Strategic leadership entails the ability to anticipate, envision, maintain

flexibility, and empower others to create strategic change as necessary.

A manager with strategic leadership skills exhibits the ability to guide the
company through the new competitive landscape by influencing the
behavior, thoughts, and feelings of co-workers, managing thought of others
and successfully dealing with rapid, complex change and uncertainty.

Strategic leaders are CEO, Board of Directors, Top Management Teams,

Divisional General Managers. They must be able to deal with the diverse
and cognitive complex competitive situations that are characteristic of
todays competitive situation.
 Responsibilities of Strategic Leaders

Managing Human Capital

Effectively managing companys Operations
Sustaining High performance over time
Being willing to make candid, courageous, yet pragmatic decisions.
Seeking feedback from face to face communication.
Having decision making responsibility that cannot be delegated.
Navigator
Strategist
Entrepreneur
Mobilizer
Talent advocate
Captivator
Global thinker
Change driver
Enterprise Euardian
Responsibilities of Strategic
Leaders
Exerting Strategic Leadership
Staying on Top of How Well Things are Going
Establishing a Strategy-Supportive Culture
Keeping Internal Organization Innovative
Exercising Ethics Leadership
Making Corrective Adjustments
 6. Building A Strategy Supportive Corporate Culture

An organizations capacity to execute its strategy depends on its hard

infrastructure--its organization structure and systems--and on its soft
infrastructure--its culture and norms.

What Makes Up a Companys Culture?

Beliefs about how business ought to be conducted
Values and principles of management
Work climate and atmosphere
Patterns of how we do things around here
Oft-told stories illustrating companys values
Taboos and political donts
Traditions and Ethical standards
Building a Strategy-Supportive
Corporate Culture
Where Does Corporate Culture Come From?
Culture and Strategy Execution
Types of Cultures
Creating a Fit Between Strategy and Culture
Establishing Ethical Standards
Building a Spirit of High Performance
 Building A Strategy Supportive Corporate
Culture
Where Does Corporate Culture Come From?
Founder or early leader
Influential individual or work group
Policies, vision, or strategies
Traditions, supervisory practices, employee attitudes
Organizational politics
Relationships with stakeholders and Internal sociological forces
 Culture and Strategy Execution:
Ally or Obstacle?
Culture can contribute to -- or hinder -- successful strategy execution.
Requirements for successful strategy execution may -- or may not -- be
compatible with culture.

A close match between culture and strategy promotes effective

strategy execution

Why Culture Matters: Benefits of a Good Culture-Strategy Fit

Strategy-supportive cultures
Shape mood and temperament of the work force, positively affecting
organizational energy, work habits, and operating practices
Provide standards, values, informal rules and peer pressures that nurture and
motivate people to do their jobs in ways that promote
good strategy execution
Strengthen employee identification with the company, its performance
targets, and strategy
 Strategy-Supportive cultures

Stimulate people to take on the challenge of realizing the companys

vision, do their jobs competently and with enthusiasm, and collaborate
with others to execute the strategy

Optimal condition: A work environment that Promotes can do attitudes,

Accepts change, Breeds needed capabilities.
Forces and Factors Causing Culture to Evolve

Internal crises

Revolutionary technologies

New challenges

Arrival of new leaders

Turnover of key employees

Diversification into new businesses

Expansion into different geographic areas

Rapid growth adding new employees

Merger with or acquisition of another company

Globalization
Creating a Strong Fit Between Strategy and Culture

Diagnose which facets of present culture

Step 1 are strategy-supportive and which are not

Talk openly about why aspects

Step 2 of present culture need
to be changed

Follow with swift, visible actions to modify

Step 3 culture - include both substantive and
symbolic actions
Types of Corporate Cultures

Strong vs. Weak Cultures

Unhealthy Cultures

Adaptive Cultures
Characteristics of Strong Culture Companies

Conduct business according to a clear, widely-understood philosophy

Management spends considerable time communicating and reinforcing

values

Values are widely shared and deeply rooted

Typically have a values statement

Careful screening/selection of new employees to be sure they will fit in

Visible rewards for those following norms; penalties for those who dont
 How Does a Culture Come to Be Strong?

Leader who establishes values consistent with

Customer needs
Competitive conditions
Strategic requirements
A deep, abiding commitment to espoused values and business philosophy
Practicing what is preached!
Genuine concern for well-being of
Customers
Employees
Shareholders
 Characteristics of Weak Culture Companies

Many subcultures
Few values and norms widely shared
Few strong traditions
Little cohesion among the departments
Weak employee allegiance to companys vision and
strategy
No strong sense of company identity
 Characteristics of Unhealthy or Low
Performance Cultures
Politicized internal environment

Issues resolved on basis of turf

Hostility to change

Experimentation and efforts to alter status quo discouraged

Avoid risks and dont screw up

Promotion of managers more concerned about process and details

than results

Aversion to look outside for superior practices

Must-be-invented here syndrome

 Hallmarks of Adaptive Cultures

Introduction of new strategies to achieve superior performance

Strategic agility and fast response to new conditions

Risk-taking, experimentation, and innovation to satisfy stakeholders

Proactive approaches to implement workable solutions

Entrepreneurship encouraged and rewarded

Top managers exhibit genuine concern for customers, employees,

shareholders, suppliers
 Types of Culture - Changing Actions

Revising policies and procedures to help drive cultural change

Altering incentive compensation to reward desired cultural behavior
Visibly praising and recognizing people who display new cultural traits
Hiring new managers and employees who have desired cultural traits
and can serve as role models
Replacing key executives strongly associated with old culture
Communicating to all employees the basis for cultural change and its
benefits
 Symbolic Culture - Changing Actions

Emphasize frugality

Eliminate executive perks

Require executives to spend

time talking with customers

Alter practices identified as cultural hindrances

Visible awards to honor heroes

Ceremonial events to praise people and teams who get with the program
 Substantive Culture - Changing Actions

Benchmarking and best practices

Set world-class performance targets

Bring in new blood, replacing traditional managers

Shake up the organizational structure

Change reward structure

Increase commitment to employee training

Reallocate budget, downsizing and upsizing