Strategy Implementation: Organizing for Action

1. Strategy Implementation: Organizing for Action • Does organizational structure come after strategy formulation? Well, yes, in theory! • New strategy is created • New administrative problems emerge • Economic performance declines • New appropriate structure is invented • Profit returns to its previous level.

2. Strategy Implementation: Organizing for Action • Simple structure – Entrepreneur and staff • Efficient implementation of formulated strategy • Sales growth – coordination and control problems • Functional structure – R&D, finance, etc. • Efficient implementation of formulated strategy • Sales growth – coordination and control problems • Multidivisional (M-form) structure – business units or profit centers • Top level management responsible for formulating and implementing overall strategies – acquisitions, restructuring, international and cooperative strategies

3. Strategy Implementation: Organizing for Action • Matrix Structure • Based on the concept that horizontal relationships across the firm are just as important as the traditional reporting relationship within a typical functional organization

4. Strategy Implementation: Organizing for Action • Matrix Structure • Uncertainty in business environment – try to spend less time “catching up”, more time responding to external changes • Adaptation to change – cope with ambiguity, learn quickly, gain new competencies • Differentiation and specialization across business units – integration challenge • Management - a high degree of empowerment in those who compose and organize the activities of key teams; high levels of trust.

5. Strategy Implementation: Organizing for Action • Matrix Structure • Companies using Matrix Structure • International Business Machines • IBM Research Labs Worldwide • Nokia • New structure in 2003: Designed to focus on the needs of particular customer segments while retaining centralized manufacturing, administration and marketing capabilities to benefit from economies of scale. • Philips • General Electric

6. Strategy Implementation: Organizing for Action • Resource Allocation • Attempt to allocate resources according to priorities established by annual objectives • Financial, • Physical • Human and • Technological

7. Strategy Implementation: Organizing for Action • Resource Allocation • A number of factors inhibit effective resource allocation • Overprotection of resources, • too great an emphasis on short-term financial criteria, • organizational politics, • vague strategy targets, • a reluctance to take risks, and • a lack of sufficient knowledge

8. Strategy Implementation: Organizing for Action Strategy Implementation Action Agenda • What to do now versus later? • What requires much time and personal attention? • What can be delegated to others?

9. Strategy Implementation: Organizing for Action Managerial Components of Implementing Strategy • Strategic leadership to drive implementation forward • Shape work environment and corporate culture to fit strategy • Setting up appropriate award/incentive systems to achieve strategic targets • Installing necessary information, communication, and operating systems to enable personnel to carry out roles

10. Strategy Implementation: Organizing for Action Managerial Components of Implementing Strategy • Instituting best practices and pushing continuous improvement • Establishing strategy-supporting policies • Allocating ample resources to strategy-critical activities • Building core competencies (resources & capabilities) for successful strategy execution

11. Strategy Implementation: Organizing for Action Elements of Implementation: Programs: activities, timeframes, and deliverables Budgets: doesn’t necessarily follow program development as text suggests Procedures: operating procedures set up for each key activity (distribution, inventory management, pricing strategies, etc.)

12. Strategy Implementation: Organizing for Action How strategic activities require cooperation among different departments: • Filling customer orders accurately and promptly: sales (wins the order); finance (check credit terms); production (product goods and replenish stock); warehousing (check stock, pick, package and ship order); shipping (get product to customer).

13. Strategy Implementation: Organizing for Action How strategic activities require cooperation among different departments: • Speeding new products to market: process is fragmented among R&D, engineering, purchasing, manufacturing , and marketing.

14. Strategy Implementation: Organizing for Action How strategic activities require cooperation among different departments: • Obtaining feedback from customers and making product modifications to meet their needs: involves customer service and after-sales support, R&D, engineering and design, components purchasing, manufacturing and assembly, and marketing research.

15. Strategy Implementation: Organizing for Action The level of autonomy given to certain business units, divisions, and projects depends on many criteria. The following three are considered the primarily criteria: • volatility of environment • low cost versus differentiation focus • degree of resource-sharing between functional areas

16. Strategy Implementation: Organizing for Action Greater autonomy generally associated with: • Higher the volatility • Higher levels of differentiation • Lower levels of resource sharing

17. Strategy Implementation: Organizing for Action How many possible scenarios are possible based on these three criteria? Which scenarios suggest highest and lowest autonomy? Can you think of business types that fit into each of these scenarios?

18. Strategy Implementation: Organizing for Action Why do we have organizational charts? The Matrix structure - Is it outdated? Coordinating product and functional areas, or product and geographic areas. Provides coverage, but creates redundancy and lacks flexibility.

19. Fluidity of Organizational Charts: TimeVision’s intranet-based org chart software

20. European Council American Airlines Georgia-Pacific Ericsson Bayer Corporation GTE Mercedes-Benz Chevron Colgate-Palmolive Compaq (Houston) Toyota Motor Strategy Implementation: Organizing for Action TimeVision’s customers include (partial listing):

21. Strategy Implementation: Organizing for Action • Job Design Issues • Rethinking the individual tasks to make them more relevant to the company and the employees • Try to answer the question: Based on what the company does (and does well), how should individual tasks be assigned and accomplished?

22. Strategy Implementation: Organizing for Action • Job Design Issues • How much task variety should there be? • How should teams be used? • To what degree should job rotation be used? • How should authority in decision-making be increased/decreased? • What channels of communication should be provided?

23. Strategy Implementation: Organizing for Action • Application of Technology to Manage • Human resources • Logistics (in- and out-bound) • Knowledge flow • Apply technologies based on strategic priorities