Chapter 11 Employing Strategy Implementation Levers

1. Chapter 11Employing StrategyImplementation Levers

2. 2 • Demonstrate how to use organizational structure as a strategy implementation levers 3 • Understand the use of systems and processes as strategy implementation levers 4 • Identify the roles of people and rewards as implementation levers 5 • Explain the dual roles that strategic leadership plays in strategy implementation 6 • Understand how global and dynamic contexts affect the use of implementation levers OBJECTIVES 1 • Understand the interdependence between strategy formulation and implementation

3. HUI: SUCCESS AS A JOURNEY …. “the company of choice in all we do today and tomorrow” – Kurt Bell of HUI

4. WL GORE: A STRATEGY OF GROWTH THROUGH INNOVATION Medical products Guitar strings Gore-Tex Dental floss Water filter systems

5. FORMULATION AND IMPLEMENTATION • Strategy formulation • Strategy implementation • The central, integrated, externallyoriented concept of how we willachieve our objectives • Arenas • Staging • Vehicles • Differentiators • Economiclogic • Implementation Levers & StrategicLeadership

6. 1 • Is its strategy flawed? • When a firm is experiencing difficulties, its good to ask three questions • Is the implementation of itsstrategy flawed? 2 • Are both strategy and imple-mentation flawed? 3 THREE QUESTIONS

7. HUI: A MODEL COMPANY A flat structure facilitates the flow of information and fast decision-making. • Structure Systems are in place to support the firm’s growth strategy through innovation. • Systems Selection and retention of people are rigorously managed. • People Selection and retention reinforces a culture that values innovation. • Culture

8. 3 KNOWING – DOING GAP • Percent of large companies who … • … regarded themselves as goodor excellent at generating newknowledge • 46% • … reported having launched newproducts based on the applicationof new knowledge • 14% (of the same firms) • Source: J. Pfeiffer and R.I. Sutton, The Knowing – Doing Gap (Boston: Harvard Business School Press, 2000)

9. CAUSES OF THE KNOWING – DOING GAP: INTERNAL & EXTERNAL RESISTANCE • When Compaq tried to copy Dell’s direct-sales model, it met stiff resistance from Comp USA, Best Buy, and other retailers • External • Internal • Businessunits • Culture • SAP attempted to launch consulting service to supple-ment its core technology offering but failed to align with SAP culture

10. New CEO Agenda 1992 1996 1996 • Cultural focuson costs • Professionalism • HR policies • Account “farming”(not just growth) • Web-basedsoftware • Profitability • Revenue • Customerservice • Employees • Reputation HOW WOULD YOU DO THAT? – SAP AMERICA

11. A CEO’S VIEW ON THE ROLE OF CULTURE “Once IBM was reminded of its core culture, it helped rally the company, bind it together in ways that had been absent for years.” - Lou Gerstner • Source: Hambrick and Cannella, “Strategy Implementation as Substance and Selling”

12. KEY FACETS OF STRATEGIC IMPLEMENTATION • Organization structureSystems and processesPeople and rewards IntendedStrategy Realized & EmergentStrategies Implementation Levers Strategic Leadership • Lever and resourceallocation decisionsCommunicating thestrategy to stakeholders

13. ORGANIZATIONAL STRUCTURE ALIGNED TO STRATEGY • Organizational structure • Strategy • Insures control • Coordinates information,decisions, andactivities

14. Air Liquide decides to locatepersonnel at client sites • Air Liquide pursues a wealth of new-business opportunities • Customer-site employees receive more decision-making autonomy • Higher-margin services improve firm performance • Customer-site employees see new services Air Liquide could offer (e.g., hazardous material handling, inventory management HOW STRUCTURE INFLUENCES STRATEGY – AIR LIQUIDE • Structure • Strategy

15. 1 • Functional 2 • Multidivisional 3 • Matrix 4 • Network 5 • Partnerships 6 • Franchises SIX FORMS OF ORGANIZATIONAL STRUCTURE

16. FUNCTIONAL STRUCTURE • Corporate Office • Organizes activities according to the specific functions that a company performs • Marketing/Sales • Finance • Operations • R&D • Example • Platypus Technologies has 30 employees organized into small departments: finance, marketing, HR, and R&D

17. MULTIDIVISIONAL STRUCTURE Headquarters Business Group A Business Group B Business Group C • One solution to problems of managing activities in multiple markets or managing multiple products Finance Finance Finance Marketing Marketing Marketing Operations Operations Operations • Example • GM is organized according to product division (GM Trucks, Chevrolet, Buick, Cadillac, Pontiac, Saturn, etc. Each maintains its own finance, marketing, and other support functions

18. MATRIX STRUCTURE Corporate Office Product or Region A Product or Region B Product or Region C Product or Region D R&D • Hybrid between functional and multidivisional structure Operations Marketing Finance • Source: http://www.cio.com/archive/090103/hs_reload.html

19. Indi-vidual • Projectgroup • Projectgroup • Example NETWORK STRUCTURE • Small, semi-autonomous, and potentially temporary groups brought together for a specific purpose • Gore’s 6,000 employees spread across the world work in small teams and are encouraged to seek out colleagues on their own

20. Partnerships • Franchises • The company is organized as a group of partners who own shares or units in the corporation • Company not only trans-fers ownership of local facilities to franchisees, but license all local man-agement responsibility • Example • Example • Most law firms • Burger King PARTNERSHIPS AND FRANCHISES

21. Vision and Strategy BALANCED SCORECARD IS A MEASUREMENT SYSTEM TO MANAGE STRATEGY IMPLEMENTATION • Source: Kaplan & Norton, 1996

22. STRATEGY MAPS HELP LINK ALL PERFORMANCE METRICS TO STRATEGY Implementation levers

23. HOW WOULD I DO THAT? – BALANCED SCORECARD AT US NAVAL UNDERSEA WARFARE CENTER NUWC Vision: Be our nation’s provider of choice for undersea superiority – satisfying today’s needs and meeting tomorrow’s challenges NUWC Mission: We provide the technical foundation which enables the conceptualization, research, development, fielding, modernization, and maintenance of systems that ensure our navy’s undersea superiority. NUWC Vision: Be our nation’s provider of choice for undersea superiority – satisfying today’s needs and meeting tomorrow’s challenges NUWC Mission: We provide the technical foundation which enables the conceptualization, research, development, fielding, modernization, and maintenance of systems that ensure our navy’s undersea superiority. Financial: To succeed, how must we look to our constituents in terms of balanced budgets, revenue sources, and value? External: To achieve our vision and mission, how must we look to our customers on the dimensions of purpose, service, and quality? Internal: To satisfy our customers, at what business processes must we excel in order to decrease lag time, raise productivity, and lower costs? Employee learning and growth: To accomplish our vision and mission and support internal processes, what kind of staff and information systems do we need to foster innovation, continuous learning, and value in intellectual assets? Implementation levers

24. PEOPLE AND REWARDS • Successful CEOs “attended to people first [and] strategy second. They got the right people on the bus, moved the wrong people off, ushered the right people to right seats – and then they figured out where to drive it” • JetBlue and Southwest Airlines both expend considerable effort making sure new hires will fit the firm • People Jim Collins • Rewards Implementation levers

25. PEOPLE AND REWARDS • People • Reward systems have two components • Performance evaluation and feedback • Compensation (e.g., salary, bonuses, stock, promotions, coveted office space) • They can serve as a force of control over outcomes or behaviors • GE which owns several unrelated companies, links division manager pay to the performance of the unit they manage • Rewards Implementation levers

26. COMMON MANAGEMENT FOLLIES IN REWARD SYSTEMS We hope for… But we often reward for… Long term growth Quarterly earnings Teamwork Individual effort Setting stretch goals Achieving goals Downsizing Adding staff Candor Reporting good new (even if not true)

27. Making substantive implementation lever and resource allocation decisions • Communicating the strategy to key stakeholders STRATEGIC LEADERSHIP IS RESPONSIBLE FOR 2 KEY OBJECTIVES Strategic Leadership

28. Upward • Managersmust sufficiently communicate in 4 directions • Across • Outward • Downward STRATEGIC LEADERSHIP – COMMUNICATING WITH KEY STAKEHOLDERS • Convince top managementof a new strategy (e.g., Intel’s shift to microprocessors) • Win cooperation of external stakeholders including customers and distributors (e.g., Compaq failed to do this with retailers) • Win support of other units within the firm • Enlist support of those who implement Strategic Leadership

29. C • C • C • ontacts • ultural understanding • redibility THREE C’S OF STRATEGY COMMUNICATION

30. STRUCTURAL OPTIONS Transnational configuration • Global configuration • Multinationalconfiguration • Internationalconfiguration • Coordinated group of federations over which more administrative control is exerted by home country headquarters • Resembles a decentralized federation much like the relation-ship between US federal government and 50 states • Description • Foreign offices are used to access customers, but demand is filled by centralized production Structure allows dispersion, specialization, and interdependence – networked control system • Examples • Japanese companies 1970s & 1980s • SAP pre 1990 • SAP post 1990 McDonald’s Global and Dynamic contexts

31. Two common responses • Ambidextrous organization • Patching FIRM RESPONSES TO DYNAMIC CONTEXTS • Challenges of dynamic, high-veto city contexts Global and Dynamic contexts

32. THE AMBIDEXTROUS ORGANIZATION Structural barriers preventing interference and interactions between existing and emerging businesses Corporate Office Existing Business Emerging Business Manu- facturing Sales R&D Manu- facturing Sales R&D New organization develops its own levers consistent with the needs of the radical innovation Existing organization with historic implementation levers Ambidextrous organizations establish units that are structurally independent from all other units. The emerging business units are to develop their own structures, processes, systems, cultures, strategies, etc. They are only integrated into the mother organization at the level of senior management Global and Dynamic contexts

33. Example: HP • Laser printingbusiness • Patching: regularly remapping businesses in accordance with changing market conditions and restitching them into internal business ventures • New technologies • New business unit PATCHING Global and Dynamic contexts