Professional Documents
Culture Documents
Executing the
Strategy: Building a
Capable Organization
and Instilling a Culture
Quote . . .
An organizations capacity
to execute its strategy
depends on its hard
infrastructureits
organizational structure and
systemsand
on its soft
Amar Bhide
Chapter Outline
A Framework for Executing Strategy
The Principal Managerial Components of the Strategy
Execution Process
Building a Capable Organization
Staffing the Organization
Building Core Competencies and Competitive
Capabilities
Organizing the Work Effort
Instilling a Corporate Culture
Implementing a New
Strategy
Requires
Adept Leadership
Implementing
a new strategy
takes adept leadership to
Convincingly communicate
reasons for the new strategy
Overcome pockets of doubt
Build consensus and enthusiasm
Secure commitment of concerned parties
Get all the implementation pieces launched, put in place
expeditiously, and then coordinated into a smoothly
functioning operation
Characteristics of the
Strategy Implementation
Every manager has Process
an active role
No proven formula for implementing
particular types of strategies
There are guidelines, but no
absolute must do it this way
rules
There are usually several ways to
proceed that are capable of working
The process cuts across many aspects of how to
manage
Characteristics of the
Strategy Implementation
Process
(continued)
Each implementation
situation occurs in a different
context, affected by differing
Business practices and competitive situations
Work environments and cultures
Policies
Compensation incentives
Mix of personalities and firm histories
Approach to implementation/execution
has to be customized to fit the situation
People implement strategies - Not companies!
BUILDING A CAPABLE
ORGANIZATION
WHAT IS INVOLVED?
Strategically-Relevant
Competencies:
Some
Examples
Greater proficiency
in product
development
Better manufacturing know-how
Capability to provide better after-sale service
Faster response to changing customer needs
Superior cost-cutting skills
Capacity to speed new products to market
Superior inventory management systems
Better marketing and merchandising skills
Specialized depth in unique technologies
Greater effectiveness in promoting
union-management cooperation
Developing
professional managers
with broad problemsolving skills and
proven ability to grow
global businesses
1.
Three-Stage Process of
Developing Competencies
and
Capabilities
Develop ability to do something
2. As experience builds,
ability can translate into a
competence or capability
3. If competence or capability continues to be
polished and refined, it can become a
distinctive competence, providing a potential
competitive advantage!
Step 1 in Developing
Competencies
Develop ability to do something
Select people with relevant skills/experience
Step 2 in Developing
Competencies
As experience builds and company learns how to
perform the activity consistently well and at acceptable
cost, the ability gradually evolves into a
competence or capability over a period of time
Typically, a capability or competence emerges from
establishing and nurturing collaborative
relationships between
Individuals and groups in different departments and/or
A company and its external allies
Step 3 in Developing
Competencies
If company masters the activity, performing it
better than rivals, the capability or
competence becomes a
Distinctive competence and
Holds potential for
competitive advantage
Approaches to Developing
Competencies
Internal development involves either
Strengthening the companys base of skills,
knowledge, and intellect or
Coordinating and networking the efforts
of various work groups and departments
Ongoing efforts to keep core competencies up-todate can provide a basis for sustaining both
Effective strategy execution and
Competitive advantage
Competitive Advantage
Potential
of Competencies
and
When it is difficult to outstrategize
Capabilities
rivals
with a superior strategy . . .
. . . Best avenue to industry
leadership is to out-compete
rivals with superior strategy
execution!
Building competencies and capabilities
rivals cant match is one of the
best ways to out-compete them!
Vice President
Vice President
Pinpointing Strategy-Critical
Activities
1. What functions or business processes have to be
performed extra well or in timely fashion to achieve
competitive advantage?
Potential Benefits of
Outsourcing Non-Critical
Activities
Turn a core competence
into a distinctive competence
Decrease internal bureaucracies
Flatten organization structure
Speed internal decision-making
Increase competitive responsiveness
Provide firm with heightened strategic focus
Enhance overall capabilities and resource strengths
Outsourcing makes strategic sense when an
outsider can perform an activity cheaper or better!
Appeal 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
Dangers 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
In a centralized structure
In a decentralized structure
Managers and employees are
empowered to make decisions
Characteristics of
Centralized Decision Making
Top executives retain authority
For most strategic and operating decisions and
Keep a tight rein on lower-level managers
Advantages of a
Decentralized Structure
Creates more horizontal structure with fewer management layers
Managers and employees develop their own action plans
Make decisions in their areas of responsibility
Held accountable for results
Maintaining Control in
a Decentralized Structure
Place limits on authority empowered employees
can exercise
Hold people accountable for their decisions
Institute compensation incentives that reward
employees for doing their jobs in a manner
contributing to good company performance
Create a corporate culture where
theres strong peer pressure on
employees to act responsibly
Coordinating Mechanisms to
Supplement the Basic
Organization Structure
Process departments
Roles of Relationship
Managers
with
Strategic Partners
Get right
people together
Promote good rapport
See plans for specific activities
are developed and implemented
Help adjust internal procedures
and communication systems to
Iron out operating dissimilarities
Nurture interpersonal ties
BUILD A
STRATEGY-SUPPORTIVE
CORPORATE CULTURE
Defining Characteristics
of Corporate Culture
Core values, beliefs, and business principles
Ethical standards
Operating practices and behaviors defining
how we do things around here
Approach to people management
Chemistry and personality permeating
work environment
Oft-told stories illustrating
Companys values
Business practices
Traditions
Company motto
Respond to Unreasonable
Customer Requests
How Is a Companys
Culture Perpetuated?
Selecting new employees who will fit in
Systematic indoctrination of new employees
Senior management efforts to reinforce core values,
beliefs, principles, key operating practices
Story-telling of company legends
Ceremonies honoring employees
who display cultural ideals
Visibly rewarding those
who follow cultural norms
Optimal Outcome of a
Tight Culture-Strategy Fit
A good job of culture-building by managers
Promotes can-do attitudes
Encourages acceptance of change
Instills strong peer pressure for
strategy-supportive behaviors
Enlists enthusiasm and dedicated
effort to achieve company objectives
Perils of Strategy-Culture
Conflict
Conflicts between culturally-approved
behaviors and behaviors needed for good
strategy execution send mixed signals
Should employees by loyal to the culture and company
traditions and resist actions and behaviors promoting
better strategy execution?
Or should they support the strategy by engaging in
behaviors that run counter to the culture?
Characteristics of
Strong Culture Companies
Conduct business according to a clear, widelyunderstood philosophy
Considerable time spent by management
communicating and reinforcing values
Values are widely shared and deeply rooted
Have a well-defined corporate character,
reinforced by a creed or values statement
Careful screening/selection of new
employees to be sure they fit in
Characteristics of
Weak Culture Companies
Lack of a widely-shared core set of values
Few behavioral norms evident in operating practices
Few strong traditions
No strong sense of company identity
Little cohesion among departments
Weak employee allegiance to
companys vision and strategy
Characteristics of Unhealthy
Cultures
Highly politicized internal environment
Issues resolved on basis of political clout
Hostility to change
Avoid risks and dont screw up
Experimentation and efforts to
alter status quo discouraged
Hallmarks of Adaptive
Cultures
Willingness to accept change and embrace challenge of
introducing new strategies
Risk-taking, experimentation, and innovation to satisfy
stakeholders
Internal entrepreneurship is
encouraged and rewarded
Funds provided for new products
New ideas openly evaluated
Genuine interest in well-being
of all key constituencies
Proactive approaches to
implement workable solutions
Menu of Culture-Changing
Actions
Make a compelling case why a new culture is in best
interests of both company and employees
Challenge status quo
Create events where employees
must listen to angry key stakeholders
Menu of Culture-Changing
Actions (continued)
Alter incentive compensation to
reward desired cultural behavior
Hire new managers and employees who have
desired cultural traits and can serve as role models
Replace key executives strongly
associated with old culture
Revise policies and procedures
to help drive cultural change
Symbolic Culture-Changing
Actions
Emphasize frugality
Eliminate executive perks
Require executives to spend
time talking with customers
Ceremonial events to praise people and
teams who get with the program
Alter practices identified as cultural hindrances
Visible awards to honor heroes
Substantive Culture-Changing
Actions
Engineer quick successes to highlight
benefits of proposed cultural changes
Bring in new blood, replacing
traditional managers
Change dysfunctional policies
Change reward structure
Reallocate budget, downsizing and upsizing
Reinforce culture through both word and deed
Enlist support of cultural norms from frontline
supervisors and employee opinion leaders
Approaches to Establishing
Ethical Standards
Word-of-mouth indoctrination and tradition
Annual reports and Web sites
Orientation courses for new employees
Training courses for managers and employees
Making stakeholders aware of a commitment
to ethical business conduct is attributable to
Greater management understanding of role
these statements play in culture building
Renewed focus on ethical standards
stemming from recent corporate scandals
Growing numbers of consumers who
prefer to patronize ethical companies
Key Approaches to
Enforcing Ethical Behavior
Have mandatory ethics trainings for employees
Conduct an annual audit to assess
Each managers efforts to
uphold ethical standards
Actions taken by managers
to remedy deficient conduct
Establishing a Strategy-Culture
Fit in Multinational and
Global
Companies
Institute training
programs to
Communicate meaning of core values and
Explain case for common operating
principles and practices