Bài giảng Crafting and Executing Strategy - Chapter 10: Building an Organization Capable ofGood Strategy Execution

Chapter 10: Building an Organization Capable ofGood Strategy ExecutionScreen graphics created by:Jana F. Kuzmicki, Ph.D.Troy UniversityChapter Learning ObjectivesGain command of what managers must do to promote successful strategy execution.Understand why good strategy execution requires astute managerial actions to build core competencies and competitive capabilities.Learn what issues to consider in organizing the work effort and why strategy-critical activities should be the main building blocks of the organizational structure.Become aware of the pros and cons of centralized and decentralized decision making in implementing and executing the chosen strategy.Chapter RoadmapA Framework for Executing StrategyBuilding an Organization Capable of Good Strategy ExecutionStaffing the OrganizationBuilding Core Competencies and Competitive CapabilitiesExecution-Related Aspects of Organizing the Work EffortCrafting vs. Executing StrategyCrafting the StrategyPrimarily a market-driven activitySuccessful strategy making depends onBusiness visionPerceptive analysis of market conditions and company capabilitiesAttracting and pleasing customersOutcompeting rivalsUsing company capabilities to forge a competitive advantageExecuting the StrategyPrimarily an operations-driven activitySuccessful strategy execution depends onDoing a good job of working through othersGood organization-buildingBuilding competitive capabilitiesCreating a strategy-supportive cultureGetting things done and delivering good results10-4An action-oriented, make-things happen task involving management’s ability toDirect organizational changeAchieve continuous improvement in operations and business processesMove toward operatingexcellenceCreate and nurture astrategy-supportive cultureConsistently meet or beat performance targets Tougher and more time-consuming than crafting strategyImplementation involves . . .Executing the StrategyImplementing a New StrategyRequires Adept LeadershipImplementing a new strategytakes adept leadership toConvincingly communicatereasons for the new strategyOvercome pockets of doubtSecure commitment of concerned partiesBuild consensus and enthusiasmGet all implementation pieces in place and coordinatedWhy Executing Strategy Isa Tough Management JobOvercoming resistance to changeWide array of demanding managerialactivities to be performedNumerous ways to tackle each activityNumber of bedeviling issues to be worked outDemands good people management skills Requires launching and managinga variety of initiatives simultaneouslyHard to integrate efforts of many different work groups into a smoothly-functioning wholeWho Are the Strategy Implementers?Implementing and executing strategy involves a company’s wholemanagement team and all employeesJust as every part of a watch plays a role in making the watch function properly, it takesall pieces of an organization working cohesively for a strategy to be well-executedTop-level managers must lead theprocess and orchestrate major initiativesBut they must rely on cooperation ofMiddle and lower-level managers to see things go well in various parts of an organization andEmployees to perform their roles competentlyGoals of the Strategy Implementing-Executing ProcessUnite total organization behind strategy See that activities are done ina manner that is conducive tofirst-rate strategy executionGenerate commitment so an enthusiasticcrusade emerges to carry out strategyFit how organization conducts itsoperations to strategy requirementsEvery manager has an active roleNo proven “formula” for implementing particular types of strategiesThere are guidelines, but no absolute rules and “must do it this way” rulesMany ways to proceed that are capable of workingCuts across many aspects of “how to manage”Characteristics of the Strategy Implementation ProcessEach implementation situation occurs in a different context, affected by differingBusiness practices and competitive situationsWork environments and culturesPoliciesCompensation incentivesMix of personalities and firm historiesApproach to implementation/execution has be customized to fit the situationPeople implement strategies - Not companies!Characteristics of the Strategy Implementation Process (continued)Figure 10.1: The Eight Components of Strategy Execution10-12Communicate the case for changeBuild consensus on how to proceedArouse enthusiasm for the strategyto turn implementation process intoa companywide crusade Empower subordinates to keep process movingEstablish measures of progress and deadlinesReward those who achieve implementation milestonesDirect resources to the right placesPersonally lead strategic change processand the drive for operating excellenceWhat Top Executives Have to Do inLeading the Implementation ProcessBUILDING A CAPABLE ORGANIZATION — WHAT IS INVOLVED?10-14Figure 10.2: The Three Components of Building anOrganization Capable of Proficient Strategy Execution 10-15Assembling a capable management team is a cornerstone of the organization-building taskFind the right people to fill each slotExisting management teammay be suitableCore executive groupmay need strengtheningPromote from withinBring in skilled outsidersPutting Together aStrong Management TeamSelecting the Management Team:Key ConsiderationsDetermine mix of BackgroundsExperiences and know-howBeliefs and valuesStyles of managing and personalitiesPersonal chemistry must be rightTalent base needs to be appropriatePicking a solid management team needs to be acted on early in implementation processThe quality of a company’speople is an essential ingredientof successful strategy executionBiggest challenge facing companiesHow to recruit and retain the bestand brightest talent with strongskill sets and management potentialIntellectual capital, not tangible assets, is increasingly being viewed as the most important investmentTalented people are a prime source of competitive advantage Recruiting and Retaining Talented Employees: Implementation IssuesKey Human Resource Practices toAttract and Retain Talented Employees Spend considerable effort in screeningjob applicants, selecting only those with Suitable skill setsEnergy and initiativePersonality traits that mesh well with firm’s work environment and cultureJudgment and aptitudes for learningPut employees through training programs throughout their careersGive promising employeeschallenging, interesting, andskills-stretching assignmentsRotate employees through jobs with great content, spanning functional and geographic boundariesEncourage employees toBe creative and innovativeChallenge existing ways of doing things and offer better waysSubmit ideas for new products or businessesFoster a stimulating work environmentExert efforts to retain high-potential employees with excellent salary and benefitsCoach average employees to improve their skillsKey Human Resource Practices to Attract and Retain Talented Employees (continued)Building Core Competenciesand Competitive CapabilitiesCrafting the strategy involvesIdentifying the desired competencies andcapabilities to build into the strategy to helpachieve a competitive advantageGood strategy execution requiresPutting desired competencies and capabilities in place,Upgrading them as needed, andModifying them as marketconditions evolve1. First develop ability to do something2. Build experience and gradually transform the ability into a core competence and proven capability3. Continue to refine and polish the competence/capability, striving to perform the activity better than rivals, thereby turning the core competence into a distinctive competence and providing a path to competitive advantage!Three-Stage Process of Developing Competencies and CapabilitiesDevelop ability to perform an activity well and at an acceptable costSelect people with relevant skills/experienceBroaden or expandindividual abilities as neededMold efforts and work products ofindividuals into a cooperative effortto create organizational abilityStep 1 in Developing CompetenciesAs experience builds and company learns how to perform the activity consistently well and at acceptable cost, transform the ability into a core competence and capabilityTypically, a core competence or competitive capability emerges from establishing and nurturing collaborative relationshipsBetween individuals and groups in different departmentsBetween a company and its strategic alliesStep 2 in Developing CompetenciesIf and when a company masters the activity, not just performing it really well but performing it better than rivals, the “core competence” (and now “proven capability”) becomes aDistinctive competence andHolds potential forcompetitive advantageStep 3 in Developing CompetenciesThis is the optimal outcome of the process of building competitively potent competencies and capabilities! 1. Competencies are bundles of skills and know-how growing from combined efforts of cross-functional departments2. Normally, competencies emerge incrementally from various company effortsto deal effectively with market conditions3. Leveraging competencies into competitive advantage requires concentrating more effort and talent than rivals on strengthening competencies to create valuable capabilities4. Sustaining competitive advantage requires adjusting competencies to new conditionsManaging the Process of Building Competences: Four Key TraitsCompetitive Advantage Potentialof Competencies and CapabilitiesWhen it is difficult to outstrategize rivals with a superior strategy . . . . . . Best avenue to industry leadership is to out-compete rivals withsuperior strategy execution!Building competencies and capabilitiesrivals can’t match is one of thebest ways to out-compete them! 10-27Execution-Related Aspectsof Organizing Work EffortsFew hard and fast rules for organizingOne Big Rule: Role and purpose of organization structure is to support and facilitate good strategy execution!Each firm’s structure is idiosyncratic, reflectingPrior arrangements and internal politicsExecutive judgments and preferences about how to arrange reporting relationshipsHow best to integrate and coordinate work effort of different work groups and departmentsVice PresidentVice PresidentVice PresidentCEOFigure 10.3: Structuring the Work Effort toPromote Successful Strategy Execution10-29Step 1: Decide Which Value Chain Activities to Perform Internally and Which to OutsourceInvolves deciding which activities areessential to strategic successMost strategies entail certain crucial business processes or activities that must be performed exceedingly well or in closely coordinated fashion if the strategy is to be executed with real proficiencyThese processes/activities usually need to be performed internallyOther activities, such as routine administrative housekeeping and some support functions, may becandidates for outsourcingCriticalactivitiesDetermining Strategy-Critical Activities: Issues to Consider1. What functions or business processeshave to be performed extra well or intimely fashion to achieve competitive advantage?2. In what value-chain activities wouldpoor execution seriously impairstrategic success?A company improves its chances for outclassing rivals inPerforming strategy-critical activities andTurning a core competence into a distinctive competenceStreamlining of internal operations that flows from outsourcing acts toDecrease internal bureaucraciesFlatten organization structureSpeed decision-makingIncrease competitive responsivenessPartnerships can add to a company’s arsenal of capabilities and contribute to better strategy executionPotential Advantages ofOutsourcing Non-Critical ActivitiesAppeal of OutsourcingOutsourcing non-critical activities allows a firm to concentrate its energies and resources on those value-chain activities where itCan create unique valueCan be best in the industryNeeds direct control toBuild core competenciesAchieve competitive advantageManage key customer-supplier-distributor relationshipsPotential Advantages of PartneringBy building, improving, and then leveraging partnerships, a firm enhances its overall capabilities and builds resource strengths thatDeliver value to customersRivals can’t quite matchConsequently pave the wayfor competitive successPartnering makes strategic sense when theresult is to enhance a company’s competencies and competitive capabilities.Dangers of OutsourcingA company must guard against hollowing out its knowledge base and capabilitiesWay to guard against pitfalls of outsourcingAvoid sourcing key components from a single supplierUse two or three suppliers to minimizedependence on any one supplierRegularly evaluate suppliersWork closely with key suppliersFor Discussion: Your OpinionWhile critics complain about companies that have outsourced functions once performed in-house to foreign suppliers (who can perform the functions more cheaply) because such outsourcing results in involuntary layoffs or job cuts, it is really fairer and more accurate to view outsourcing as a means whereby a company can enhance its competitiveness, achieve acceptable financial performance, and thereby better protect the jobs of the remaining employees. True or false? Explain. Assign managers of strategy-critical activities a visible, influential positionAvoid fragmenting responsibility for strategy-critical activities across many departmentsProvide coordinating linkages between related work groupsMeld into a valuablecompetitive capabilityAssignmanagerskey rolesPrimary activitiesStrategicrelation-shipsCoordi-nationValuablecapabilitySupportfunctionsStep 2: Make Strategy-CriticalActivities the Main Building BlocksWhat Types of OrganizationalStructures Fit Which Strategies?A company operating in one businessFunctional department structureA company with operations in various parts of the worldGeographic organizational unitsA vertically integrated companyDivisional organizational structureA diversified companyIndividual business units, with each business unit operating as independent profit centerIn a centralized structure Top managers retain authorityfor most decisionsIn a decentralized structureManagers and employees areempowered to make decisionsTrend in most companiesShift from authoritarian to decentralizedstructures stressing empowermentStep 3: Determine How MuchAuthority to Delegate to WhomTable 10.1: Advantages and Disadvantages ofCentralized versus Decentralized Decision Making10-40Classic method of coordinating activities – Have related units report to single managerUpper-level managers have cloutto coordinate efforts of their unitsSupport activities should bewoven into structure toMaximize performance of primary activitiesContain costs of support activitiesFormal reporting relationships often need to be supplemented to facilitate coordination Step 4: Provide for InternalCross-Unit CoordinationGuard Against FunctionalDesigns That Fragment ActivitiesScattering pieces of critical business processes across several specialized departments results inMany hand-offs whichLengthens completion time Drives up administrative costsIncreases risk of detailsfalling through the cracksObsession with activity rather than resultSolution  Business process reengineeringInvolves pulling strategy-critical processes from functional departments to create process departments or cross-functional work groupsExamples of Fragmented Strategy-Critical ActivitiesFilling customer ordersSpeeding new products to marketImproving product qualitySupply chain managementBuilding capability to conductbusiness via the InternetObtaining feedback from customers, making product modifications to meet their needsCross-functional task forcesDual reporting relationshipsInformal networkingVoluntary cooperationIncentive compensation tiedto group performanceTeamwork and cross-departmental cooperationCoordinating Mechanisms to Supplement the Basic Organization StructureStep 5: Provide forCollaboration With Outsiders Need multiple ties at multiple levels to ensureCommunicationCoordination and controlFind ways to produce collaborativeefforts to enhance firm’s capabilitiesand resource strengthsWhile collaborative relationshipspresent opportunities, nothingvaluable is realized until therelationship develops into an enginefor better organizational performanceGet right people togetherPromote good rapportSee plans for specific activitiesare developed and implementedHelp adjust internal procedures and communication systems toIron out operating dissimilaritiesNurture interpersonal tiesRoles of Relationship ManagersWith Strategic PartnersOrganizational Structures ofthe Future: Overall ThemesRevolutionary changes in how work is organized have been triggered byNew strategic prioritiesRapidly shifting competitive conditionsTools of organizational design includeEmpowered managers and workersReengineered work processesSelf-directed work teamsRapid incorporation of InternettechnologyNetworking with outsidersCharacteristics ofOrganizations of the FutureExtensive use of Internet technologyand e-commerce business practicesFewer barriers betweenDifferent vertical ranksFunctions and disciplinesUnits in different geographic locationsCompany and its suppliers, distributors,strategic allies, and customersCapacity for change and rapid learningCollaborative efforts among people in different functions and geographic locationsAssembling work teams including more members dispersed over a wider geographic areaChange &Learning