Chapter 10 Summary Crafting and Executing Strategy

Chapter 10: Building an Organization Capable of Good Strategy Execution A Framework for Executing Strategy  Like crafting strategy, executing strategy is a job for a company's whole management team—not just a few senior managers. While the chief executive officer and the heads of major units (business divisions, functional departments, and key operating units) are ultimately responsible for seeing that strategy is executed successfully, the process typically affects every part of the firm—all value chain activities and all work groups.  Good strategy execution requires a team effort. All managers have strategy-executing responsibility in their areas of authority, and all employees are active participants in the strategy execution process.  Key Success Factors o Is operations-driven, involving management of both people and business processes o Is a job for the whole management team, not just a few senior managers o Can take years longer to develop as a real proficiency for implementing strategy o Requires a determined commitment to change, action, and performance  Committing to Executing a Strategy: o Entails figuring out the specific techniques, actions, and behaviors necessary for a smooth strategy-supportive operation o Following through to get things done and deliver results. o Making things happen (leadership) and making them happen right (management)  The Prinicpal Compnents of the Strategy Executon Process o Staffing the organization with manager and employees capable of executing the statregy well o Developing resources and organization capbilties require dfor successful strategy execution o Creaing a strategy-supportive organizational structure o Allocating suffiecnt resources to the strawgt exection effort o Instiuting polcies and procedures that facilitate strastegy exedution o Adoping best practices and business processes to drive conitous mprovement in strategy eceton activities o Installing infomraiton and oeorating system that enable company personnel to carry out their strategic roles prfociently o Tying rewards and icnetivies directly to ahceibement strategic and financial targets o Intilinga cirpotate culture that promotes good strategy o Excresing the internal leasdership needed to propel strategy implementation  When strategies fail, it is often because of poor execution. Strategy execution is therefore a critical managerial endeavor.  In devising an action agenda for executing strategy, managers should start by conducting a probing assessment of what the organization must do differently to carry out the strategy successfully.  The two best signs of good strategy execution are whether a company is meeting or beating its performance targets and whether it is performing value chain activities in a manner that is conducive to companywide operating excellence.  In big organizations with geographically scattered operating units, senior executives' action agenda mostly involves communicating the case for change, building consensus for how to proceed, installing strong managers to move the process forward in key organizational units, directing resources to the right places, establishing deadlines and measures of progress, rewarding those who achieve implementation milestones, and personally leading the strategic change process Building an Organization Capable of Good Strategy Execution: Three Key Actions  Profiency strawtgy execton depednss on having inplan and organization capable of the tasks demanded of it o Staffing o Developing o Structuring: Create strategy-supportive organization capable of good strategy execution  Staffing the Organization: Assemble a strong management team and a cadre of competent employees o Planners who ask tough questions and figure out what needs to be done o Implementers who can select, manage, and lead the right people o Executors who turn decisions into actions that drive the changes that produce sustainable competitive advantage o Important to fill key managerial spots with smart people who are clear thknigns, good at fiuring out what needs to e done, skilled n maaning people and accmplosejd in deverling good results o Putting together a talented management team with the right mix of experiences, skills, and abilities to get things done is one of the first steps to take in launching the strategy-executing process.  Recruiting, Training and Retaining Capable Employees: o Developing: Renew, upgrade, and revise resources and capabilities to match chosen strategy o Intensively screen and evaluate applicants to ensure selecting those who are best-suited and best-fitted o Provide training programs throughout employee careers o Offer challenging, interesting, and skill-stretching assignments o Rotating people through jobs that span functional and geographic boundaries o Make the work environment stimulating and engaging so that the firm is considered a great place to work o Encourage employees to propose creative ways of better operating, and to push ideas for new products or businesses o Use assorted financial incentives and perks to retain employees o Coach average performers to improve their skills and capabilities, while weeding out underperformers o In many industries, adding to a company’s talent are and building intellectual capital are more important to a good strategy execution than are additional investments in capital projects o Southwest Airlines goes to considerable lengths to hire people who can have fun and be fun on the job; it uses special interviewing and screening methods to gauge whether applicants for customer-contact jobs have outgoing personality traits that match its strategy of creating a highspirited, fun-loving in-flight atmosphere for passengers. Southwest Airlines is so selective that only about 3 percent of the people who apply are offered jobs. o The best companies make a point of recruiting and retaining talented employees—the objective is to make the company's entire workforce (managers and rank-and-file employees) a genuine competitive asset. Developing and Building Critical Resources and Capabilities  Building new competencies and capabilities is a multistage process that occurs over a period of months and years. It is not something that is accomplished overnight.  Approaches to Build Building and Strengthening Capabilities o Developing Capabilities Internally  A company's capabilities must be continually refreshed and renewed to remain aligned with changing customer expectations, altered competitive conditions, and new strategic initiative  Training Is Important In:  Executing a strategy that requires different skills, competitive capabilities, and operating methods  Organizational efforts to build skills-based competencies  Supplying technical know-how to employees when rapidly changing technology puts a firm in danger of losing its ability to compete o Acquiring companies through mergers and acquisitions  Speeds up the process of acquiring new capabilities  Capabilities motivated acquisitions are essential  When the company does not have the ability to create the needed capability internally  When the industry conditions, technology or competitors are moving at such a rapid clip that time is of the essence o Access capabilities via collaborative partnerships  Outsource the function in which the company's capabilities are deficient to a key supplier or another provider.  Collaborate with a firm that has complementary resources and capabilities in a joint venture, strategic alliance, or other type of partnership established for the purpose of achieving a shared strategic objective.  Engage in a collaborative partnership for the purpose of learning how the partner does things, internalizing its methods and thereby acquiring its capabilities. o Faciltaing Collcatioon with external patterns and strategic alliances  Creating a Network Structure: Using “relationship managers” to build and maintain cooperative arrangements of value both parties  Strategic alliances  Outsoring arrangements  Joint entures  Cooperative partnerhsips  Strategy Executon Capalbties and Competitive Advnatge o Superiod Strategy Eectuon Cabalities  Are difficult to imitate and socially complex process that take a long time to develop  Maximize organizational resources and competitive capabilities in support of the business model  Lower costs and permit firms to deliver more value to customers  Enable a firm to react more quickly to market changes, beat competitors to market with new products and services, and gain uncontested market dominance o Superior strategy execution capabilities are the only source of sustainable competitive advantage when strategies are easy for rivals to copy Matching Organizational Structure to the Strategy  A company's organizational structure should be matched to the particular requirements of implementing the firm's strategy.  Ensuring that Structure Follows Strategy By: o Deciding which value chain activities to perform internally and which to outsource o Aligning the firm’s organizational structure with its strategy o Determining how much authority to delegate o Facilitating collaboration with external partners and strategic allies  Alligning the Firm;s Oraniztilna Srucurre with its Strategy o Wisely choosing which activities to perform internally and which to outsource can lead to several strategy-executing advantages—lower costs, heightened strategic focus, less internal bureaucracy, speedier decision making, and a better arsenal of organizational capabilities. o A firm's organizational structure comprises the formal and informal arrangement of tasks, responsibilities, lines of authority, and reporting relationships by which the firm is administered.  Matching Type of Organizatioal Strcuure to Stratgy Exection o A simple structure consists of a central executive (often the owner-manager) who handles all major decisions and oversees all operations with the help of a small staff. Simple structures are also called line-and-staff structures or flat structures.  Typically employed by smaller firms and startups o A functional structure is organized into functional departments, with departmental managers who report to the CEO and small corporate staff. Functional structures are also called departmental structures and unitary structures or U-forms.  In large organizations, functional structures lighten the load on top management, in comparison to simple structures, and enable more efficient use of managerial resources.  Their primary advantage, however, is greater task specialization, which promotes learning, enables the realization of scale economies, and offers productivity advantages not otherwise available.  Their chief disadvantage is that the departmental boundaries can inhibit the flow of information and limit the opportunities for cross-functional cooperation and coordination. o A multidivisional structure is a decentralized structure consisting of a set of operating divisions organized along business, product, customer group, or geographic lines and a central corporate headquarters that allocates resources, provides support functions, and monitors divisional activities. Multidivisional structures are also called divisional structures or M-forms.  Multidivisional structures are common among companies pursuing some form of diversification strategy or international strategy, with operations in a number of businesses or countries o A matrix structure is a combination structures that overlays one type of structure onto another type, with multiple reporting relationships. It is used to foster cross-unit collaboration. Matrix structures are also called composite structures or combination structures.  They are often used for project-based, process-based, or teambased management. Such approaches are common in businesses involving projects of limited duration, such as consulting, architecture, and engineering services.  An advantage of matrix structures is that they facilitate the sharing of plant and equipment, specialized knowledge, and other key resources. Thus, they lower costs by enabling the realization of economies of scope. They also have the advantage of flexibility in form and may allow for better oversight since supervision is provided from more than one perspective.  A disadvantage is that they add another layer of management, thereby increasing bureaucratic costs and possibly decreasing response time to new situations  Determining How Much Authority to Delegate o Centralized Decision Making: author retained by top management o Decentralized Decision Making: author delegates to lower-level mangers and employees  The ultimate goal of decentralized decision making is to put authority in the hands of those persons closest to and most knowledgeable about the situation.  Efforts to decentralize decision making and give company personnel some leeway in conducting operations must be tempered with the need to maintain adequate control and cross-unit coordination. Further Perspectives on Structuring the Work Effort  Matching Structure to Strategy o Pick a basic organizational matches structure to strategy o Supplement design with appropriate cording mechanism o Institute collaborate networking and communication arrangements