21 Models of Strategic Implementation

1.      Learning Outcome

2.      Introduction

3.      Interrelationship between Strategy Formulation and Implementation

4.      Models of Strategy Implementation

5.      7-S Framework

6.      Summary

1.   Learning Outcome

After completing this module the students will be able to understand:

• The concept of strategy implementation
• Interrelationship between strategy formulation and implementation
• The importance of organizational structure in strategy implementation
• The McKinsey 7-S Framework

2.      Introduction

Strategy implementation is critical to a firm’s success. Simply formulating a strategy does not suffice the purpose of a corporation; the strategy has to be effectively implemented so as to be acknowledged as a good strategy. There has to be translation of strategic thought into strategic action. Though strategy formulation is the proposed action to meet the intent of the organization; the implementation on the other hand stresses on who, when, where and how of achieving the desired organizational goals and objectives. In order to have a competitive edge over its competitors, the organization with a superior strategy needs to have a superior ability to execute a strategy. Therefore, to make a formulated strategy operational, an organization must have a control system that could well monitor and regulate the deviations from the proposed future path. As a result the strategist have to overcome barriers that impede the smooth implementation of the strategy such as change in the circumstances, the mismatch between the cultures and values that of organization and individuals, resistance to building a common system acceptable to the organization as a whole. Hence, it becomes imperative to address these needs by adopting models that relates to human resources and organizational fit for successful strategy as an outcome.

3.   Interrelationship between Strategy Formulation and Implementation

It is however, important to note that in real life, strategy formulation and strategy implementation processes are intertwined. Therefore, the relationship between the two could be best understood by their interdependence, though as a discipline two are viewed as different phases of strategic management process purely because of the sequential and skill needs. However, strategy formulation phase involves largely conceptual and analytical activities and is a top management function whereas strategy implementation is more to do with administration and involves middle and lower management. Further, there exist two types of linkages between these two phases of strategic management that are forward linkages and backward linkages. The forward linkages deal with the impact of strategy formulation on the implementation whereas backward linkages relates to the relation in the opposite direction. The forward linkage means that with the formulation of the new strategies or reformulations leading to modified strategies, many organizational processes and structures have to undergo change as per the requirements of the new or modified formulated strategy. Therefore, the formulated strategy provides the direction for the implementation of the strategy. On the other hand, the formulation process of the strategy is also affected by the factors related to implementation. The organizations tend to consider those strategies which can be implemented with the help of present structure and resources. Such incremental changes underway over a period of time, in turn assist the organization to move up from its present position to the desired state.

4.   Models of Strategy Implementation

Implementation of a strategy involves identification of the organization’s structure and processes so that the necessary tasks are assigned and the performances are well evaluated, monitored, controlled and regulated to achieve the ultimate organizational objectives. Depending upon the priority given to the strategy, the processes are closely watched and revamped for successful implementation of the strategy.

Strategic fit is one of the important factors that express the degree to which an organization aligns the business strategy with its values, resources, and structure to positively impact performance. A good strategic fit indicates how a strategy needs to be “fitted” with its external environment and how the internal organization needs to be properly meshed with the strategy. The casual dynamics of a good fit can be outlined as follows:

(Image Source: http://pinchange.com/wp-content/uploads/2012/12/Success-Graph-300dpi-280×190.png)

1.      The first step involves identifying the organization’s management processes and the fundamental structure that could support the formulated strategy.

2.      Secondly, to transform the organizational complex demands into simplified ideologies and processes so that they are easily perceived by all stakeholders.

3.      This simplicity evolves into a holistic understanding that helps to reinforce the fit and minimizes the need for extensive coordination among different divisions of the organization.

4.      Therefore, an outstanding performance can be sustained by emphasizing the basic fit among the formulated strategy, structure and process.

Exhibit 1 highlights the evolution of management processes at Tata Ceramics Limited with Titan’s intervention in the business to turnaround the profitability of TCL.

Exhibit 1: Titan does wonders for Tata Ceramics

Tata Ceramics Ltd. (TCL), was incorporated in 1991 as an associate of Tata Power. Being an export oriented unit, nearly 90 per cent of its turnover came from European markets, Australia and New Zealand. Tata Ceramics Ltd. manufactured bone china tableware for some of the world’s best brands such as Wedgewood, Royal Doulton and Churchill. Despite that the company was meeting all stringent international quality standards; it was unable to scale up the size of its business. Its plant at Kochi, Kerela having a production capacity of 10 million pieces a year was underutilised (50 percent), leading to losses for the company. The main reason attributed to the falling sales was the declining consumer preference towards bone china crockery in export markets.

Tableware crafted for the Rashtrapati Bhavan

It was in 2013 that Bhaskar Bhat, the MD at Tata group’s Titan Company Ltd. was appointed Chairman of TCL and was bestowed with the task of reviving the company. He was the man behind the scene who oversaw Titan’s diversification from a watch maker to a jewellery and eyewear retailer. He was once again entrusted to bring in a similar transformation in TCL.

The strategy adopted by Bhat was to shift the focus to the domestic market, for which researches were undertaken to explore the potential. Analysing the tableware market in India to be unorganised, the thrust was to know that how to make the local market organised and grow. Moreover, there lied an opportunity that many Indian middle-class households were moving from steel tumblers to crockery and TCL had a competence in manufacturing world class bone china table ware. Henceforth, the thrust was to continue the growth in exports along with establishing its presence in the domestic market.

Titan’s mandate was to turnaround the profitability for Tata Ceramics Ltd., where Titan operated at an arms-length. In an attempt to align the business strategy with its resources, capabilities and structure to impact the performance positively, the company established the long and short term objectives of this turn-around. In the short run, focus was laid on optimizing the year-on-year cash flow by streamlining the production range and to launch a new array of products based on consumer’s needs and preference which holds an immense potential. Further measures were taken for improving processes at the manufacturing back end, strengthening the existing HoReCa (Hotels, Restaurants and Cafes) and distributor accounts through well-planned replenishment, improved service standard and identifying new high-worth segments for the existing range of products (for instance, corporate gifting). On the other hand in the long run, keeping in mind Titan’s expertise in new market entry, there lays ahead a very strong pitch that Tata Ceramics may launch a retail-brand for the domestic market under the aegis of Titan.

5.   7-S Framework

The 7-S model was developed in 1980s by McKinsey consultants Tom Peters and Robert H. Waterman. The purpose of the model is to analyze how well an organization is positioned to achieve its intended objective. The framework helps to identify the elements in the organisation that need to be aligned to improve performance. It is important to note that implementing a strategy is not only a matter of structure, although it remains one of the key elements. Therefore, the 7-S model highlights the seven different internal aspects of an organization that need to be aligned together to achieve effectiveness in an organization are: Strategy, Structure, System, Skills, Staff, Style and Shared Valves. These seven elements of organization are divided into ‘soft’ and ‘hard’ areas. Strategy, Systems and Structure are defined as the hard elements as it is much easier to identify and manage them when compared with the other elements such as Style, Staff, Skills, and Shared Values which are termed as ‘Soft Ss’. The 7-S model is graphically depicted in the figure1 as below:

The graphical representation of the model depicts that there exists multiple internal factors (7S) that need to be aligned to improve the organization’s performance. Secondly, all the factors are interconnected and it is perhaps not only difficult but impossible to make significant progress in one area without making any in others.

The 7-S model is a valuable tool that helps the company to frame the organizational design in times of uncertainty. However, the most common uses of the model are:

To determine how best to implement a new strategy. To facilitate organizational change.

To improve the performance of the company.

Let us now try to understand the 7S one on one in detail for a better understanding of the framework.

Strategy: Strategy may be defined as the actions undertaken by a company in response to the changes in its external environment. It is the way by which the company positions itself vis-a-vis its competitors in the industry to achieve competitive advantage. One of the pre-requisite for successful implementation of strategy is that the strategy has to be simplified, for it to be easily perceived and communicated to the entire stakeholders.

Alfred Chandler was the first to point out that ‘structure follows strategy’. Definitely, a better understanding of the strategy helps to rationally align the organization’s structural design but the statement ‘structure follows strategy’ may not stand valid in isolation. Neither a good formulated strategy nor a well structured organisation is self-sustained for successful execution of a strategy. There lie many more        dimensions       that help in   successful  implementation of the strategy.

Structure: The Structure is defined as the organizational chart of the firm that represents the way portfolio of business divisions and units are organized. The very basic purpose of a structure is to divide the tasks/activities and then to provide coordination between them. Organizational structure is a trades-off between specialization and integration. By way of structure, a company takes stock of its internal competencies and capitalise it to achieve organizational objectives. No doubt, as the complexity and size of businesses increases with time; the dimensions along which companies want to divide its tasks also changes. The various possibilities for division before a company may be based on function, product, division, geography, strategic business unit and probably more. Structure is one of the most visible and easy to change elements of the framework.

(Source: http://strategisch-adviseur.nl/wp-content/uploads/2013/03/harkjes.jpg)

System: If a company wants to bring in a change without disrupting the structure of the organization then system is one of those elements. Systems are the processes and procedures, both formal and informal that makes an organization accomplish it day-to-day business activities. Cost accounting procedures, training systems, budgeting systems, management information systems are the examples of systems within a company. For successful strategy implementation a company must have its systems in place. For example, if a bank wants to decrease the waiting time for its customers while availing retail banking services at the branch; the bank needs to focus on its systems and sub-systems that could enhance the bank’s effectiveness.

ImageSource:http://daghealth.com/wpcontent/uploads/2015/08/Fotolia_88089787_Subscription_Monthly_M.jpg

Skills: We generally tend to characterize the companies by what they do best? Skills refer to the attributes or the capabilities that the company needs to acquire in order to reinforce its new strategies. Corporation like 3M that is known as the global innovation company had differentiated its products in the marketplace and created high entry barriers through its high levels of innovation. The people at 3M capture the spark of new ideas and transform them into thousands of ingenious products and practical applications that help make people’s lives better. Skills are thus the tacit capabilities that are difficult or impossible for the rivals to imitate and enable the company to achieve competitive advantage over them.

Image Source: http://tridiversity.net/skills-requirements-for- different-types-of-engineering-degrees/

Staff: The staff element relates to type and number of personnel within the organization. How they will be recruited, trained, motivated and rewarded. In today’s knowledge-based economies, it is the people who make the real difference.

Image Source: http://www.aisdit.com/wp-content/uploads/2014/11/STAFF.png

For the successful implementation of the strategy, the organization has to assure that it has the right people to undertake the appropriate job. For example, it was in 2013 that Bhaskar Bhat, the MD at Tata group’s Titan Company Ltd. was appointed Chairman of Tata Ceramics Limited (TCL) and was bestowed with the task of reviving the company. He was the man behind the scene who oversaw Titan’s diversification from a watch maker to a jewellery and eyewear retailer and was once again entrusted to bring in a similar transformation in TCL.

Style: Style refers to the leadership approach of the top managers in the organization. How do the leaders interface with subordinates and others in the organization, and how do members interact with each other? Every organisation has its own distinct culture and management style that largely includes the values, belief, norms etc. which become the enduring part of organizational life. For example, the South Asia –Head of General Electric, Banmali Agarwala laid emphasis on the new culture emergent in the organization that was driven by Jeff Immelt, GE’s global CEO. It demanded its people to cut through the maze of politeness and to deliver their messages directly for enhanced performance. The intent of such a culture was that the people should not waste their time on being nice and polite to each other just because they want to avoid confrontations and don’t want to displease anyone. The belief behind promoting such a culture hence was to promote constructive criticism that in turn would help the organization and its employees to come up with new and better ideas. Hence, the leadership styles of the top management have an important role in bringing in the required changes in the organization and thus helping in easy adoption of new strategies.

Image Source: http://professionbiz.com/wp-content/uploads/2015/03/1e0e94c.jpg

Jeff Immelt, GE’s Global CEO

(Image Source: http://static3.businessinsider.com/image/582396ba5124c954322aa8cf-480/general-electric-co-chief-executive-jeff-immelt-speaks-at-a-news-conference-in-boston-massachusetts-in-this-april-4-2016-file-photo-reutersbrian-snyderfiles.jpg)

Shared Values: Shared values are the fundamental ideas or the guiding concepts around which the business is built. These are a set of beliefs, often unwritten that goes beyond the conventional formal statement of organizational objectives. These values and common goals bind the employees towards a common destination as a cohesive team. On the contrary, the organizations with weak values and common goals often tend to exhibit difference between the employees personal and organizational goals, where employees are found following their individual goals different from that of the organization. For example, the aspiration to ‘Lead with purpose’ remains the area of focus for Johnson & Johnson that drives the company to create innovations that significantly impact human health and well-being. In the same way, 3M’s slogan ‘Science. Applied to Life’ inspires people to apply science and innovation to make a real impact in every person’s life around the world. These shared values may carry a very little meaning for the outsiders, who are not well conversant with the organization but for the insiders these values hold higher level of significance.

(Source: http://www.focusconferences.nl/assets/image/666x/1/shared-value.jpg)

Therefore, it is to be noted that the solution to problem of implementing the strategy is not only sufficed by bringing a change in the organization structure but the reasons lie among the other variables as highlighted by the 7-S framework.

6.   Summary

Strategy implementation remains one of the crucial steps in the process of strategic management process– intent, analysis, choice, and implementation. Implementation refers to as a process through which strategies are put into action by programs, budgets and procedures. For a strategy to be successful, the strategic thoughts need to be translated into strategic actions. A well framed strategy is a half way to success till it is properly implemented. However, in real life, strategy formulation and strategy implementation processes are intertwined. The strategy formulation phase involves largely conceptual and analytical activities and is a top management function whereas strategy implementation is more to do with administration and involves middle and lower management. The implementation of a strategy involves identification of the organization’s structure and processes and to align them with the proposed strategic intent. For which the necessary tasks are assigned and their performances are evaluated, monitored, controlled and regulated to achieve the ultimate organizational objectives. The traditional processes evoke only aligning the organizational structure for successful implementation of strategy. Whereas, the 7-S framework highlighted that implementing a strategy is not only a matter of structure, although it remains one of the key elements. The framework describes various internal aspects of an organization that need to be aligned together to achieve effectiveness in an organization that are: Strategy, Structure, System, Skills, Staff, Style and Shared Values. These seven elements of organization are further divided into ‘soft’ and ‘hard’ areas. Strategy, Systems and Structure are defined as the hard elements as it is much easier to identify and manage them when compared with the other elements such as Style, Staff, Skills, and Shared Values which are termed as ‘Soft Ss’. The softer components of the model are the most challenging elements as they are difficult to change. However, if soft ‘S’ are altered, they can have a great impact on the hard ‘S’ i.e. structure, strategies and the systems of the organization.