Block 3 – Reading 1
Strategy implementation: Lawrence G Hrebiniak
Strategy formulation is difficult. However, strategy execution or implementation is more difficult. Without effective implementation, no business strategy can succeed. Managers face many problems while implementing strategies. The question is, what are the obstacles to successful execution?
1- Managers are trained to plan, not execute
Managers know more about strategy formulation than execution. They have been trained to plan not execute. In schools, students are taught about strategy formulation and its tools such as marketing strategy, competitive strategy, financial planning, etc, but not trained or taught about strategy implementation.
Implementation requires on the job training and long work experience. Managers know what to do, but don’t know how to do it. They may benefit from a model of implementation that lays out the process, the steps or decisions involved to make strategy work.
2- let the “Grunts” handle the execution
A problem occurs when the top- level management believes that strategy implementation is below them. There is a belief that it is the role of the high-level managers to plan and think strategically, while the role of the lower-level “grunts” is to execute. The separation of formulation and planning exists in almost every organization but it becomes dysfunctional, when planners see themselves smart and treat doers as “grunts”, and this will create execution problems. The truth is, the implementation defines the essence of the work and demands ownership at all levels of implementation.
3- Planning and execution are interdependent
Strategy formulation and implementation are separate, distinguishable parts of the strategic management process. Implementation follows formulation, but they are also interdependent and affect each other. The relationship between formulation and execution suggests two critical points:
First, successful strategic outcomes are best achieved when those who are responsible of implementation are a part in the formulation process. The higher the interaction is between doers and planners, the higher the probability is of execution success.
Second, strategic success demands a simultaneous view of planning and doing. Managers must think of execution problems as they are formulating plans. Execution problems must be anticipated as a part of a big picture dealing with planning and doing. This simultaneous view is important, difficult to achieve, and represents a challenge to effective implementation.
4- Implementation is a process that takes longer time than formulation
The execution of strategy takes longer than the formulation of a strategy. Planning may take weeks or months, while execution may take years. The longer time frame can make it harder for managers to focus on and control the execution process. Many unforeseen issues may appear such as, interest rate may fluctuate, change in customers demands or technology, key personnel may leave the company, etc..
The execution process must be dynamic and adaptive, responding to and compensating for unanticipated events. Faster is not always better; successful integration takes time and attention.
5- Execution involves more people than strategy formulation
Strategy implementation involves more people than strategy formulation. This creates additional problems. Communication down the organization across different functions becomes a challenge. Making sure that incentives throughout the organization support the execution effort is an issue. Moreover, linking strategic objectives with day-to-day objectives and concerns of personnel at different levels is also a challenge. The larger the number of people involved, the greater the challenge to effective strategy execution.
There are additional five obstacles highlighted by Wharton Gartner researches to strategy implementation based on open-ended responses and panel discussions :
1- Inability to manage change effectively. This was the topmost obstacle in the process of implementation. Two main issues were pointed out :
- Culture is placed at the core of change-related issues
- The speed of implementation that the strategy requires. High speed is dangerous and injurious to the implementation process.
2- Poor or vague strategy. Implementation starts with the strategy. Bad strategy leads to bad execution and thus poor results. Strategists need to focus on two important issues :
- A sound and clear strategy
- Skillful and good leaders to run the execution.
3- Not having a model to guide implementation efforts. Managers need a model of implementation to guide them. This will help them to know what comes first and what steps to follow. The lack of model will lead to uncoordinated, divergent or even conflicts decisions and actions.
4- Poor or inadequate information sharing and unclear responsibility and accountability. Implementation of complex strategies requires cooperation, coordination, and information sharing to be successful. Managers should know who is responsible for what, whom they are interdependent in task-related implementation activities and the information required to avoid the muddle and have an effective execution.
5- Working against the power structure. Managers surveyed that executing a strategy that conflicts the prevailing power structure is doomed to failure. Managers must gain support from influential people and form coalitions which will help the implementation. Managers should be able to influence and move others to purposeful actions.
Developing a model of execution
The model of execution guides the process of implementation. It shows a logical flow of execution decisions or actions and includes a control loop that comprises feedback and change.(figure 1, pg14)
· Corporate strategy : concentrates on the entire organization and focuses on areas such as portfolio management, diversification, and resource allocation across the entire business or operating units that make the entire enterprise. Its role is financial and strategic.
· Corporate structure : Corporate strategy drives the choice of corporate structure and the corporate structure is vital to the implementation of the strategy. This relationship is important therefore, the corporation must create a balance between centralization and decentralization. Decentralization is to enable the organization to respond to market demand quickly and centralization (HR) to avoid duplication of resources and generate cost savings. This balance enables a corporation to execute its strategy and achieve strategic goals.
· Need for integration : in order to achieve coordination across the units comprising the organizational structure, the work of the centralized units must be shared by decentralized units.
· Business strategy : businesses create their own strategies. They focus on products, services and how to compete in a given industry. Business strategy emphasis on industry analysis, external forces and internal resources and capabilities.
Business strategy is important to the implementation of corporate strategy because it helps in gaining a competitive advantage and profits for the entire corporation. Corporate strategy and business strategy are interdependent; each affects and is affected by the other.
Business strategy makes important demands that should be met in order to execute successfully. The business must create functional skills, capabilities and competences to allow the execution.
· Integrating strategy and short-term objectives :
Business strategy must be translated into short-term operating objectives to execute the strategy. Key issues, elements, and needs must be translated into shorter-term objectives and action plan, and this translation process is an integral and vital part of the execution of the strategy.
· Business structure : different businesses in the same company face different competitive situations and thus must have different structures. Imposing the same structure on all businesses because they are a part of the company is an error and should be avoided. Business structure should reflect and be driven by the nature of the business strategy to be able to execute that strategy. It should also allow integration and communication among different units to transfer knowledge, share information, and coordinate work flow.
· Incentive and controls. The picture of strategy implementation is not complete because the creation of strategy, objectives, structure, and coordinating mechanisms is not enough to ensure that individuals will adapt their goals to those of the organization. Execution will fail if no one has a stake in it. Feedback is also needed to make sure that the right outcomes are achieved. In essence, what is required a careful development of incentives and control. On one hand, incentives motivate and guide performance, and on the other hand, controls provide feedback whether desired outcomes are achieved. Controls allow also revision of incentives if the desired outcomes are not being met.
The implementation context : All actions and decisions in the model take place with the organizational context. There are four important factors that should be paid attention to, that lead to the success of the implementation : 1- the change management context; 2- the power structure of the organization; 3- the culture of the organization; 4- the leadership context.
The change management has critical importance for strategy implementation. The biggest obstacle is the inability to manage the change. Managers revealed that, managing the change has two critical variables; 1- the size of the change; 2- the time managers felt they had to achieve positive results.
Considering that the change is large, the changes in job responsibilities, structure, people, incentives and controls are large and challenging. The speed is also important, where the shorter the time of execution, the greater the complexity of the change process.
There are two different approaches for managing large changes:
1- Sequential change : if managers believe that they have long time for execution, then the sequential change is employed. The organization reduces large changes into smaller, manageable pieces or proportions. Managers will handle the change of each piece before moving to the next. Example, a company wants to determine if a particular type of product could work in a defined segment A. Two prototypes of the product (B1, B2) are developed. After product performance and customer reactions are observed, modifications are made resulting in a new product (C) which is further tested. Then a decision is made for mass production (D). Then, decision for expanding distribution is made (E). etc..
The benefits of the sequential change :
- step by step implementation reduces resistance
- allows for a clear cause-effect analysis
- allows for incremental investments of time and money
- less risky as each step is successfully handled before moving to the next step
- coordination and learning are easier
The costs of the sequential change :
- time consuming
- people lose sight of ultimate goals of the change
- exogenous forces change such as, competitors plan and actions, customer demand, governmental regulations, etc.
2- Complex Change : when time available for the change is short, the complex change is employed. Many important elements for the change are being handled at the same time. Its characteristics : everything important is going on at once during the change. Although complex change is fast and seems exciting, where all managers at different levels roll up their sleeves and pitch in into the change, it is better to be avoided unless it is inevitable because it creates a number of issues.
1- Coordination and control are extremely difficult because too much is going on at the same time and managers are dealing with different problems
2- Cause-effect analysis is difficult, if not impossible. It is impossible to explain with high certainty what happened and why things went wrong.
3- Learning suffers. The complexity of actions and the unclear model of cause-effect, makes learning impossible.
4- Operation suffers. All resources are dedicated to the change.
5- It is necessary to relax the performance against which people are held accountable. In other words, set priorities, focus on key performance outcomes, and let other performance measures slide.
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