Crafting vs. Executing Strategy

1 Screen graphics created by: Jana F. Kuzmicki, Troy University Crafting vs. Executing Strategy Executing the Strategy Crafting the Strategy Executing the Strategy An action-oriented, make-things happen Primarily a market-driven Primarily an operations- task involving management's ability to activity driven activity Direct organizational change Successful Strategy making Successful Strategy depends on execution depends on Achieve continuous improvement in operations Business vision Doing a good job of and business processes Implementation Perceptive analysis of working through others market conditions and Move toward operating involves .. Good organization- company capabilities building excellence Attracting and pleasing Building competitive Create and nurture a customers capabilities Strategy -supportive culture Outcompeting rivals Creating a Strategy - Using company supportive culture Consistently meet or beat performance targets capabilities to forge a Getting things done and competitive advantage delivering good results Tougher and more time-consuming than Crafting Strategy Implementing a New Strategy Why Executing Strategy Is Requires Adept Leadership a Tough Management Job Implementing a new Strategy Overcoming resistance to change takes adept leadership to Wide array of demanding managerial activities to be performed Convincingly communicate reasons for the new Strategy Numerous ways to tackle each activity Overcome pockets of doubt Number of bedeviling issues to be worked out Demands good people management skills Secure commitment of concerned

2 Parties Requires launching and managing Build consensus and enthusiasm a variety of initiatives simultaneously Get all implementation pieces in place and Hard to integrate efforts of many different coordinated work groups into a smoothly-functioning whole 1. Goals of the Strategy Characteristics of the Strategy Implementing- Executing Process Implementation Process Unite total organization behind Strategy Every manager has an active role No proven formula for implementing See that activities are done in particular types of strategies a manner that is conducive to first-rate Strategy execution There are guidelines, but no absolute rules and must do it this way rules Generate commitment so an enthusiastic crusade emerges to carry out Strategy Many ways to proceed that are capable of working Fit how organization conducts its Cuts across many aspects of how to operations to Strategy requirements manage . Characteristics of the Strategy Figure : The Eight Components of Strategy Execution Implementation Process (continued).

3 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 be customized to fit the situation People implement strategies - Not companies! Figure : The Three Components of Building an Organization Capable of Proficient Strategy Execution Putting Together a Strong Management 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 2. Building Core Competencies Example: Intel's Core Competence and Competitive Capabilities Crafting the Strategy involves Identifying the desired competencies and capabilities to build into the Strategy to help Design and mass production achieve a competitive advantage of complex chips Good Strategy execution requires for personal computers Putting desired competencies and capabilities in place, Upgrading them as needed, and Modifying them as market conditions evolve Example: Procter & Gamble's Example.

4 Ciba Specialty Core Competencies Chemicals Core Competence Superb marketing-distribution skills and R&D Technology-based competencies allowing it to capabilities in five core technologies - fats, quickly manufacture products for customers wanting customized products relating to coloration, oils, skin chemistry, surfactants, emulsifiers brightening and whitening, water treatment and paper processing, freshness, and cleaning Example: Disney's Core Competencies Example: Toyota's Core Competence Legendary production system giving it Theme park operation the capability to produce high-quality Family entertainment vehicles at relatively low costs 3. Three-Stage Process of Developing Managing the Process of Building Competencies and Capabilities Competences: Four Key Traits 1. First develop ability to do something 1. Competencies are bundles of skills and know-how growing from combined efforts of 2. Build experience and gradually cross-functional departments transform the ability into a 2.

5 Normally, competencies emerge core competence and incrementally from various company efforts proven capability to deal effectively with market conditions 3. Continue to refine and polish the 3. Leveraging competencies into competitive competence/capability, striving to perform advantage requires concentrating more effort the activity better than rivals, thereby and talent than rivals on strengthening turning the core competence into a competencies to create valuable capabilities distinctive competence and providing a 4. Sustaining competitive advantage requires path to competitive advantage! adjusting competencies to new conditions Updating Competencies and Approaches to Developing Competencies Capabilities as Conditions Change Internal development involves either Competencies and capabilities must Strengthening the company's base of skills, continuously be modified and perhaps knowledge, and intellect or even replaced with new ones due to Coordinating and networking the efforts New strategic requirements of various work groups and departments Evolving market conditions Partnering with key suppliers, Changing customer expectations forming strategic alliances.

6 Or maybe even outsourcing Ongoing efforts to keep core competencies certain activities to specialists up-to-date can provide a basis for sustaining both Buying a company that has the required capabilities and integrating these Effective Strategy execution and competencies into the firm's value chain Competitive advantage Competitive Advantage Potential Strategic Role of Employee Training of Competencies and Capabilities Training plays a critical role in implementation when a firm shifts to a When it is difficult to outstrategize rivals Strategy requiring different with a superior Strategy .. Skills or core competencies Competitive capabilities .. Best avenue to industry Managerial approaches leadership is to out-compete Operating methods rivals with Types of training approaches superior Strategy execution! Internal universities . Orientation sessions for new employees Building competencies and capabilities Tuition reimbursement programs rivals can't match is one of the Online training courses best ways to out-compete them!

7 4. Figure : Structuring the Work Effort to Promote Successful Strategy Execution Involves deciding which activities are essential to strategic success Most 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 proficiency These processes/activities usually need to be performed internally Critical Other activities, such as routine activities administrative housekeeping and some support functions, may be candidates for outsourcing Assign managers of Strategy -critical In a centralized structure activities a visible, influential position Top managers retain authority for most decisions Avoid fragmenting responsibility for Strategy -critical activities across many In a decentralized structure departments Managers and employees are empowered to make decisions Provide coordinating linkages Assign between related work groups managers key roles Trend in most companies Primary Support activities functions Meld into a valuable Shift from authoritarian to decentralized Strategic Valuable competitive capability relation- Coordi- nation capability structures stressing empowerment ships Table.

8 Advantages and Disadvantages of Centralized versus Decentralized Decision Making Classic method of coordinating activities Have related units report to 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 Formal reporting relationships often need to be supplemented to facilitate coordination 5. Characteristics of Organizations of the Future Need multiple ties at multiple levels to ensure Extensive use of Internet technology and e-commerce business practices Communication Fewer barriers between Change &. Coordination and control Different vertical ranks Learning Find ways to produce collaborative Functions and disciplines efforts to enhance firm's capabilities Units in different geographic locations and resource strengths Company and its suppliers, distributors, strategic allies, and customers While collaborative relationships Capacity for change and rapid learning present opportunities, nothing Collaborative efforts among people in different valuable is realized until the functions and geographic locations relationship develops into an engine Assembling work teams including more members for better organizational performance dispersed over a wider geographic area Screen graphics created by: Jana F.

9 Kuzmicki, Troy University 6. Figure : How Prescribed Policies and Procedures Facilitate Strategy Execution Figure : From Benchmarking and Best-Practice Characteristics of Best Practices Implementation to Operating Excellence The best practice must To be valuable and have a proven record in transferable, a best Significantly lowering practice must costs Demonstrate success over time Improving quality or performance Deliver quantifiable and highly positive results Shortening time requirements and Enhancing safety or Be repeatable Delivering some other highly positive operating outcome What Is Total Quality Management? Popular TQM Approaches A philosophy of managing a set of business practices that emphasizes Deming's Continuous improvement in all phases of 14 Points operations 100 percent accuracy in performing activities The Juran Crosby's 14. Involvement and empowerment Trilogy Quality Steps of employees at all levels Team-based work design Baldridge Benchmarking and Award Criteria Total customer satisfaction 7.

10 Implementing a Philosophy Six Sigma Quality Control A Tool of Continuous Improvement for Promoting Operating Excellence Reform the corporate culture Six Sigma is a disciplined, statistics-based system aimed at having not more than defects Instill enthusiasm to do things per million iterations for any business practice right throughout company Two approaches to Six Sigma DMAIC process (Design, Measure, Strive to achieve little steps forward Analyze, Improve, Control). each day (what the Japanese call kaizen) An improvement system for existing processes falling below specification Ignite creativity in employees to improve and needing incremental improvement A great tool for improving performance performance of value-chain activities when there are wide variations in how well an activity is performed Preach there is no such thing as good DMADV process (Define, Measure, Analyze, enough Design, Verify) or DFSS (Design for Six Sigma).