Chapter 10 Summary - book \"Crafting and Executing Strategy\" PDF

Preview

Summary

Download Chapter 10 Summary - book "Crafting and Executing Strategy" PDF

Description

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.  Go o ds t r a t e g ye x e c ut i o nr e q u i r e sat e a me ffo r t . Al lma na g e r sh a v es t r a t e gy e x e c u t i ng r e s p o n s i bi l i t yi nt h e i ra r e a so fa ut h o r i t y , a n da l le mp l o y e e sa r ea c t i v ep a r t i c i pa n t si n t h es t r a t e g ye x e c u t i o np r oc e s s .  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 

Whe ns t r a t e gi e sf a i l , i ti sof t e nbe c a us eofpoore x e c ut i on. St r a t e gye x e c ut i oni st he r e f or eac r i t i c a l ma na ge r i a le nde a v or .

 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. 

Thet wobe s ts i gnso fg oods t r a t e gye x e c ut i ona r ewhe t he rac ompa n yi sme e t i n gorb e a t i n gi t s pe r f or ma n c et a r g e t sa ndwh e t he ri ti spe r f or mi n gv a l uec ha i na c t i vi t i e si nama nne rt h a ti sc onduc i v et o c ompa n ywi deope r a t i nge x c e l l e nc e .

 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

Put t i n gt o ge t h e rat a l e nt e dma na g e me ntt e a mwi t ht her i g htmi xofe xpe r i e nc e s ,s ki l l s , a nd a bi l i t i e st og e tt hi n g sdonei soneoft h efir s ts t e pst ot a k ei nl a u nc hi n gt hes t r a t e gy e x e c ut i n g pr oc e s s .

 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 high-spirited, funloving 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  Bu i l di n gn e wc o mpe t e n c i e sa n dc a p a b i l i t i e si samu l t i s t a g ep r o c e s st h a to c c u r so v e ra p e r i odo fmo n t h sa n dy e a r s . I ti sn o ts ome t hi n gt h a ti sa c c o mp l i s h e do v e r n i g h t .  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  Ac o mp a n y ' so r g a n i z a t i on a ls t r u c t u r es h o u l db ema t c h e dt ot h ep a r t i c u l a rr e q u i r e me n t s o fi mp l e me nt i n gt h efir m' ss t r a t e gy .  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 Wi s e l yc h o o s i n gwh i c ha c t i vi t i e st op e r f o r mi nt e r n a l l ya n dwh i c ht oo u t s o u r c e c a nl e a dt os e v e r a l s t r a t e g y e x e c u t i n ga d v a n t a g e s —l o we rc o s t s , h e i g ht e ne d s t r a t e g i cf o c us , l e s si n t e r n a lb u r e a u c r a c y , s p e e d i e rd e c i s i o nma ki n g , a n da b e t t e ra r s e n a lo fo r g a ni z a t i o n a lc a p a b i l i t i e s . o Afir m' so r g ani z a t i ona ls t r uc t ur ec o mpr i s e st hef o r ma la ndi n f o r ma l a r r a n g e me n toft a s k s , r e s p o n s i b i l i t i e s , l i n e so fa u t h o r i t y , a n dr e p o r t i n g r e l a t i o n s h i p sb ywh i c ht h efir mi sa d mi n i s t e r e d .  Matching Type of Organizatioal Strcuure to Stratgy Exection o As i mpl es t r uc t ur ec o n s i s t so fac e n t r a le x e c u t i v e( o f t e nt h eo wn e r ma n a g e r ) wh oh a nd l e sa l lma j o rde c i s i o nsa n do v e r s e e sa l lo pe r a t i o n swi t ht h eh e l pofa

s ma l ls t a ff. Si mp l es t r u c t u r e sa r ea l s oc a l l e dl i n e a n d s t a ffs t r u c t u r e so rfla t s t r u c t u r e s .  Typically employed by smaller firms and startups o Af unc t i o na ls t r uc t ur ei so r g a n i z e di n t of u n c t i o n a l de p a r t me nt s , wi t h d e p a r t me n t a l ma na g e r swh or e p o r tt ot h eCEOa n ds ma l lc or p o r a t es t a ff. Fun c t i o na l s t r u c t u r e sa r ea l s oc a l l e dd e p a r t me n t a ls t r u c t u r e sa ndu ni t a r y s t r u c t u r e so rUf o r ms .  I nl a r g eo r g a n i z a t i o n s , f u n c t i o n a ls t r u c t u r e sl i g h t e nt hel o a do nt o p ma n a g e me n t , i nc o mp a r i s o nt os i mp l es t r u c t u r e s ,a n de n a b l emo r e e ffic i e n tu s eo fma n a g e r i a lr e s o u r c e s .  Th e i rp r i ma r ya d v a n t a g e ,h o we v e r ,i sg r e a t e rt a s ks p e c i a l i z a t i o n, wh i c h p r o mot e sl e a r n i n g ,e n a b l e st h er e a l i z a t i o no fs c a l ee c on o mi e s , a n d o ffe r sp r o d u c t i vi t ya d v a n t a g e sn o to t he r wi s ea v a i l a b l e .  Th e i rc hi e fd i s a d v a n t a g ei st h a tt h ede p a r t me nt a lb o u n d a r i e sc a ni n h i b i t t heflo wo fi nf o r ma t i o na n dl i mi t t h eo p p or t u n i t i e sf o rc r o s s f u n c t i o n a l c o o p e r a t i o na n dc o o r d i n a t i o n . o Amul t i di vi s i o na ls t r uc t ur ei sad e c e nt r a l i z e ds t r u c t u r ec o n s i s t i n go fas e to f o p e r a t i n gd i vi s i o nso r g a n i z e da l o n gb u s i n e s s , p r o d uc t ,c u s t o me rg r ou p , o r g e og r a p h i cl i n e sa n dac e n t r a l c o r p o r a t eh e a d q u a r t e r st ha ta l l o c a t e sr e s o ur c e s , p r o v i de ss u p p o r tf u n c t i o n s , a n dmo ni t o r sd i v i s i o n a la c t i v i t i e s .Mu l t i di v i s i on a l s t r u c t u r e sa r ea l s oc a l l e dd i v i s i o n a ls t r u c t ur e sorMf o r ms .  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 Ama t r i xs t r uc t ur ei sac o mb i n a t i o ns t r u c t u r e st h a to v e r l a y so n et yp eo f s t r u c t u r eo n t oa no t he rt y p e , wi t hmul t i p l er e p o r t i n gr e l a t i on s h i p s . I ti su s e dt o f o s t e rc r o s s u n i tc o l l a b or a t i o n . Ma t r i xs t r u c t u r e sa r ea l s oc a l l e dc o mp o s i t e s t r u c t u r e so rc o mb i n a t i o ns t r uc t u r e s .  They are often used for project-based, process-based, or team-based 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  Th eu l t i ma t eg o a l ofd e c e n t r a l i z e dd e c i s i o nma ki n gi st op u ta u t h o r i t y i nt h eh a n d so ft h o s ep e r s o n sc l o s e s tt oa n dmo s tkno wl e d g e a bl ea b o u t t hes i t u a t i on . 

Effor t st ode c e nt r a l i z ede c i s i onma ki n ga ndgi v ec ompa n ype r s o nne ls omel e e wa yi n c onduc t i n gope r a t i onsmus t bet e mpe r e dwi t ht hene e dt oma i nt a i na de q ua t ec ont r ol a ndc r os s uni tc oor di na t i on.

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...