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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

The Task of Implementing Strategy

q

An action-oriented, operations-driven activityrevolving around managing people and businessprocesses

q Tougher and more time-consuming than crafting

strategy

q Success depends on doing agood job of

Leading Motivating

Working with others to create fits between

strategy and how organization does things

Implementation

involves . . .

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Why Implementing Strategy Isa Tough Management Job

q Implementing a new strategytakes adeptleadership to

Overcome pockets of doubt

Build consensus

Secure commitment of concernedparties

Get all implementation pieces in place

and coordinated

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

The Eight Components ofImplementing Strategy

StrategyImplementers

Action

Agenda

Building a

Capable

Organization

Allocating Resources

Establishing Strategy-

Supportive Policies

Instituting BestPractices for

Continuous

Improvement

Installing Support

Systems to Carry

out Strategic RolesTying Rewards

to Achievement

of Key Strategic Targets

Exercising

Strategic

Leadership

Shaping Corporate

Culture to Fit

Strategy

q supportive fits

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Task # 1: Building aCapable Organization

Select able peoplefor key positions

Develop skills, core competencies,managerial talents, competitive capabilities

Organize business processes, value chainactivities, and decision-making to promote

successful strategy execution

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Building Core Competencies: TheNecessary Understanding

1. Core competencies are rarely grounded in skillsor know-how of a single department Typically emerge from

collaborative efforts of

different work groups2. Leveraging competencies into competitive

advantage requires concentrating more effortand more talent than rivals on strengtheningcompetencies and creating valuableorganizational capabilities

4. Sustainingcompetitive advantage requires

adaptingcompetencies to new conditions

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Building Competitively ValuableCompetencies and Capabilities

q

Involves Managinghuman skills, knowledge bases,

and intellect

Coordinatingefforts of related work groups

Collaborative networkingamong internal

groups and with external partners

Achieving dominating depth

q Senior managers have toguide the processq The Ongoing Challenge: Broaden, deepen, or

modify competencies and capabilities in

response to customer/market changes

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

The Process of BuildingOrganizational Capabilities: Step 1

q

Step one is to Select people with relevant skills/experience

Broaden or deepen individual abilities asneeded

Mold the energies andwork products ofindividuals into a

cooperative group effortto create organizational ability

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

The Process of BuildingOrganizational Capabilities: Step 2

q

As experience builds, such that theorganization learns to accomplish

the activity consistently well and at

acceptable cost, the ability

translates into a competence and

an organizationalcapability

q Capabilities emerge from establishing and

nurturing collaborative working relationships

between individuals and groups in departments

and between a company and its external allies

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

The Process of BuildingOrganizational Capabilities: Step 3

q If mastery is achieved to the point wherethe organization has the capability to

perform the activitybetter than rivals,

the capability becomes adistinctive competence

and holds potential for

competitive advantage This is the optimal outcome

of the capability-building

process!!

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Strategy and Organization Structure

q

Few hard and fast rules for organizing Main rule:Structure must support and

facilitate good strategy execution

q Each firms organization structure is

idiosyncratic, reflecting

Prior arrangements, internal politics

Executive judgments and preferences about

how to arrange reporting relationships

V i c e P r e s i d e n t V i c e P r e s i d e n t V i c e P r e s i d e n t

C E O

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Matching Organization Structure toStrategy: The Steps to Take

1. Pinpoint critical activities and capabilities2. Decide which activities to outsource

3. Decide which activities require partners

4. Make primary, internally-performed

activities the main building blocks

5. Determine degree of authority to delegate

6. Establish ways to achieve coordination

7. Assign responsibility for managing

relationships with outsiders

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Strategy-Driven Approachesto Organization Structure

Functional and process specialization

Geographic organization

Decentralized business units

Strategic business units

Matrix structures

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

A Traditional FunctionalOrganizational Structure

General Manager

Research &

DevelopmentManufacturing

Human

Resources

Engineering MarketingFinance &

Accounting

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

A Process-Oriented FunctionalStructure

General Manager

Foundry &

Castings

Screw

MachiningInspection

Customer

Service

Milling &

Grinding

Finishing &

Heat Treating

Loading &

Shipping

Billing &

Accounting

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

A GeographicOrganizational Structure

CEO

Corporate

Staff

GMEurope

GMLatin America

GMNorth America

GMAsia Pacific

GMCentral Asia &

Africa

Marketing &

DistributionProduction

Engineering &

Prod. Design

DistrictStaff

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

A Decentralized Line-of-BusinessOrganization Structure

CEO

Corporate

Services

GM

Business B

Functional/Process

Departments

GM

Business A

Functional/Process

Departments

GM

Business C

Functional/Process

Departments

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

An SBU Organization Structure

CEO

Corporate

Services

Group VP

SBU II

Strategically Related

Business Units

Group VP

SBU I

Strategically Related

Business Units

Group VP

SBU III

Strategically Related

Business Units

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

A Matrix Organization Structure

Head

Manufacture

Head

R&D

Venture

Manager 1

Head

Marketing

Head

Finance

Venture

Manager 2

Venture

Manager 3

Venture

Manager 4

R&D

Specialists

Production

Specialists

Marketing

Specialists

Finance

Specialists

R&D

Specialists

Production

Specialists

Marketing

Specialists

Finance

Specialists

R&D

Specialists

Production

Specialists

Marketing

Specialists

Finance

Specialists

R&D

Specialists

Production

Specialists

Marketing

Specialists

Finance

Specialists

General Manager

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The McGraw-Hill Companies, Inc., 1998Irwin/McGraw-Hill

Perspectives on Organizing

q

All the basic organization structures havestrategic advantages and disadvantages

q There is no idealorganization design

q To do a good job ofmatching

structure to strategy

Pick a basic design

Modify as needed

Supplement with coordinating mechanisms

and communication arrangements

C f

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The McGraw Hill Companies Inc 1998I i /M G Hill

Characteristics ofOrganizations of the Future

q

Fewer boundaries between Different vertical ranks

Functions and disciplines

Units in different geographic locations Firm and its suppliers, distributors, strategic

allies, and customers

q

Capacity for change and learningq Collaborative efforts among people in different

functions and geographic locations

q Extensive use of digital technology

Change &Learning