8/7/2019 Chap 11 AJS

1/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-1

Building Resource Strengths andBuilding Resource Strengths andOrganizational CapabilitiesOrganizational Capabilities

Building Resource Strengths andBuilding Resource Strengths andOrganizational CapabilitiesOrganizational Capabilities

11111111

Chapter

Screen graphics created by:

Jana F. Kuzmicki, Ph.D.

Troy State University-Florida and Western Region

8/7/2019 Chap 11 AJS

2/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-2

Crafting vs. Executing StrategyCrafting vs. Executing StrategyCrafting vs. Executing StrategyCrafting vs. Executing Strategy

Crafting the Strategy

Primarily a market-drivenactivity

Successful strategy makingdepends on

Business vision

Perceptive analysis ofmarket conditions andcompany resources andcapabilities

Attracting and pleasingcustomers

Outcompeting rivals

Using company resourcesand capabilities to forge acompetitive advantage

Executing the Strategy

Primarily an operations-drivenactivity

Successful strategy executiondepends on

Good organization-buildingand people management

Creating a strategy-supportive culture

Continuous improvement

Getting things done anddelivering good results

8/7/2019 Chap 11 AJS

3/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-3

Executing the StrategyExecuting the StrategyExecuting the StrategyExecuting the Strategy

An action-oriented, make-things happen taskinvolvingmanagements ability to

Direct organizational change

Achieve continuous improvement inoperations and business processes

Move toward operating excellence

Create and nurture astrategy-supportive culture

Consistently meet or beat performance targets

Tougher and more time-consuming than crafting strategy

Implementation

involves . . .

8/7/2019 Chap 11 AJS

4/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-4

Why Executing Strategy Is aWhy Executing Strategy Is aTough Management JobTough Management Job

Why Executing Strategy Is aWhy Executing Strategy Is aTough Management JobTough Management Job

The demanding variety of managerial

activities to be performed

Numerous ways to tackle each activity

Requires good people management skills

Requires launching and managing

a variety of initiatives simultaneously

Number of bedeviling issues to be worked out Battling resistance to change

Hard to integrate efforts of many different work groups

into a smoothly-functioning whole

8/7/2019 Chap 11 AJS

5/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-5

Implementing a Newly ChosenImplementing a Newly ChosenStrategy Requires Adept LeadershipStrategy Requires Adept Leadership

Implementing a Newly ChosenImplementing a Newly ChosenStrategy Requires Adept LeadershipStrategy Requires Adept Leadership

Implementinga new strategy

takes adeptleadership to

Convincingly communicate

reasons for the new strategy

Overcome pockets of doubt

Build consensus and enthusiasm

Secure commitment of concerned parties

Get all implementation pieces in place and coordinated

8/7/2019 Chap 11 AJS

6/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-6

Who Are theWho Are theStrategy Implementers?Strategy Implementers?

Who Are theWho Are theStrategy Implementers?Strategy Implementers?

Implementing and executing strategy involves acompanys whole management team and allemployees

Just as every part of a watch plays a role in making thewatch function properly, it takes all pieces of anorganization working cohesively for a strategyto be well-executed

Top-level managers must lead the processand orchestrate major initiatives

Butthey must rely on the cooperation of Middle and lower-level managers to see that things go

well in the various parts of the organization and

Employees to perform their roles competently on a daily

basis

8/7/2019 Chap 11 AJS

7/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-7

What Are the Goals of the StrategyWhat Are the Goals of the StrategyImplementingImplementing--Executing Process?Executing Process?

What Are the Goals of the StrategyWhat Are the Goals of the StrategyImplementingImplementing--Executing Process?Executing Process?

Unite total organizationbehind strategy

See that activities are done in a manner that is conducive

tofirst-rate strategy execution

Generate commitmentso an enthusiastic

crusade emerges to carry out strategy

Fithow organization conducts its

operations to requirements of strategy

8/7/2019 Chap 11 AJS

8/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-8

Characteristics of the StrategyCharacteristics of the Strategy

Implementation ProcessImplementation Process

Characteristics of the StrategyCharacteristics of the Strategy

Implementation ProcessImplementation Process

Every manager has an active role

No proven formula for implementing

particular types of strategies

There are guidelines, but no

absolute rules and must do it

this way rules

Many ways to proceed that arecapable of working

Cuts across many aspects of how to manage

8/7/2019 Chap 11 AJS

9/33

8/7/2019 Chap 11 AJS

10/33

BUILDING A CAPABLEBUILDING A CAPABLE

ORGANIZATIONORGANIZATION WHATWHAT

IS INVOLVED?IS INVOLVED?

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.

8/7/2019 Chap 11 AJS

11/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-11

Putting Together a StrongPutting Together a StrongManagement TeamManagement Team

Putting Together a StrongPutting Together a StrongManagement TeamManagement Team

Assembling a capable management team is a cornerstone

of the organization-building task

Find the right people to fill each slot

Existing management team

may be suitable

Core executive group

may need strengthening

Promote from within

Bring in skilled outsiders

8/7/2019 Chap 11 AJS

12/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-12

Selecting the ManagementSelecting the ManagementTeam: Key ConsiderationsTeam: Key Considerations

Selecting the ManagementSelecting the ManagementTeam: Key ConsiderationsTeam: Key Considerations

Determine mix of

Backgrounds

Experiences and know-how

Beliefs and values

Styles of managing and personalities

Personal chemistry must be right

Talent base needs to be appropriate

Picking a solid management team needs to be acted on

early in implementation process

8/7/2019 Chap 11 AJS

13/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-13

Building Core CompetencesBuilding Core Competencesand Competitive Capabilitiesand Competitive CapabilitiesBuilding Core CompetencesBuilding Core Competencesand Competitive Capabilitiesand Competitive Capabilities

Craftingthe strategy involves

Identifyingthe desired competences and capabilities to

build into the strategy and help achieve competitive

advantage

Good strategy execution requires

Puttingdesired competences and capabilities in place,

Upgradingthem as needed, and

Modifyingthem as market

conditions evolve

8/7/2019 Chap 11 AJS

14/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-14

ThreeThree--Stage Process of DevelopingStage Process of Developing

Competences and CapabilitiesCompetences and Capabilities

ThreeThree--Stage Process of DevelopingStage Process of Developing

Competences and CapabilitiesCompetences and Capabilities

1. Develop ability to do something

2. As experience builds,

ability can translate into a

competence or capability

3. Ifability continues to be polished and refined, itcan become a distinctive competence,providing a

potential competitive advantage!

8/7/2019 Chap 11 AJS

15/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-15

Competitive Advantage PotentialCompetitive Advantage Potentialof Competences and Capabilitiesof Competences and Capabilities

When it is difficultto outstrategize rivals

with a superior strategy ...

... Best avenue to industry

leadership is to out-compete

rivals with superior strategy

execution!

Building competences and capabilities

rivals cant match is one of the

best ways to out-compete them!

8/7/2019 Chap 11 AJS

16/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-16

Strategic Role ofStrategic Role ofEmployee TrainingEmployee TrainingStrategic Role ofStrategic Role of

Employee TrainingEmployee Training Training plays a critical role in implementation when a

firm shifts to a strategy requiring different

Skills or core competences

Competitive capabilities Managerial approaches

Operating methods

Types of training approaches

Internal universities Orientation sessions for new employees

Tuition reimbursement programs

Online training courses

8/7/2019 Chap 11 AJS

17/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-17

Pinpointing StrategyPinpointing Strategy--CriticalCriticalActivities: Ask 2 QuestionsActivities: Ask 2 Questions

Pinpointing StrategyPinpointing Strategy--CriticalCriticalActivities: Ask 2 QuestionsActivities: Ask 2 Questions

1.What functions or business processes

have to be performed extra well or in

timely fashion to achieve competitive advantage?

2. In what value-chain activities wouldpoor execution seriously impair

strategic success?

8/7/2019 Chap 11 AJS

18/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-18

Potential Advantages ofPotential Advantages ofOutsourcing NonOutsourcing Non--Critical ActivitiesCritical Activities

Potential Advantages ofPotential Advantages ofOutsourcing NonOutsourcing Non--Critical ActivitiesCritical Activities

Decrease internal bureaucracies

Flatten organization structure

Speed decision-making

Provide firm with heightened strategic focus

Improve a firms innovative capacity

Increase competitive responsiveness

Outsourcing makes strategic sense when an outsider

can perform an activity cheaper or better.

8/7/2019 Chap 11 AJS

19/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-19

Appeal of OutsourcingAppeal of OutsourcingAppeal of OutsourcingAppeal of Outsourcing

Outsourcing non-critical activities allows a firm to

concentrate its energies and resources on those value-

chain activities where it

Can create unique value

Can be best in the industry

Needs direct control to

Build core competences

Achieve competitive advantage

Manage key customer-supplier-distributor relationships

8/7/2019 Chap 11 AJS

20/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-20

Potential AdvantagesPotential Advantagesof Partneringof Partnering

Potential AdvantagesPotential Advantagesof Partneringof Partnering

By building, improving, and then leveragingpartnerships, a firm enhances its overall capabilities andbuilds resource strengths that

Deliver value to customers

Rivals cant quite match

Consequently pave the wayfor competitive success

Partnering makes strategic sense when the

result is to enhance a companys competences and

competitive capabilities.

8/7/2019 Chap 11 AJS

21/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-21

Dangers of OutsourcingDangers of OutsourcingDangers of OutsourcingDangers of Outsourcing

A company must guard against hollowing out its

knowledge base and capabilities

Way to guard against pitfalls of outsourcing

Avoid sourcing key components from a single supplier

Use two or three suppliers to minimize

dependence on any one supplier

Regularly evaluate suppliers

Work closely with key suppliers

8/7/2019 Chap 11 AJS

22/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-22

Step 2: Make StrategyStep 2: Make Strategy--CriticalCriticalActivities the Main Building BlocksActivities the Main Building Blocks

Step 2: Make StrategyStep 2: Make Strategy--CriticalCriticalActivities the Main Building BlocksActivities the Main Building Blocks

Assign managers of strategy-critical activities a visible,

influential position

Avoidfragmenting responsibility for strategy

-criticalactivities across many departments

Provide coordinating linkages

between related work groups

Meld into a valuable

competitive capability

Assign

managers

key roles

Primaryactivities

Strategic

relation-

ships

Coordi-

nation

Valuable

capability

Supportfunctions

8/7/2019 Chap 11 AJS

23/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-23

Why StructureWhy StructureFollows StrategyFollows StrategyWhy StructureWhy StructureFollows StrategyFollows Strategy

Changes in strategy typically require a new or modified

organization structure

A new strategy often involves different skills,

different key activities, and different staffingand organizational requirements

Hence, a new strategy signals a need to

reassess and often modify the organization

structure

How work is structured is a means to an end

not an end in itself!

8/7/2019 Chap 11 AJS

24/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-24

Examples of FragmentedExamples of FragmentedStrategyStrategy--Critical ActivitiesCritical ActivitiesExamples of FragmentedExamples of FragmentedStrategyStrategy--Critical ActivitiesCritical Activities

Filling customer orders

Speeding new products to market

Improving product quality

Supply chain management

Building capability to conduct business via the Internet

Obtaining feedback from customers, making product

modifications to meet their needs

8/7/2019 Chap 11 AJS

25/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-25

Advantages of aAdvantages of aDecentralized StructureDecentralized Structure

Advantages of aAdvantages of aDecentralized StructureDecentralized Structure

Creates a more horizontal structure with fewer management layers

Managers and employees develop their own answers and action plans

Make decisions in their areas of responsibility

Held accountable for results

Shortens organizational response times and spurs New ideas

Creative thinking and innovation

Greater involvement of managers and employees

Jobs can be defined more broadly

Fewer managers are needed

Electronic communication systems provide quick, direct access to

data

Genuine gains in morale and productivity

8/7/2019 Chap 11 AJS

26/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-26

Step 4: Provide for InternalStep 4: Provide for InternalCrossCross--Unit CoordinationUnit Coordination

Step 4: Provide for InternalStep 4: Provide for InternalCrossCross--Unit CoordinationUnit Coordination

Classic methodofcoordinating activities Have related

units reportto single manager

Upper-level managers have clout to

coordinate efforts of their units

Support activities should be

woven into structure to

Maximize performance of primary activities

Contain costs of support activities

Formalreporting relationships often need to be

supplementedtofacilitate coordination

8/7/2019 Chap 11 AJS

27/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-27

Coordinating Mechanisms to SupplementCoordinating Mechanisms to Supplement

the Basic Organization Structurethe Basic Organization Structure

Coordinating Mechanisms to SupplementCoordinating Mechanisms to Supplement

the Basic Organization Structurethe Basic Organization Structure

Cross-functional task forces

Dual reporting relationships

Informal networking

Voluntary cooperation

Incentive compensation tied

to group performance

Teamwork and cross-

departmental cooperation

8/7/2019 Chap 11 AJS

28/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-28

Step 5: Provide forStep 5: Provide forCollaboration With OutsidersCollaboration With Outsiders

Step 5: Provide forStep 5: Provide forCollaboration With OutsidersCollaboration With Outsiders

Need multiple ties at multiple levels to ensure

Communication

Coordination and control

Find ways to produce collaborative efforts to

enhance firms capabilities and resource strengths

While collaborative relationships present opportunities,nothing valuable is realized untilthe relationship

develops into an engine for betterorganizational

performance

8/7/2019 Chap 11 AJS

29/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-29

Roles of Relationship ManagersRoles of Relationship ManagersWith Strategic PartnersWith Strategic Partners

Roles of Relationship ManagersRoles of Relationship ManagersWith Strategic PartnersWith Strategic Partners

Get right people together

Promote good rapport

See plans for specific activitiesare developed and implemented

Help adjust internal procedures

and communication systems to

Iron out operating dissimilarities

Nurture interpersonal ties

8/7/2019 Chap 11 AJS

30/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-30

Perspectives on OrganizingPerspectives on OrganizingPerspectives on OrganizingPerspectives on Organizing

All basic organization designs have strategy-related

strengths and weaknesses

No idealorganization design exists

To do a good job ofmatching

structure to strategy

Pick a basic design

Modify as needed

Supplement with appropriate coordinating, networking,

and communication mechanisms to support effective

execution of the strategy

8/7/2019 Chap 11 AJS

31/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-31

Drawbacks of CentralizedDrawbacks of CentralizedAuthoritarian StructuresAuthoritarian Structures

Drawbacks of CentralizedDrawbacks of CentralizedAuthoritarian StructuresAuthoritarian Structures

Centralizedor authoritarian structures have often

turned out to be a liability where

Customer preferences shift from

standardized to customized products Product life-cycles grow shorter

Flexible manufacturing replaces

mass production

Customers want to be treated as individuals

Pace of technological change accelerates

Market conditions are fluid

8/7/2019 Chap 11 AJS

32/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-32

Characteristics ofCharacteristics ofOrganizations of the FutureOrganizations of the Future

Characteristics ofCharacteristics ofOrganizations of the FutureOrganizations of the Future

Fewer barriersbetween

Different vertical ranks

Functions and disciplines

Units in different geographic locations Company and its suppliers, distributors,

strategic allies, and customers

Capacity forchange and rapidlearning

Collaborative efforts among people in differentfunctions and geographic locations

Extensive use ofInternet technology

and e-commercebusiness practices

Change &Learning

8/7/2019 Chap 11 AJS

33/33

McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc. All rights reserved.11-33

Building Resource Strengths andBuilding Resource Strengths andOrganizational CapabilitiesOrganizational Capabilities

Building Resource Strengths andBuilding Resource Strengths andOrganizational CapabilitiesOrganizational Capabilities

11111111

Chapter

Screen graphics created by:

Jana F. Kuzmicki, Ph.D.

Troy State University-Florida and Western Region