Transcript Document 7651161

12
Implementing Strategy in
Companies That Compete in a
Single Industry
1
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
• Critical trade-offs: differentiation and
integration; specialization and coordination
2
Implementing Strategy
3
Organizational Culture
• Culture and strategic leadership
• Traits of strong and adaptive corporate
cultures
– Bias for action
– Nature of the organization’s mission (sticking
with what the organization does best)
– How to operate the organization (motivating
employees to do their best)
• Culture is nurtured by building blocks . .
4
Building Blocks for Culture–
focus attention
•
•
•
•
•
•
•
Strategy
Overarching goals
Leadership/Management Style
Structure
Management systems
Staff
Skills
5
Building Blocks of Culture
continued
• Influence/role of leadership, staff, and skills
should not be overlooked.
– Leadership – senior management, e.g. Chair
– Staff – types of managers and rank and file
– Skills – what technology is dominant in an
organization influences the kind of staff it has and
eventually its culture.
• The building blocks must blend; or these seven
will evolve and adjust to each other.
• Culture is an outcome of the interaction of these
building blocks
6
Organizational Life-Cycle
• An organization’s structure goes through a “lifecycle”
– The structure of the organization increases in
complexity as the business expands in size, e.g.
sales volume, and scope, e.g. number of products,
geographic regions, etc.
– The complexity is a response to control related issues
that arise as a result of expansion
• Increasing complexity requires maturity on the
part of organization and its members.
7
“Organizational life cycle”
• Entrepreneurial - the owners share
responsibilities and does everything
• Functional - they hire a manager for accounting,
marketing, etc.
• Multi-product or geographic – a manager for a
specific geographic region, product line, etc.
• Profit center – each region or product line
becomes responsible for bottom line
• Matrix/Product-team
8
Next Slides
• Materials from Chapter 12 should be selfexplanatory
• Lets discuss the Opening Case in small
groups by describing how Dell’s structure
evolved.
9
Implementing Strategy Through
Organizational Structure, Control, and
Culture
• Organizational structure
– Specifies how tasks and roles are linked to
achieve organizational objectives: increase
efficiency, quality, innovation, and
responsiveness to customers
– To coordinate and integrate the efforts of all
employees
– Assigns employees to specific value creation
tasks and roles within structure
10
Implementing Strategy Through
Organizational Structure, Control, and
Culture (cont’d)
• Control system
– Provides feedback on performance so corrective
action can be taken
– A set of incentives to motivate employees towards
desired goals, e.g. increase efficiency, quality,
innovation, and responsiveness to customers
• Organizational culture
– The collection of values, norms, beliefs, and attitudes
shared within an organizations and that control
interactions within and outside the organization
11
Building Blocks of
Organizational Structure
• Grouping tasks, functions, and divisions
– Organizational structure follows the range and
variety of tasks that an organization pursues
– Ideally companies should group tasks into
functions and then functions into divisions
• Note: differentiation and specialization
– Often companies consider people occupying
jobs and performing tasks as they group
– Bureaucratic costs
12
Building Blocks of
Organizational Structure
(cont’d)
• Allocating authority and responsibility
– Hierarchy of authority
• chain of command
– Span of control
• number of subordinates/units to supervise
– Tall and flat organizations
13
Tall and Flat Structures
14
Building Blocks of
Organizational Structure
(cont’d)
– Drawbacks of taller organizations
•
•
•
•
Less flexibility and slower response time
Communication problems
Distortion of commands
Expense
15
Allocating Authority and
Responsibility (cont’d)
– Decentralization?
• Delegating responsibility reduces information
overload, enables managers to focus on strategy
• Empowering lower-level managers increases
motivation and accountability
• Empowering employees requires fewer managers
• Reduces head office size
16
Allocating Authority and
Responsibility (cont’d)
– Centralization . . .
• allow easier coordination of activities
• means that decisions fit broad organizational
objectives
• Increases head office size in large organizations
– If environment or industry is stable, tall
organizations sometimes make sense
17
Building Blocks of
Organizational Structure
(cont’d)
• Integration and integrating mechanisms
– Direct contact among managers across
functions or divisions
– Liaison roles
• Gives one manager in each function or division the
responsibility for coordinating with the other
– Teams
18
Strategic Control Systems
• Four basic building blocks, each with its
own set of measures
– Control and efficiency
– Control and quality
– Control and innovation
– Control and responsiveness to customers
• Cascade measures to lowest possible unit
19
Steps in Designing an Effective
Control System
20
Levels of Organizational Control
21
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
22
Using Information Technology
• Behavior control
– IT standardizes behavior through the use of a
consistent, cross-functional software platform
• Output control
– IT allows all employees or functions to use the
same software platform to provide information
on their activities
• Integrating mechanism
– IT provides people at all levels and across all
functions with more information
23
Strategic Reward Systems
• Based on strategy, managers must decide
which behaviors to reward.
• A control system measures indicators of
those behaviors and links the reward
structure to these indicators.
• The difficulty is finding the appropriate
indicators.
24
Building Distinctive
Competencies at the Functional
Level
• Grouping by function: functional structure
– Grouping people on the basis of their
expertise or because they use the same
resources
– Advantages
•
•
•
•
People can learn from one another
People can monitor each other
Managers have greater control
With different functional hierarchies, the company
can avoid becoming too tall
25
Functional Structure
26
The Functional Level
• The role of strategic control
– Managers and employees can monitor and improve a
common set of operating procedures
– Easier to apply output control
• Developing culture
– Managers must implement functional strategy and
develop incentive systems to allow each function to
succeed
– Manufacturing: TQM
– R&D: innovation to bring products quickly to market
– Sales: output and behavior controls
27
Functional Structure and
Bureaucratic Costs
• Communications problems – across
functions usually
• Measurement problems – there are
functions that lend themselves to
quantification, others less so
• Customer problems
• Location problems
• Strategic problems – can be ignored
• The outsourcing option
28
Implementing Strategy in a
Single Industry
• Implementation begins at the functional
level, however, managers must coordinate
and integrate across functions and
business units
• Effective strategy implementation at the
business level
– Increases differentiation, adds value for
customers, allows for a premium price
– Reduces bureaucratic costs
29
Implementing Strategy in a
Single Industry (cont’d)
• Implementing a cost-leadership approach
– Reducing costs across all functions
– Continuously monitoring for effective
operation
• Implementing a differentiation approach
– Design structure around the source of
distinctive competency, differentiated product,
and customer groups
30
Implementing Strategy in a
Single Industry (cont’d)
• Implementing a broad product line—
product structure
– Group the overall product line into product
groups
– Centralize support value chain functions to
lower costs
– Divide support functions into product-oriented
teams of functional specialists who focus on
the needs of one specific product group
31
Kodak’s Product Structure
32
Implementing Strategy in a
Single Industry (cont’d)
• Increasing responsiveness to customer
groups—market structure
– Group people and functions by customer or
market segments
– Different managers are responsible for
developing products for each group of
customers
33
Market Structure
34
Implementing Strategy in a
Single Industry (cont’d)
• Expanding nationally—geographic
structure
– To be responsive to needs of regional
customers
– To reduce transportation costs
35
Geographic Structure
36
Implementing Strategy in a
Single Industry (cont’d)
• Competing in fast-changing, high-tech
environments—product-team and matrix
structures
– Matrix structure
• Value chain activities are grouped by function and
by product or project
• Flat and decentralized
• Promotes innovation and speed
• Norms and values based on innovation and
product excellence
37
Matrix Structure
38
Implementing Strategy in a
Single Industry (cont’d)
• Competing in fast-changing, high-tech
environments—product-team and
matrix structures (cont’d)
– Product-team structure
• Tasks divided along product or project lines
• Functional specialists are part of
permanent cross-functional teams
39
Product-Team Structure
40
Implementing Strategy in a
Single Industry (cont’d)
• Focusing on a narrow product line
– Tends to have higher production costs
because output is lower, reducing opportunity
for scale economies
– Has to develop some form of distinctive
competency
– Functional structure is appropriate
41
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
42
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)
43