Implementing Strategy

1. Implementing Strategy

2. Implementing Strategy

3. Implementing Strategy– What’s wrong? • 75% of executive teams do not have a clear customer propositions (idea of the mix that appeals to the target market) (Kaplan & Norton, 2001). • 20% of organizations take more than 16 weeks to prepare a budget, with many not completed by the start of the fiscal year (Many companies, 1999) • 78% of companies do not change their budgets within the fiscal cycle, even if the rest of the world changes around them (Corporate strategic, 1999) • 85% of management teams spend less than one hour per month discussing strategy (Norton, 1996) • 60% of organizations don't link strategy and budgeting (Corporate strategic, 1999) • 92% of organizations don't report on strategic lead indicators (Corporate strategic, 1999) • less than 5% of an organization's workforce understands its strategy (Kaplan & Norton, 2001) • only 51% of senior managers, 21% of middle managers, and 7% of line employees have personal goals linked with strategy (Kaplan & Norton, 2001) • organizations find that up to 25% of strategy measures change each year (Kaplan & Norton, 2001) • tangible book value represented only 62% of industrial organization's market value in 1982; in 1992 it was 38%, and 10-15% in 2000 (Blair, 1995; Webber, 2000). • the failure rate of strategies is between 70-90%, due primarily to poor implementation (Charan & Colvin, 1999; Keichel, 1982)

4. Analyzing external stakeholder response to strategic moves • What are the stakeholder’s current goals and focus? What have they been in the past? • Where are their major long and short term resources and policy commitments directed? • Are they satisfied with their current position or is change likely? What changes are likely? • Where are they weak? Strong? In our eyes? In theirs? • What moves will provoke the greatest retaliation? • Are they inhibited from responding to strategic moves because: • To match the moves would be counterstrategic? • The move is regarded as nonthreatening? • They are distracted by major problems or opportunities? • The move is not visible to them? • The threatened division has low priority in the larger organization? • No specific division is responsible or motivated to respond? • A correct response calls for a major policy revision or costly revision of procedures? • A response would create jurisdictional disputes and bureaucratic disruptions? • What are the stakeholder’s own political issues?

5. Building an organization with the competencies, capabilities, and resource strengths needed for successful execution Exercising the strategic leadership needed to drive implementation forward Allocating ample resources to strategy critical activities Strategy Implementer’s Action Agenda Shaping the work environment & corporate culture to fit strategy • What to do now vs. later • What requires much time • & personal attention • What can be delegated to • others Establishing strategy-supportive policies Tying rewards and incentives to achievement of strategic targets Instituting best practices & pushing for continuous improvement Installing information, communication, and operating systems that enable company personnel to better carry out strategic roles proficiently The Big-8 Components of Strategy Implementation

6. Generic Strategy Required Skills & Resources Organizational Requirements Overall Cost Leadership • Sustained capital investment & access • Process engineering skills • Intense supervision of labor • Products designed for ease of manufacture • Low cost distribution system • Tight cost control • Frequent, detailed control reports • Structured organization & responsibilities • Incentives based on meeting strict quantitative targets Differen-tiation • Strong manufacturing abilities • Product engineering • Creative flair • Strong capability in basic research • Corporate reputation for quality & tech leadership • Long tradition in industry or unique combination of skills from other businesses • Strong cooperation from channels • Strong coordination among functions in R&D, product, and marketing • Subjective measurement and incentives instead of quantitative measures • Amenities to attract highly skilled labor, scientists, or creative people Focus • Combination of above policies directed by the particular strategic target • Combination of the above policies directed at the particular strategic target What does it take?

7. Interpret (analyze) Application (modify/correct) Reflect (monitor) Implement Monitoring Implementation: Continuous Improvement Financial Goals/ Outcome Customer Target/ Objectives Initiative Internal Performance Indicator Who? What? When? Where? How? Growth & Development

8. The Role of Policy: reduce variation, institutionalize standard operating procedures, channel synergy, counteract resistance to change • Policy institutionalizes strategy-supportive practices & operating procedures thereby pushing daily activities in the direction of efficient strategy execution • Policy limits independent action and discretionary decisions and behavior. Policy communicates what is expected, guides strategy-related activities, and restricts unwanted variations • Policy aligns actions & behaviors with strategy, thereby minimizing divergent decisions and conflict • Policy helps shape character of work environment and translates corporate philosophy into how things are done, how people are treated, and what corporate beliefs and attitudes mean in everyday terms; determines the fit between corporate culture & strategy

9. Organizational Structure Corporate Culture Skills & Competencies Strategy Budget Allocations Reward Structure Key checkpoints for strategy compatibility How well do these complement, support, and reflect strategy?

10. Strategy as The Art of War • Don’t start what you shouldn’t begin • The impossible is impossible • Don’t attack a tank with a peashooter • Attack what isn’t defended • If you can’t attack, defend • Illusion creates confusion • Do what they don’t expect • Rather than assume they won’t attack, position yourself so they can’t • The unprepared can be defeated • The unknowing can be outsmarted • Do not challenge unless you have the means to win • Do not fight unless you’re determined to win

11. The Politics of Leadership • Let weakly supported ideas die through inaction • Establish additional hurdles or strongly sup- ported ideas that are unacceptable but shouldn’t be openly opposed • Keep a low political profile on unacceptable proposals by getting subordinate managers to say no • Let most negative decisions come from consensus that the manager confirms, reserving personal veto for big issues and crucial moments • Lead but don’t dictate strategy– depend more on questions and seek to probe and clarify until consensus emerges • Stay alert to symbolic impact of one’s actions and statements lest a false signal stimulate action in an unwanted direction • Ensure that all major power bases in the organization have representation in or access to top management • Inject new faces and views into consideration of major changes to preclude those involved from stereotyped ways and then systematically screening against other views • Minimize political exposure on highly controversial issues and where major opposition can trigger a “shootout”

13. How managers lead is a function of: • their experience and accumulated knowledge about the business • whether they are new to the job or seasoned incumbents • their network of personal relationships with others in the organization • their own diagnostic, administrative, interpersonal, and problem solving skills • the authority they’ve been given • the leadership style they’re comfortable with • their view of the role they need to play to get things done

14. We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers' orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens - support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.