Chapter 15: Implementing strategy

Question 1

Why is strategy implementation important?

Answer 1

Implementation is important because that is where strategy often goes wrong: strategies may fail not because they are badly chosen but because they are badly executed; General Motors example: they nearly went bankrupt early in their history. They had become diversified but retained their old, centralized structures.

There are two key themes in implementation: Hard and soft.

Question 2

What is hard elements of organizational structure and systems?

Answer 2

Organizational structures and organizational systems.

Organizational structures are important, and there are four different types:
Functional
Divisional
Matrix
Agile team structure

Organizational systems support and control people as they carry out structurally defined roles and responsibilities. Involves
Planning systems
Performance targeting systems
Market systems

Question 3

Why is structures and systems considered as hard elements?

Answer 3

Because their key features can be precisely designed and they are objective rather than subjective (relative to culture for instance). Tänk KPMG, vem rapporteur till vem osv.

Question 4

Define the functional structure (as a part of organizational structures, hard implementation)

Answer 4

the functional structure divides responsibilities according to the organisations primary specialist roles such as production, marketing and finance, as shown in green table above^.

Benefits:

• gives top management direct hands-on involvement in key activities and thereby provides greater operational control from the top (top-down). → consistent implementation of strategy.
• good for startups

Cons:

• direct control from the top typically does not work well, as organisations become larger or more diverse. Centralizing to the top managers is not good when diversifying with products or geographical diversity. Functional structures tend to fit strategies that are narrowly focused and typically a poor fit for complex, diversified strategies. Ex: a central marketing department might try to impose a uniform approach to advertising regardless of the diverse needs of the organisations various markets around the world. Solution? Divisional structure.

Question 5

Define the divisional structure (as a part of organizational structures, hard implementation)

Answer 5

a divisional structure is build up of separate divisions based on products, services or geographical areas

Divisionalisation often comes about as an attempt to overcome the problems that functional structures have in dealing with diversification and complexity. The key principle is decentralization. Here, divisional managers are given freedom to respond to the specific requirements of their products and markets, using their own set of functional departments. Top management typically does not get involved; but they monitor the results.

Benefits:

• detachment means less meddling (inblandning) from the top.
• for the head office, this means less distraction by operational details
• decentralisation to divisions is a good way of implementing diversification or internationalization strategies. each product, or geographical location, can form a semi-autonomous division of its own and manage according to their particular needs

Cons:

• divisional structures tend to get in the way of cooperation and knowledge-sharing between business units: divisions can quite literally divide. Division-specific performance targets provides little incentive to collaborate with other divisions. And this can be tricky since diversification and internationalization strategies requires collaboration. So simple decentralization in the form of divisionalization might be a poor structural fit for large and highly complex organisations. Solution? Matrix structure below.

Question 6

Define the matrix structure (as a part of organizational structures, hard implementation)

Answer 6

A matrix structure combines different structural dimensions (axes) simultaneously. Staff typically reports to two managers instead of one.

School example: needs to manage the needs of both subject specialism and of different age groups. An individual teacher would report both to a subject specialism head and to the head of a student group. A similar kind of matrix is often used in MNC where on structural axis might be products (ex software) and the other structural axis might be geographical (ex Americas, Europe..). It is called a transnational structure when product and geographical matrices are reinforced by strong collaborative networks between various units.

The key ingredient for a successful matrix structure is senior managers who are good at sustaining collaborative relationships across the matrix and coping with the messiness and ambiguity which it can bring. The matrix structure is described as involving a “frame of mind” because it requires individuals within the organization to adopt a certain mindset that embraces flexibility, collaboration, and shared responsibility. This mindset is crucial because of the unique complexities of the matrix structure

Question 7

Define the agile team structure (as a part of organizational structures, hard implementation)

Answer 7

Agile teams are small, entrepreneurial groups given the autonomy to respond quickly to the needs of internal or external customers.

Question 8

What are the benefits of agile team structure?

Answer 8

• effective in implementing strategies focused on innovation, being close to customers and highly flexible.
• teams can start up fast and close down easily: individually, teams are temporary structures, rather than part of a permanent structure. They are like matrix structures but in motion: they draw fluidly on multiple dimensions of the organisations. Although teams are given autonomy to find solutions for themselves, and have little internal hierarchy, they are held accountable for delivering defined outcomes
• agile teams are relevant for organisations emphasizing innovation and speed. Like Spotify or Klarna.
• gives changes to success

Question 9

What are the cons of agile team structure?

Answer 9

• the constant dynamism of agile teams is probable to create confusion and complexity. to reduce this, they are often organized in groups in order to reduce complexity
• especially at scale, agile teams need careful organizing
• as with Klarna, can be very messy with little rewards and rapid growth means some systems and processes are made up as they go along.. and growing fast can create frictions and unclearness on the interaction of teams

Question 10

What are the benefits of matrix structure?

Answer 10

Benefits:

• effective in complex organizations where collaboration between different parts of the organization is important
• attractive as they can combine the advantages of different dimensions at the same time. the organization benefits from specialized expertise at the same time being responsive to particular client needs.
• matrix structures are therefore good for implementing complex strategies that require a lot of collaboration and knowledge-sharing.

Question 11

What are the cons of matrix structure?

Answer 11

• replacing single lines of authority with cross-matrix relationships can create conflict. Staff can find themselves pulled in to ways.
• Matrix structures are considered ambiguous because they create multiple reporting relationships and shared authority, leading to potential confusion and conflicting demands

Question 12

What are the three different systems? (hard implementation)?

Answer 12

Planning system

Performance targeting systems

Market systems

Question 13

Describe planning systems

Answer 13

Strategy implementation relies on resources; financial and human. Money must be invested and people set to work. Planning systems govern the allocation fo resources and monitors their utilization. Tight control over resources is efficient BUT planning systems can be too rigid and fail to anticipate rapid change, and may hence reduce flexibility.

Question 14

What are the three corporate strategy styles in planning systems (hard implementation) by Goold and Campbell, 1989)

Answer 14

Three types of planning system (Goold and Campbells 1989 helps to identify the advantages and disadvantages of different planning systems.

1. Strategic planning style
2. Financial control style
3. Strategic control style

Question 15

Describe the strategic planning style by Goold and Campbell 1989 (planning systems, systems, hard implementation)

Answer 15

The strategic planning style combines both a strong planning influence on strategic direction from the corporate center with relaxed performance accountability for the business units. The logic is that if the centre sets strategic direction, business unit managers should not be held strictly accountable for disappointing results since it might be due to an inappropriate plan from start.

Question 16

Describe the financial control style by Goold and Campbell 1989 (planning systems, systems, hard implementation)

Answer 16

The financial control style involves little central planning. Each business unit sets their own strategic plans, probably after some negotiation with the corporate centre and are then held strictly accountable for the results.

Question 17

Describe the strategic control style by Goold and Campbell 1989 (planning systems, systems, hard implementation)

Answer 17

Middle of strategic planning and financial control. Has a more consensual development of the strategic plan between the corporate centre and the business units and moderate levels of business unit accountability.

The centre will usually act as a coach to its business unit managers, helping them to see and seize opportunities.

Question 18

Describe performance targeting systems

Answer 18

Performance targets focus on the outputs of an organisation (or part of an organisation) such as service levels, product quality, revenues or profits. These targets are often known are KPIs, Key Performance Indicators. Targets measures how well the strategy is being implemented.

Question 19

In what situations can performance targeting systems be beneficial? ( planning systems, systems, hard implementation)

Answer 19

• Within large businesses, corporate centers may choose performance targets to control their business units without getting involved in the details of how they achieve them. These targets are often cascaded down the organisation as specific targets for subunits, functions and even individuals.
• In regulated markets, such as utilities in most countries, government-appointed regulators increasingly exercise control through agreed KPIs, such as service or quality levels, as a means of ensuring competitive performance.
• In the public services, governments typically set targets for outputs and outcomes.

Question 20

What are the three potential problems with targets?

Answer 20

1. Inappropriate measures of performance
2. Inappropriate target levels
3. Excessive internal competition

Question 21

The performance targeting systems have difficulties. It has led to the development of two techniques designed to encourage a more balanced approach to target-setting. Which?

Answer 21

1. The most fundamental technique is the balanced scorecard. Balanced scorecards set performance targets according to a range of perspectives, not only financial.
2. Strategy maps, developing the balanced scorecard idea. Strategy maps link different performance targets into a mutually supportive casual chain supporting strategic objectives

Question 22

Define market systems

Answer 22

Market systems (or planning systems) refer to ways of managing and organizing strategy in large organizations. Instead of detailed, top-down plans, market systems rely on decentralized decision-making, where different business units are guided by market-like structures and incentives. Each unit competes and operates almost as a separate “business” within the company, using market signals (like costs, prices, and profits) to make strategic decisions.

This approach encourages flexibility and responsiveness by allowing each unit to adapt to its specific market conditions while still aligning with the organization’s overall goals.

Question 23

Where does internal market systems work well? (planning systems, systems, hard implementation)

Answer 23

Internal markets work well where complexity or rapid change makes detailed control through planning impractical

Question 24

What problems can come with market systems? (3) (planning systems, systems, hard implementatiom)

Answer 24

1. Can increase bargaining between units, consuming important management time
2. They may create a new bureaucracy monitoring all of the internal transfers of resources between units
3. An overzealous use of market mechanisms can lead to dysfunctional competition and legalistic contracting; destroying cultures of collaboration and relationships

Question 25

What is soft implementation?

Answer 25

Soft implementation includes cultural change, sensemaking and procedural justice (When implementing strategies, organizations often face resistance from employees or other stakeholders. If the processes are perceived as fair, it can reduce resistance and increase support for strategic initiatives.)

These are labelled soft because they are hard to design precisely before initiation, unlike formal structures or performance targets. Cultures, sensemaking and justice frequently evolve during implementation. Soft elements of implementation tend to be subjective rather than objective and qualitative rather than quantitative. They are hard to manage, but getting them wrong can derail the whole implementation process.

Question 26

What is cultural change? (soft implementation)

Answer 26

Employee assumptions about what is strategically important, and employee behavior being consistent with the strategic is vital for successful implementation. Changes in strategy need matching by changes in culture.

Question 27

How can you define organisational culture?

Answer 27

The taken for granted assumptions and behaviours of organisatiomal members.

Question 28

Many organisations attempt cultural change using five steps. Which?

Answer 28

1. determine the required culture
2. analyze the gap between the existing culture and the required culture
3. develop a plan to bridge the gap between the existing culture and the required culture
4. implement the plan, drawing on the four Rs:
   
   • recruitment of new emmployees
   • retraining of existing employees
   • rewards for those displaying appropriate behavior
   • reinforcement; leadership communication, symbolic actions such as changes in slogans
5. review the culture change for its success and its consistency with the strategy and take action to sustain the change or adjust it

Yes, there are elements of hard strategy implementation here such as rewards. But it is important to recognize that culture is subjective and hard to control. It is easy to overestimate the ability to define the features of a desired culture precisely.

Question 29

What did John Kotter mean by “it is not what senior leaders say but what they do that ultimately sets the culture”?

Answer 29

Leaders are crucial role models in the everyday enactment of culture. Cultures are not simply designed upfront; they need continuous reaffirmation.

Question 30

What is sensemaking? (soft implementation)?

Answer 30

It is essential that middle managers and employees understand the strategies that they are expected to roll out within their units. Broad strategies have to be translated into specific actions according to local conditions and changing circumstances. Top managers frequently over-estimate their success in communicating their strategies to their teams.

Managers have to make sense of their strategies that they are responsible for implementing.

Strategic sensemaking = the cognitive and emotional process through which managers understand, interpret and make coherent their changing environments.

Managers make sense of new strategies through the everyday experience of their work and interactions with colleagues. They overlay formal communications with informal conversations; stories, jokes, gossip, rumors. Through this process, strategic sensemaking typically reinterprets, fills out and often diverges from the original strategic plan.

Question 31

What does the sequence of sensemaking and sensebreaking look like? (3)

Answer 31

Successful strategy implementation processes are likely to happen through something like the following sequence of sensemaking (and sense breaking):

1. the fracturing, or breaking down, of old ways of understanding the organisations strategy, often involving some kind of shock to past expectations (sense breaking)
2. the differentiated understanding of the new strategy, according to the local sensemaking of particular groups of managers
3. the mutual adjustment of differentiated understandings as managers come to sufficient consensus to work together as a coherent organisation, at the same time as retaining the local interpretations required to deal with specific circumstances.

Question 32

What did Don Sull say about sensemaking in organisations?

Answer 32

One of the myths of strategy implementation is that “communication equals understanding”.

There is a gap between communciation and understanding from top managers to middle managers.

Question 33

What did Don Sull found from their large-scale survey?

Answer 33

That only 55% of middle managers can name even one of their company’s five top priorities.

Question 34

What is procedural justice? (soft implementation)

Answer 34

Another aspect of implementation implying that rigid top-down approaches might be counter-productive is procedural justice.

Procedural justice = the fairness of the process by which decisions are made.
Strategic changes are always liable to give some parts of the organisation more resources, while others get less. This uneven distribution may be seen as unfair, but the concept of procedural justice implies that the perceived fairness of the process matters as well. A just procedure provides reassurance to individuals that they will receive fair outcomes in the future, even if a particular decision is unfavorable. Procedural justice is important to secure the commitment and loyalty of all stakeholders involved in implementing the strategy: stakeholders such as subcontractors and suppliers, employees and managers. If key managers or employees believe that they are working within an unjust decision-making system, they will do the minimum they can get away with, behave cynically and depart at the first opportunity. Hence, procedural injustice is liable to undermine strategy implementation.

Question 35

Which are the three key dimensions of procedural justice in organisations?

Answer 35

There are 3 key dimensions of procedural justice in organisations:

• engagement
• explanation
• clarity of expectations

Question 36

What is influencing the realization of strategy?

Answer 36

Internal factors and external factors

Question 37

Who said culture eats strategy for breakfast?

Answer 37

Peter Drucker

Question 38

What is the benefits and dangers of strategic planning systems?

Answer 38

Benefits:
Can provide opportunities for involvement
Leads to a sense of ownership
Provides security of managers
Reassures managers and stakeholders that the strategy is logical

Dangers
Confusing managing strategy with planning
Detachment from reality
Paralysis by analysis
Over-complex planning processes
Dampening of innovation

Question 39

What does implementation mean?

Answer 39

Implementation refers to the translation of a chosen strategy into organisational action

Question 40

What is strategic alignment?

Answer 40

Strategic alignment refers to how strategy and organisation should flow logically from the organisations central goals (or purpose or mission).

This means that strategies are aligned when they are consistent with both organisational goals and organisational characteristics.