How has zara gone about building an organization capable of proficient strategy execution?

Presentation on theme: "CHAPTER 10 Building an Organization Capable of Good Strategy Execution: People, Capabilities, and Structure."— Presentation transcript:

1 CHAPTER 10 Building an Organization Capable of Good Strategy Execution: People, Capabilities, and Structure

2 LEARNING OBJECTIVES THIS CHAPTER WILL HELP YOU UNDERSTAND:
What managers must do to execute strategy successfully Why hiring, training, and retaining the right people constitute a key component of the strategy execution process That good strategy execution requires continuously building and upgrading the organization’s resources and capabilities What issues to consider in establishing a strategy- supportive organizational structure and organizing the work effort The pros and cons of centralized and decentralized decision making in implementing the chosen strategy

3 EXECUTING STRATEGY Strategy execution
Is operations-driven, involving management of both people and business processes Is a job for the whole management team, not just a few senior managers Can take many more years to develop as a real proficiency than implementing strategy Requires a determined commitment to change, action, and performance

4 A FRAMEWORK FOR EXECUTING STRATEGY
Committing to executing a strategy: Entails figuring out the specific techniques, actions, and behaviors necessary for a smooth strategy-supportive operation Following through to get things done and deliver results Making things happen (leadership) and making them happen right (management)

5 Core Concept (1 of 5) Good strategy execution requires a team effort. All managers have strategy-executing responsibility in their areas of authority, and all employees are active participants in the strategy execution process.

6 FIGURE 10.1 The 10 Basic Tasks of the Strategy Execution Process
Jump to Appendix 1 long image description

7 Strategic Management Principle (1 of 11)
When strategies fail, it is often because of poor execution. Strategy execution is therefore a critical managerial endeavor. The two best signs of good strategy execution are whether a company is meeting or beating its performance targets and whether they are performing value chain activities in a manner that is conducive to companywide operating excellence.

8 BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION: THREE KEY ACTIONS
Staffing: Assemble a strong management team and a cadre of competent employees Developing: Renew, upgrade, and revise resources and capabilities to match chosen strategy Structuring: Create strategy-supportive organization capable of good strategy execution

9 Jump to Appendix 2 long image description
FIGURE Building an Organization Capable of Proficient Strategy Execution: Three Types of Paramount Actions Jump to Appendix 2 long image description

10 Strategic Management Principle (2 of 11)
Putting together a talented management team with the right mix of experiences, skills, and abilities to get things done is one of the first steps to take in launching the strategy-executing process.

11 STAFFING THE ORGANIZATION
Putting together a strong management team Planners who ask tough questions and figure out what needs to be done Implementers who can select, manage, and lead the right people Executors who turn decisions into actions that drive the changes that produce sustainable competitive advantage Key takeaway A critical mass of talented activist managers

12 Strategic Management Principle (3 of 11)
In many industries, adding to a company’s talent base and building intellectual capital are more important to good strategy execution than additional investments in capital projects.

13 Management Development at Deloitte Touche Tohmatsu Limited
Clear path to partnership Formal training programs Special programs for high performers Sponsorship, not mentorship Learning and development programs that contribute to Deloitte’s successful execution of its talent strategy Jump to Appendix 3 long image description

14 RECRUITING, TRAINING, AND RETAINING CAPABLE EMPLOYEES
Intensively screen and evaluate applicants to ensure selecting those who are best-suited and best-fitted Provide training programs throughout employee careers Offer challenging, interesting, and skill-stretching assignments Rotating people through jobs that span functional or geographic boundaries Make the work environment stimulating and engaging so that the firm is considered a great place to work Encourage employees to propose creative ways of operating better, and to push ideas for new products or businesses Use assorted financial incentives and perks to retain employees Coach average performers to improve their skills and capabilities, while weeding out underperformers

15 Strategic Management Principle (4 of 11)
The best companies make a point of recruiting and retaining talented employees; the objective is to make the firm’s entire workforce (managers and rank-and-file employees) a genuine competitive asset.

16 DEVELOPING AND BUILDING CRITICAL RESOURCES AND CAPABILITIES
Develop capabilities internally Acquire capabilities through mergers and acquisitions Access capabilities via collaborative partnerships Approaches to Building and Strengthening Capabilities Jump to Appendix 4 long image description

17 Strategic Management Principle (5 of 11)
Building new competencies and capabilities is a multistage process that occurs over a period of months and years. It is not something that is accomplished overnight.

18 DEVELOPING CAPABILITIES INTERNALLY
Coordinate and integrate the efforts of work groups and departments Strengthen the firm’s base of skills, knowledge, and intellect Managerial Actions to Develop Competencies and Capabilities Jump to Appendix 5 long image description

19 Strategic Management Principle (6 of 11)
A company’s capabilities must be continually refreshed and renewed to remain aligned with changing customer expectations, altered competitive conditions, and new strategic initiatives.

20 SETTING STRETCH GOALS: FROM CAPABILITY TO COMPETENCE
Thinking strategically about a firm’s knowledge and skills base Thinking strategically opportunities and challenges Setting a stretch goal of developing an organizational ability to do something well Evolving the ability into a competence or capability by performing it well and at an acceptable cost Refreshing, updating, and upgrading competencies and capabilities as necessary to gain and maintain competitive advantage Jump to Appendix 6 long image description

21 ACQUIRING CAPABILITIES THROUGH MERGERS AND ACQUISITIONS
A question of market opportunity When a market opportunity can slip by faster than a needed capability can be created internally A question of competitive necessity When industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence A question of successful integration Tacit knowledge and complex routines may not transfer readily from one organizational unit to another

22 ACCESSING CAPABILITIES THROUGH COLLABORATIVE PARTNERSHIPS
Outsource the function requiring the capabilities to a key supplier or another provider Collaborate with a firm that has complementary resources and capabilities Engage in a collaborative partnership for the purpose of learning how the partner does things Approaches to Acquiring Capabilities from an External Source Jump to Appendix 7 long image description

23 THE STRATEGIC ROLE OF EMPLOYEE TRAINING
Training is important in: Executing a strategy that requires different skills, competitive capabilities, and operating methods Organizational efforts to build skills-based competencies Supplying technical know-how to employees when rapidly changing technology puts a firm in danger of losing its ability to compete

24 STRATEGY EXECUTION CAPABILITIES AND COMPETITIVE ADVANTAGE
Superior strategy execution capabilities: Are difficult to imitate and socially complex processes that take a long time to develop. Maximize organizational resources and competitive capabilities in support of the business model Lower costs and permit firms to deliver more value to customers Enable a firm to react more quickly to market changes, beat competitors to market with new products and services, and gain uncontested market dominance

25 Zara’s Strategy-Execution Capabilities: Fast Fashion Retailer
Strategy is focused on rapid value chain execution Quick and flexible design-to-production process Close proximity to manufacturing factories Lower percentage of commitment to fashion lines than competitors to keep in-store items fresh Small lot-size orders reduce retail discounting, and encourage impulse-buying and frequent shopping Placement of goods in proximity to high-fashion stores as a substitute for advertising

26 Strategic Management Principle (7 of 11)
Superior strategy execution capabilities are the only source of sustainable competitive advantage when strategies are easy for rivals to copy.

27 MATCHING ORGANIZATIONAL STRUCTURE TO THE STRATEGY
Ensuring that structure follows strategy by: Deciding which value chain activities to perform internally and which to outsource Aligning the firm’s organizational structure with its strategy Determining how much authority to delegate Facilitating collaboration with external partners and strategic allies

28 Strategic Management Principle (8 of 11)
A company’s organizational structure should be matched to the particular requirements of implementing the firm’s strategy.

29 Jump to Appendix 8 long image description
FIGURE Structuring the Work Effort to Promote Successful Strategy Execution Jump to Appendix 8 long image description

30 DECIDING WHICH VALUE CHAIN ACTIVITIES TO PERFORM INTERNALLY AND WHICH TO OUTSOURCE
Outsourcing’s execution-related benefits Helps in outperforming rivals in strategy-critical activities and in turning a competence into a distinctive competence Decreases bureaucracies, flattens structure, speeds decision making, and shortens response time to changing market conditions Adds to a firm’s capabilities and contributes to better strategy execution through partnerships with suppliers and channel partners

31 Strategic Management Principle (9 of 11)
Wisely choosing which activities to perform internally and which to outsource can lead to several strategy-executing advantages: lower costs, heightened strategic focus, less internal bureaucracy, speedier decision making, and a better arsenal of organizational capabilities.

32 Which Value Chain Activities Does Apple Outsource and Why?
How important is outsourcing to Apple’s marketplace success? Is outsourcing to low-wage overseas manufacturers to avoid paying higher wages in markets where it sells the majority of its products a failure of corporate social responsibility by Apple?

33 ALIGNING THE FIRM’S ORGANIZATIONAL STRUCTURE WITH ITS STRATEGY
Comprises the formal and informal arrangement of tasks, responsibilities, lines of authority, and reporting relationships for the firm Structure is aligned with strategy when: Its design contributes to the creation of value for customers Its parts are aligned with one another and also matched to the requirements of the strategy It lowers operating costs through lower bureaucratic costs and operational efficiencies

34 Core Concept (2 of 5) A firm’s organizational structure comprises the formal and informal arrangement of tasks, responsibilities, lines of authority, and reporting relationships by which the firm is administered.

35 MATCHING TYPE OF ORGANIZATIONAL STRUCTURE TO STRATEGY EXECUTION REQUIREMENTS
Simple Structure (Line-and-Staff) Functional Structure (Departmental or Unitary) Multidivisional Structure (Divisional or M-form) Matrix Structure (Composite or Combination) Strategy Execution Requirements: Chosen Strategy Capabilities and Competencies Centralized or Decentralized Control Jump to Appendix 9 long image description

36 Core Concepts (3 of 5) A simple structure (line-and-staff structure) consists of a central executive (often the owner-manager) who handles all major decisions and oversees all operations with the help of a small staff. A functional structure is organized into functional departments, with departmental managers who report to the CEO and small corporate staff.

37 Core Concepts (4 of 5) A multidivisional structure is a decentralized structure consisting of a set of operating divisions organized along business, product, customer group, or geographic lines, and a central corporate headquarters that allocates resources, provides support functions, and monitors divisional activities. A matrix structure combines two or more organizational forms, with multiple reporting relationships. It is used to foster cross-unit collaboration.

38 DETERMINING HOW MUCH AUTHORITY TO DELEGATE
Organizational Approaches to Decision-Making Decentralized Decision Making Centralized Decision Making Authority is retained by top management Authority delegated to lower-level managers and employees Jump to Appendix 10 long image description

39 BASIC TENETS OF CENTRALIZED VERSUS DECENTRALIZED DECISION MAKING
Centralized Organizational Structures Decentralized Organizational Structures Basic tenets Decisions on most matters of importance should be in the hands of top-level managers who have the experience, expertise, and judgment to decide what is the best course of action. Decision-making authority should be put in the hands of the people closest to, and most familiar with, the situation. Lower-level personnel have neither the knowledge, time, nor inclination to properly manage the tasks they are performing. Those with decision-making authority should be trained to exercise good judgment. Strong control from the top is a more effective means for coordinating company actions. A company that draws on the combined intellectual capital of all its employees can outperform a command-and-control company.

40 CHIEF ADVANTAGES OF CENTRALIZED VERSUS DECENTRALIZED DECISION MAKING
Centralized Organizational Structures Decentralized Organizational Structures Chief advantages Chief Advantages Fixes accountability through tight control from the top Encourages company employees to exercise initiative and act responsibly Eliminates potential for conflicting goals and actions on the part of lower-level managers Promotes greater motivation and involvement in the business on the part of more company personnel Facilitates quick decision making and strong leadership in crisis situations Spurs new ideas and creative thinking Allows for fast response to market change Entails fewer layers of management

41 PRIMARY DISADVANTAGES OF CENTRALIZED VERSUS DECENTRALIZED DECISION MAKING
Centralized Organizational Structures Decentralized Organizational Structures Primary disadvantages Lengthens response times by those closest to the market conditions because they must seek approval for their actions May result in higher-level managers being unaware of actions taken by empowered personnel under their supervision Does not encourage responsibility among lower-level managers and rank-and-file employees Can lead to inconsistent or conflicting approaches by different managers and employees Discourages lower-level managers and rank-and-file employees from exercising any initiative Can impair cross-unit collaboration

42 Strategic Management Principle (10 of 11)
The ultimate goal of decentralized decision making is to put authority in the hands of those persons closest to and most knowledgeable about the situation.

43 CAPTURING CROSS-BUSINESS STRATEGIC FIT IN A DECENTRALIZED STRUCTURE
Centralizing related functions requiring close coordination at the corporate level Enforcing close cross- business collaboration to avoid duplication of effort Capturing Cross-Business Strategic Fit Jump to Appendix 11 long image description

44 Strategic Management Principle (11 of 11)
Efforts to decentralize decision making and give company personnel some leeway in conducting operations must be tempered with the need to maintain adequate control and cross-unit coordination.

45 FACILITATING COLLABORATION WITH EXTERNAL PARTNERS AND STRATEGIC ALLIES
Strategic alliances Outsourcing arrangements Joint ventures Cooperative partnerships Creating a Network Structure: Using “relationship managers” to build and maintain cooperative arrangements of value both parties Jump to Appendix 12 long image description

46 Core Concept (5 of 5) A network structure is a configuration composed of a number of independent organizations engaged in some common undertaking, with one firm typically taking on a more central role.

47 FURTHER PERSPECTIVES ON STRUCTURING THE WORK EFFORT
Matching Structure to Strategy Pick a basic organizational design that matches structure to strategy Supplement design with appropriate coordinating mechanisms Institute collaborative networking and communication arrangements Jump to Appendix 13 long image description

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