The Strategic Planning Process

The Strategic Planning Process In the 1970's, many large firms adopted a formalized top-down strategic planning model. Under this model, strategic planning became a deliberate process in which top executives periodically would formulate the firm's strategy, then communicate it down the organization for implementation. The following is a flowchart model of this process: The Strategic Planning Process

Mission | V Objectives | V Situation Analysis | V Strategy Formulation | V Implementation | V Control This process is most applicable to strategic management at the business unit level of the organization. For large corporations, strategy at the corporate level is more concerned with managing a portfolio of businesses. For example, corporate level strategy involves decisions about which business units to grow, resource allocation among the business units, taking advantage of synergies among the business units, and mergers and acquisitions. In the process outlined here, "company" or "firm" will be used to denote a single-business firm or a single business unit of a diversified firm. Mission

A company's mission is its reason for being. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go. Objectives Objectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. They also should be measurable so that the company can monitor its progress and make corrections as needed. Situation Analysis Once the firm has specified its objectives, it begins with its current situation to devise a strategic plan to reach those objectives. Changes in the external environment often present new opportunities and new ways to reach the objectives. An environmental scan is performed to identify the available opportunities. The firm also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success. The situation analysis therefore involves an analysis of both the external and internal environment. The external environment has two aspects: the macro-environment that affects all firms and a micro-environment that affects only the firms in a particular industry. The macroenvironmental analysis includes political, economic, social, and technological factors and sometimes is referred to as a PEST analysis. An important aspect of the micro-environmental analysis is the industry in which the firm operates or is considering operating. Michael Porter devised a five forces framework that is useful for industry analysis. Porter's 5 forces include barriers to entry, customers, suppliers, substitute products, and rivalry among competing firms. The internal analysis considers the situation within the firm itself, such as: • • • • • • • • • • • •

Company culture Company image Organizational structure Key staff Access to natural resources Position on the experience curve Operational efficiency Operational capacity Brand awareness Market share Financial resources Exclusive contracts

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Patents and trade secrets

A situation analysis can generate a large amount of information, much of which is not particularly relevant to strategy formulation. To make the information more manageable, it sometimes is useful to categorize the internal factors of the firm as strengths and weaknesses, and the external environmental factors as opportunities and threats. Such an analysis often is referred to as a SWOT analysis. Strategy Formulation Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed. While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms. Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives. Porter advised against implementing a combination of these strategies for a given product; rather, he argued that only one of the generic strategy alternatives should be pursued. Implementation The strategy likely will be expressed in high-level conceptual terms and priorities. For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization. The expression of the strategy in terms of functional policies also serves to highlight any practical issues that might not have been visible at a higher level. The strategy should be translated into specific policies for functional areas such as: • • • • • •

Marketing Research and development Procurement Production Human resources Information systems

In addition to developing functional policies, the implementation phase involves identifying the required resources and putting into place the necessary organizational changes. Control Once implemented, the results of the strategy need to be measured and evaluated, with changes made as required to keep the plan on track. Control systems should be developed and implemented to facilitate this monitoring. Standards of performance are set, the actual performance measured, and appropriate action taken to ensure success.

Dynamic and Continuous Process The strategic management process is dynamic and continuous. A change in one component can necessitate a change in the entire strategy. As such, the process must be repeated frequently in order to adapt the strategy to environmental changes. Throughout the process the firm may need to cycle back to a previous stage and make adjustments. Drawbacks of this Process The strategic planning process outlined above is only one approach to strategic management. It is best suited for stable environments. A drawback of this top-down approach is that it may not be responsive enough for rapidly changing competitive environments. In times of change, some of the more successful strategies emerge informally from lower levels of the organization, where managers are closer to customers on a day-to-day basis. Another drawback is that this strategic planning model assumes fairly accurate forecasting and does not take into account unexpected events. In an uncertain world, long-term forecasts cannot be relied upon with a high level of confidence. In this respect, many firms have turned to scenario planning as a tool for dealing with multiple contingencies.

PEST Analysis

A PEST analysis is an analysis of the external macro-environment that affects all firms. P.E.S.T. is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment. Such external factors usually are beyond the firm's control and sometimes present themselves as threats. For this reason, some say that "pest" is an appropriate term for these factors. However, changes in the external environment also create new opportunities and the letters sometimes are rearranged to construct the more optimistic term of STEP analysis. Many macro-environmental factors are country-specific and a PEST analysis will need to be performed for all countries of interest. The following are examples of some of the factors that might be considered in a PEST analysis. Political Analysis • • • • • •

Political stability Risk of military invasion Legal framework for contract enforcement Intellectual property protection Trade regulations & tariffs Favored trading partners

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Anti-trust laws Pricing regulations Taxation - tax rates and incentives Wage legislation - minimum wage and overtime Work week Mandatory employee benefits Industrial safety regulations Product labeling requirements

Economic Analysis • • • • • • • • • • • • • •

Type of economic system in countries of operation Government intervention in the free market Comparative advantages of host country Exchange rates & stability of host country currency Efficiency of financial markets Infrastructure quality Skill level of workforce Labor costs Business cycle stage (e.g. prosperity, recession, recovery) Economic growth rate Discretionary income Unemployment rate Inflation rate Interest rates

Social Analysis • • • • • • •

Demographics Class structure Education Culture (gender roles, etc.) Entrepreneurial spirit Attitudes (health, environmental consciousness, etc.) Leisure interests

Technological Analysis • • • • •

Recent technological developments Technology's impact on product offering Impact on cost structure Impact on value chain structure Rate of technological diffusion

The number of macro-environmental factors is virtually unlimited. In practice, the firm must prioritize and monitor those factors that influence its industry. Even so, it may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.

The Value Chain

To better understand the activities through which a firm develops a competitive advantage and creates shareholder value, it is useful to separate the business system into a series of value-generating activities referred to as the value chain. In his 1985 book Competitive Advantage, Michael Porter introduced a generic value chain model that comprises a sequence of activities found to be common to a wide range of firms. Porter identified primary and support activities as shown in the following diagram:

Porter's Generic Value Chain M A Outboun Marketing Inbound R > Operations > d > & > Service > Logistics G Logistics Sales I N Firm Infrastructure HR Management Technology Development Procurement

The goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin. The primary value chain activities are: • • •

Inbound Logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required. Operations: the processes of transforming inputs into finished products and services. Outbound Logistics: the warehousing and distribution of finished goods.

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Marketing & Sales: the identification of customer needs and the generation of sales. Service: the support of customers after the products and services are sold to them.

These primary activities are supported by: • • • •

The infrastructure of the firm: organizational structure, control systems, company culture, etc. Human resource management: employee recruiting, hiring, training, development, and compensation. Technology development: technologies to support value-creating activities. Procurement: purchasing inputs such as materials, supplies, and equipment.

The firm's margin or profit then depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain. It is in these activities that a firm has the opportunity to generate superior value. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation. The value chain model is a useful analysis tool for defining a firm's core competencies and the activities in which it can pursue a competitive advantage as follows: • •

Cost advantage: by better understanding costs and squeezing them out of the value-adding activities. Differentiation: by focusing on those activities associated with core competencies and capabilities in order to perform them better than do competitors.

Cost Advantage and the Value Chain A firm may create a cost advantage either by reducing the cost of individual value chain activities or by reconfiguring the value chain. Once the value chain is defined, a cost analysis can be performed by assigning costs to the value chain activities. The costs obtained from the accounting report may need to be modified in order to allocate them properly to the value creating activities. Porter identified 10 cost drivers related to value chain activities: • • • • • • •

Economies of scale Learning Capacity utilization Linkages among activities Interrelationships among business units Degree of vertical integration Timing of market entry

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Firm's policy of cost or differentiation Geographic location Institutional factors (regulation, union activity, taxes, etc.)

A firm develops a cost advantage by controlling these drivers better than do the competitors. A cost advantage also can be pursued by reconfiguring the value chain. Reconfiguration means structural changes such a new production process, new distribution channels, or a different sales approach. For example, FedEx structurally redefined express freight service by acquiring its own planes and implementing a hub and spoke system. Differentiation and the Value Chain A differentiation advantage can arise from any part of the value chain. For example, procurement of inputs that are unique and not widely available to competitors can create differentiation, as can distribution channels that offer high service levels. Differentiation stems from uniqueness. A differentiation advantage may be achieved either by changing individual value chain activities to increase uniqueness in the final product or by reconfiguring the value chain. Porter identified several drivers of uniqueness: • • • • • • • • •

Policies and decisions Linkages among activities Timing Location Interrelationships Learning Integration Scale (e.g. better service as a result of large scale) Institutional factors

Many of these also serve as cost drivers. Differentiation often results in greater costs, resulting in tradeoffs between cost and differentiation. There are several ways in which a firm can reconfigure its value chain in order to create uniqueness. It can forward integrate in order to perform functions that once were performed by its customers. It can backward integrate in order to have more control over its inputs. It may implement new process technologies or utilize new distribution channels. Ultimately, the firm may need to be creative in order to develop a novel value chain configuration that increases product differentiation. Technology and the Value Chain

Because technology is employed to some degree in every value creating activity, changes in technology can impact competitive advantage by incrementally changing the activities themselves or by making possible new configurations of the value chain. Various technologies are used in both primary value activities and support activities: •

Inbound Logistics Technologies o Transportation o Material handling o Material storage o Communications o Testing o Information systems

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Operations Technologies o Process o Materials o Machine tools o Material handling o Packaging o Maintenance o Testing o Building design & operation o Information systems

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Outbound Logistics Technologies o Transportation o Material handling o Packaging o Communications o Information systems

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Marketing & Sales Technologies o Media o Audio/video o Communications o Information systems

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Service Technologies o Testing o Communications o Information systems

Note that many of these technologies are used across the value chain. For example, information systems are seen in every activity. Similar technologies are used in support

activities. In addition, technologies related to training, computer-aided design, and software development frequently are employed in support activities. To the extent that these technologies affect cost drivers or uniqueness, they can lead to a competitive advantage. Linkages Between Value Chain Activities Value chain activities are not isolated from one another. Rather, one value chain activity often affects the cost or performance of other ones. Linkages may exist between primary activities and also between primary and support activities. Consider the case in which the design of a product is changed in order to reduce manufacturing costs. Suppose that inadvertantly the new product design results in increased service costs; the cost reduction could be less than anticipated and even worse, there could be a net cost increase. Sometimes however, the firm may be able to reduce cost in one activity and consequently enjoy a cost reduction in another, such as when a design change simultaneously reduces manufacturing costs and improves reliability so that the service costs also are reduced. Through such improvements the firm has the potential to develop a competitive advantage. Analyzing Business Unit Interrelationships Interrelationships among business units form the basis for a horizontal strategy. Such business unit interrelationships can be identified by a value chain analysis. Tangible interrelationships offer direct opportunities to create a synergy among business units. For example, if multiple business units require a particular raw material, the procurement of that material can be shared among the business units. This sharing of the procurement activity can result in cost reduction. Such interrelationships may exist simultaneously in multiple value chain activities. Unfortunately, attempts to achieve synergy from the interrelationships among different business units often fall short of expectations due to unanticipated drawbacks. The cost of coordination, the cost of reduced flexibility, and organizational practicalities should be analyzed when devising a strategy to reap the benefits of the synergies. Outsourcing Value Chain Activities A firm may specialize in one or more value chain activities and outsource the rest. The extent to which a firm performs upstream and downstream activities is described by its degree of vertical integration.

A thorough value chain analysis can illuminate the business system to facilitate outsourcing decisions. To decide which activities to outsource, managers must understand the firm's strengths and weaknesses in each activity, both in terms of cost and ability to differentiate. Managers may consider the following when selecting activities to outsource: • • •

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Whether the activity can be performed cheaper or better by suppliers. Whether the activity is one of the firm's core competencies from which stems a cost advantage or product differentiation. The risk of performing the activity in-house. If the activity relies on fast-changing technology or the product is sold in a rapidly-changing market, it may be advantageous to outsource the activity in order to maintain flexibility and avoid the risk of investing in specialized assets. Whether the outsourcing of an activity can result in business process improvements such as reduced lead time, higher flexibility, reduced inventory, etc.

The Value Chain System A firm's value chain is part of a larger system that includes the value chains of upstream suppliers and downstream channels and customers. Porter calls this series of value chains the value system, shown conceptually below: The Value System ...

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Supplier Firm Channel Buyer > > > Value Chain Value Chain Value Chain Value Chain

Linkages exist not only in a firm's value chain, but also between value chains. While a firm exhibiting a high degree of vertical integration is poised to better coordinate upstream and downstream activities, a firm having a lesser degree of vertical integration nonetheless can forge agreements with suppliers and channel partners to achieve better coordination. For example, an auto manufacturer may have its suppliers set up facilities in close proximity in order to minimize transport costs and reduce parts inventories. Clearly, a firm's success in developing and sustaining a competitive advantage depends not only on its own value chain, but on its ability to manage the value system of which it is a part.

The BCG Growth-Share Matrix

The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. It is based on the observation that a company's business units can be classified into four categories based

on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share". Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability. BCG Growth-Share Matrix

This framework assumes that an increase in relative market share will result in an increase in the generation of cash. This assumption often is true because of the experience curve; increased relative market share implies that the firm is moving forward on the experience curve relative to its competitors, thus developing a cost advantage. A second assumption is that a growing market requires investment in assets to increase capacity and therefore results in the consumption of cash. Thus the position of a business on the growth-share matrix provides an indication of its cash generation and its cash consumption. Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firm's other business units that were at a more mature stage and generating significant cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born. The four categories are: •

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Dogs - Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture. Question marks - Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate

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much cash. The result is a large net cash comsumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. Stars - Stars generate large amounts of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation. Cash cows - As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. Because the cash cow generates a relatively stable cash flow, its value can be determined with reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow analysis.

Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined soley by whether it had become the market leader during the period of high growth. While originally developed as a model for resource allocation among the various business units in a corporation, the growth-share matrix also can be used for resource allocation among products within a single business unit. Its simplicity is its strength - the relative positions of the firm's entire business portfolio can be displayed in a single diagram. Limitations The growth-share matrix once was used widely, but has since faded from popularity as more comprehensive models have been developed. Some of its weaknesses are: •

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Market growth rate is only one factor in industry attractiveness, and relative market share is only one factor in competitive advantage. The growth-share matrix overlooks many other factors in these two important determinants of profitability. The framework assumes that each business unit is independent of the others. In some cases, a business unit that is a "dog" may be helping other business units gain a competitive advantage. The matrix depends heavily upon the breadth of the definition of the market. A business unit may dominate its small niche, but have very low market share in the

overall industry. In such a case, the definition of the market can make the difference between a dog and a cash cow. While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporation's business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units.

Scenario Planning

Traditional forecasting techniques often fail to predict significant changes in the firm's external environment, especially when the change is rapid and turbulent or when information is limited. Consequently, important opportunities and serious threats may be overlooked and the very survival of the firm may be at stake. Scenario planning is a tool specifically designed to deal with major, uncertain shifts in the firm's environment. Scenario planning has its roots in military strategy studies. Herman Kahn was an early founder of scenario-based planning in his work related to the possible scenarios associated with thermonuclear war ("thinking the unthinkable"). Scenario planning was transformed into a business tool in the late 1960's and early 1970's, most notably by Pierre Wack who developed the scenario planning system used by Royal Dutch/Shell. As a result of these efforts, Shell was prepared to deal with the oil shock that occurred in late 1973 and greatly improved its competitive position in the industry during the oil crisis and the oil glut that followed. Scenario planning is not about predicting the future. Rather, it attempts to describe what is possible. The result of a scenario analysis is a group of distinct futures, all of which are plausible. The challenge then is how to deal with each of the possible scenarios. Scenario planning often takes place in a workshop setting of high level executives, technical experts, and industry leaders. The idea is to bring together a wide range of perspectives in order to consider scenarios other than the widely accepted forecasts. The scenario development process should include interviews with managers who later will formulate and implement strategies based on the scenario analysis - without their input the scenarios may leave out important details and not lead to action if they do not address issues important to those who will implement the strategy. Some of the benefits of scenario planning include: • • •

Managers are forced to break out of their standard world view, exposing blind spots that might otherwise be overlooked in the generally accepted forecast. Decision-makers are better able to recognize a scenario in its early stages, should it actually be the one that unfolds. Managers are better able to understand the source of disagreements that often occur when they are envisioning different scenarios without realizing it.

The Scenario Planning Process The following outlines the sequence of actions that may constitute the process of scenario planning. 1. Specify the scope of the planning and its time frame. 2. For the present situation, develop a clear understanding that will serve as the common departure point for each of the scenarios. 3. Identify predetermined elements that are virtually certain to occur and that will be driving forces. 4. Identify the critical uncertainties in the environmental variables. If the scope of the analysis is wide, these may be in the macro-environment, for example, political, economic, social, and technological factors (as in PEST). 5. Identify the more important drivers. One technique for doing so is as follows. Assign each environmental variable two numerical ratings: one rating for its range of variation and another for the strength of its impact on the firm. Multiply these ratings together to arrive at a number that specifies the significance of each environmental factor. For example, consider the extreme case in which a variable had a very large range such that it might be rated a 10 on a scale of 1 to 10 for variation, but in which the variable had very little impact on the firm so that the strength of impact rating would be a 1. Multiplying the two together would yield 10 out of a possible 100, revealing that the variable is not highly critical. After performing this calculation for all of the variables, identify the two having the highest significance. 6. Consider a few possible values for each variable, ranging between extremes while avoiding highly improbable values. 7. To analyze the interaction between the variables, develop a matrix of scenarios using the two most important variables and their possible values. Each cell in the matrix then represents a single scenario. For easy reference in later discussion it is worthwhile to give each scenario a descriptive name. If there are more than two critical factors, a multidimensional matrix can be created to handle them but would be difficult to visualize beyond 2 or 3 dimensions. Alternatively, factors can be taken in pairs to generate several two-dimensional matrices. A scenario matrix might look something like this:

Scenario Matrix VARIABLE 1 Outcome 1A | V

Outcome 1B | V

V A R I A B L E

Outcome 2A -->

Scenario 1

Scenario 2

Outcome 2B -->

Scenario 3

Scenario 4

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One of these scenarios most likely will reflect the mainstream views of the future. The other scenarios will shed light on what else is possible. 8. At this point there is not any detail associated with these "first-generation" scenarios. They are simply high level descriptions of a combination of important environmental variables. Specifics can be generated by writing a story to develop each scenario starting from the present. The story should be internally consistent for the selected scenario so that it describes that particular future as realistically as possible. Experts in specific fields may be called upon to devlop each story, possibly with the use of computer simulation models. Game theory may be used to gain an understanding of how each actor pursuing its own self interest might respond in the scenario. The goal of the stories is to transform the analysis from a simple matrix of the obvious range of environmental factors into decision scenarios useful for strategic planning. 9. Quantify the impact of each scenario on the firm, and formulate appropriate strategies. An additional step might be to assign a probability to each scenario. Opinions differ on whether one should attempt to assign probabilities when there may be little basis for determining them. Business unit managers may not take scenarios seriously if they deviate too much from their preconceived view of the world. Many will prefer to rely on forecasts and their judgement, even if they realize that they may miss important changes in the firm's environment. To overcome this reluctance to broaden their thinking, it is useful to create "phantom" scenarios that show the adverse results if the firm were to base its decisions on the mainstream view while the reality turned out to be one of the other scenarios.

WHY IMPLEMENTING STRATEGY IS A TOUGH MANAGEMENT JOB •

Tougher & more time-consuming than strategy-making due to o Variety of managerial activities o Many different ways to tackle each activity o People management skills required o Perseverance & wave-making it takes to launch a variety of initiatives o Number of bedeviling issues to be worked through o Resistance to change to overcome

Implementing a NEW STRATEGY takes adept managerial leadership to • • •

Overcome pockets of doubt & disagreement Build consensus for how to proceed Secure commitment & cooperation of concerned parties

CHARACTERISTICS OF STRATEGY IMPLEMENTATION PROCESS • • •

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Every manager has an active role No 10-step checklists & few concrete guidelines o It’s the least charted, most open-ended part of strategy management Best evidence of do’s & don’ts comes from personal experiences, anecdotal reports, & case studies o But wisdom yielded is inconsistent Get all implementation pieces in placeEach implementation situation occurs in a different context, affected by differing o Business practices & competitive situations o Work environments & cultures o Policies o Compensation incentives o Mixes of personalities & firm histories Approach to implementation should be customized People implement strategies -- Not companies!

WHAT IS THE GOAL OF STRATEGY IMPLEMENTATION? •

Unite total organization behind strategy

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See that activities are done in a manner that tightly matches requirements for firstrate strategy execution Generate such a determined commitment at all organizational levels that an enthusiastic crusade emerges to carry out strategy Create a series of strategy-supportive “fits”

WHO ARE THE STRATEGY IMPLEMENTERS? • •

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Implementing strategy is a job for whole management team Persons most responsible for implementation effort o Chief Executive Officer o Heads of major organizational units Implementation involves every organization unit Top management has to orchestrate major implementation initiatives o But they must rely on middle & lower-level managers to get things done

Eight Managerial Components of Implementing Strategy Corporate Strategy Building a Capable Organization Allocating Resources Establishing StrategySupportive Policies Instituting Best Practices for Continuous Improvement Installing Support Systems for Carrying Out Strategic Roles Tying Rewards to the Achievement of Key Strategic Targets Exercising Strategic Leadership Shaping Corporate Culture to Strategy

PRINCIPAL TASKS OF STRATEGY IMPLEMENTATION • • • • • • • •

Building a capable organization Allocating ample resources to strategy-critical activities Establishing strategy supportive policies & procedures Instituting best practices & mechanisms for continuous improvement Building a capable organization Allocating ample resources to strategy-critical activities Establishing strategy supportive policies & procedures Instituting best practices & mechanisms for continuous improvement

WAYS TO LEAD IMPLEMENTATION PROCESS • • • • •

Take active, visible role OR low-key, behind the scenes role Make decisions on basis of consensus OR authoritatively Delegate much OR little Be personally involved in implementation details OR coach others carrying dayto-day burden Proceed swiftly to achieve results OR move deliberately, content with gradual progress over a long time frame

FACTORS INFLUENCING MANAGER IN LEADING IMPLEMENTATION PROCESS • • • • • • • •

His/her experience & accumulated knowledge about business Whether manager is new to job or seasoned Manager’s network of personal relationships Manager’s own diagnostic, administrative, interpersonal, & problem-solving skills Authority which manager has been given Leadership style manager is most comfortable with Manager’s conclusions about role he/she should play in light of what has to be done Context of organization’s situation

SELECTING PEOPLE FOR KEY POSITIONS • •

What kind of core management team is needed to carry out strategy Finding the right people to fill each slot

Existing management team may be suitable Core executive group may need strengthening  Promoting from within  Bringing in skilled management talent from outside Determining mix of backgrounds, experiences, know-how, values, styles of managing, & personalities to o Contribute to successful strategy execution Putting together strong management team with right personal “chemistry” & mix of skills o Needs to be acted on early in implementation process o o

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BUILDING A CORE COMPETENCE •

When it is difficult to outstrategize rivals with a superior strategy -o Next best avenue to industry leadership is to outexecute them - Beat them with superior strategy implementation! o Building core competencies that rivals can’t match is one of the best ways to outexecute them

Strategically-relevant core competencies • • • • • •

Greater proficiency in product development Better manufacturing know-how Superior cost-cutting skills Better marketing & merchandising skills Capability to provide better after-sale service Ability to respond quickly to changes in customer needs

STRATEGIC ROLE OF TRAINING & RETRAINING • • •

Training takes on strategic importance in efforts to build a skills-based competence Training is a strategy-critical activity in businesses where technical know-how is changing or advancing rapidly Strategy implementers ensure training function is o Adequately funded and o Effective training programs are in place

MATCHING ORGANIZATION STRUCTURE TO STRATEGY Design internal organization structure around tasks & activities most critical to success of a firm’s strategy Principle Matching structure to strategy requires making strategy-critical activities and organization units the main building blocks in the organizational structure!

1. Pinpoint primary activities & key tasks critical to successful strategy execution 2. Establish ways to achieve necessary coordination when it doesn’t make sense to group all facets of an activity under a single manager 3. Determine degree of authority each unit needs to carry out its assignment effectively 4. Determine whether non-critical activities can be outsourced more efficiently than performed internally Guidelines •

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Vary according to o Particulars of a firm’s strategy o Value chain make-up o Competitive requirements Identifying a firm’s strategy-critical activities 1. What functions have to be performed extra well & on time to achieve sustainable competitive advantage?2. In what value-chain activities would malperformance endanger success?