Transcript Chapter 12 Implementing Strategy in Companies That Compete in a

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Implementing Strategy in Companies
That Compete in a Single Industry
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Overview
 Strategy implementation
 How a company should create, use, and
combine organizational structure, control
systems, and culture to pursue
strategies that lead to a competitive
advantage and superior performance
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Implementing Strategy
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Six Organization Shapers
Buyer Power
 Buyers are gaining power and learning how
to use it
Variety and solutions
 Customers do not want bundle of products
and services
 They want them integrated into a solution
The Internet
 The web site becomes a single face to the
customer forcing functions to integrate
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Six Organization Shapers
Multiple dimensions (of organizations)
 Functions, products, geographies (old)
 Segments, solutions, channels, processes
(new)
Change
 Rapid change requires management to relearn and re-decide
 To make more decisions more frequently
 It requires more decentralized management
and networks of decision makers
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Six Organization Shapers
 More variety, more comprehensive
solutions – FASTER!
 Shorter lead times, shorter cycle
times
 Speed is a force for decentralization
 Can you think of examples?
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Competitive Advantage
An organization design that facilitates
 Variety,
 Change,
 Speed, and
 Integration
is a source of competitive advantage
It is difficult to execute but also
difficult to copy
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Tradeoffs
 Hype
 There has been an overselling of credible
ideas
 Teamwork, reengineering, virtual
organizations etc.
 Any organizational design requires
tradeoffs and will have positives and
negatives
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The Star Model
Strategy
People
Structure
Rewards
Processes
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The Star Model
 Strategy
 Is the company’s formula for winning!
 Goals, mission, objectives, values
 Delineates products, markets, value
proposition, competitive advantage
 First part of the model to be addressed
 Establishes criteria for choosing among
different organizational forms
 Drives resource allocation
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Structure
 Specialization
 Type and number of job specialties
 Shape
 Span of control – flat vs. tall structures
 Distribution of power
 Centralization vs. decentralization
 Departmentalization
 Function, product, process, market or
geography
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Processes
 Vertical processes
 Business planning, budgeting, resource
allocation decisions
 Horizontal (or lateral) processes
 Designed around the work flow
 Cross functional
 Value chain emphasis
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Rewards
Purpose
 To align the goals of the employees with
the goals of the organization
Some Issues
 Individual vs. Team
 Function vs. Cross function (‘citizenship’)
 Monetary vs. Non-monetary rewards
Rewards must be congruent with other
parts of organization design
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People
Human resources
 Recruiting, selection, rotation, training,
development
 Creating the skills and mind-sets needed
to implement the strategy (culture)
Must also develop organizational
capabilities
 Flexibility, ability to work with others
 Knowledge management
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Implications
Structure is only one facet of design
 Structure usually overemphasized
status and power issues
 Processes, rewards, and people are
becoming more important
Congruence
 Different strategies lead to different
organizations!
 All policies must be aligned and in harmony
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Matching strategy and structure
Departmentalization
 Departments arise when org size>24
 Consider:
Functional
Product
Market
Geographical
Process
Hybrid
 What are the (dis)advantages of each?
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Five Types of Lateral Processes
 Voluntary (or informal)
 Rotation, interdept events, co-location, mirror
image depts, consistent reward system
 E-coordination
 Formal group
 Full-time integrators
 Project managers, brand managers, process
managers etc.
 Matrix organization
 Level of coordination grows but so does cost and
difficulty of implementation
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Types of Strategic Control
System
 Personal control
 Face-to-face interaction
 Output control
 Performance goals for each division,
department, and employee
 Behavior control
 Rules and procedures to direction actions or
behaviors of divisions, functions, and individuals
 Operating budget
 Standardization
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Strategic Reward Systems
 Based on strategy managers must
decide which behaviors to reward
 A control system measures those
behaviors and links the reward
structure to them
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Organizational Culture
 Culture and strategic leadership
 Traits of strong and adaptive
corporate cultures
 Bias for action
 Sticking with what the organization does
best
 Motivating employees to do their best
 Anything else?
 Is culture a control mechanism?
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How
Organization
al
Design
Increases
Profitability
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Restructuring and
Reengineering
 Restructuring involves
 Streamlining hierarchy of authority and reducing
number of levels
 Downsizing the workforce to reduce costs
 Reasons
 Change in the business environment
 Excess capacity
 Organization grew too tall and inflexible;
bureaucratic costs
 To improve competitive advantage and stay on
top
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Restructuring and
Reengineering (cont’d)
 Reengineering
 Fundamental rethinking and radical
redesign of business processes to
achieve dramatic improvements
 Focuses not on functions, but on
processes (which cut across functions)
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Exercises
 Wal-Mart Control System
 Soft Drink Restructure
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