Strategic Management in the Information Age
Strategic Management in the Information Age
Strategy implementation – strategy in action - is the third of the three broad dimensions of strategy: analysis, choice and implementation. It can be seen as the final step in the sequence of identification of the strategic problem, obtaining necessary information, production of possible solutions, evaluation of these solutions, selection of unique strategy and strategy implementation.
Broadly, strategy implementation or making strategy happen involves the translation of the chosen strategy into administrative and operational activities. Such activities include more formal procedures for delegation and co-ordination (organization structure), programmes for individual projects (for example, project management techniques), management information systems, and arrangements for strategic appraisal and control. Strategy implementation itself therefore contains elements of structure, processes and relationships; and a key assumption – developed further below – is that these elements that comprise the organization design or configuration play a major role in strategy implementation. Choice among the various design or configuration possibilities is therefore a significant determinant of success in strategy implementation.
Strategy Implementation and other Stakeholders and Organizations
It is also important to note that strategy implementation has to embrace the structures, processes and relationships that link an organization with a range of ‘outside’ organizations. One way in which to think of this is in terms of the adjacent value chains within the overall market value chain, with connections between, say, the respective outbound and inbound logistics value-chain components. These outside organizations include customers, suppliers, partners and employee organizations. Thus for organizations dependent upon a relatively small group of customers, each of whom is responsible for a significant part of the business revenues, the organization must choose an appropriate interface with such customers in terms of structures, processes and relationships. Increasingly, organizations are seeking improved efficiency through high levels of vertical integration with external suppliers or are outsourcing activities previously undertaken within the organization. Each of these strategic relationships requires appropriate structural etc implementation. Similarly, international businesses must ensure that their organizational structures etc relative to those of their partners or alliance members are appropriate. In some industries it is particularly necessary to have appropriate structures, processes and relationships with trade unions etc.
It is increasingly recognized that the implementation stage of strategy – often neglected in earlier studies – is now of crucial importance. “Better a first-class implementation procedure for a second-class strategy than vice versa”.
Strategy Implementation through the Lenses
It is important to recognize that different approaches to strategic decision making overall will have an impact upon the attitude to strategy implementation. The design or classical approach emphasizes the value of planning for strategy and its implementation through planning guidelines, a planning cycle, planning fora and a linking of business-level and corporate planning. Such an approach is intended to structure the whole planning process, encourage a longer-term view of strategy, enhance co-ordination of lower-level strategies within the organization and generally communicate the strategy throughout the organization. In many not-for-profit organizations such an approach may be largely dictated by the funding body, such as the Scottish Government or SFHEFC. Thus, perhaps paradoxically, for some people the more formal and structured classical or design school approach to strategic planning and implementation has an important psychological dimension in providing for involvement and ownership of strategy.
By contrast, those of the experience school regard strategy making as different from planning, and consider strategy making within a planning system as unduly restrictive in its thought processes, its timetabling and the range of managers involved. Contrary to some perceived benefits of the classical approach to strategy, the experience school regards strategic planning as too attached to the financial or budgetery system. It is detached from the reality of the business, there is a lack of ownership and a wariness of innovation. These concerns come naturally to those who doubt whether there can be a single, clearly-defined and optimal long-term strategy for many businesses. The best that can be achieved, in their view, is a managed system of logical strategic incrementalism, and that strategy and strategy implementation must cope with environmental uncertainty, a generalised view of what the strategy of the organization is, strategic experimentation and at best the co-ordination of emergent strategies.
Levels of Strategy Implementation
Three dimensions of strategy implementation may be recognized.
Structural or Organizational Implementation
This is obviously a largely structural as opposed to a process or relationship dimension of strategy implementation. It involves the choice of the formal business organization structure that best suits the chosen strategy. This may, however, be extended to the area of organization culture and therefore contains elements of relationships along with structure. Indeed for some authors the basic purpose of the organization structure is to establish appropriate relationships between the centre of the organization and its operations.
With regard to the link between formal organization structure and strategy, early studies established an observed link between the traditional functional or U-form organization structure and ‘simple’ single-market strategies. In contrast to this, the development in the US in the second quarter of the 20th century of more sophisticated strategies such as market diversification (multi-product), vertical integration (multi-stage) and geographical expansion (multinational) was accompanied by the emergence of the multidivisional or M-form organization structure.
The intercalation of the M-form layer within the organization structure not only allows for the maintenance of an appropriate degree of central control as organization size increases but also provides for profit etc accountability on the part of individual SBUs that would not be possible in a functional organization structure. The M-form structure also provides for ‘portfolio management’ of the range of market interests of the business within a ‘complex’ strategy and for the straightforward addition or subtraction of individual subsidiaries. From observation of early 20th century American business by the business historian Alfred Chandler came the Chandler Hypothesis that ‘structure follows strategy’; and more recent statistical evidence suggests that those business organizations that adhere to the hypothesis by implementing their chosen strategies through an appropriate organization structure perform significantly better in terms of profitability than those businesses that ignore this relationship.
This development involving the adoption of an M-form organization structure has subsequently been extended to include the legal holding company structure and matrix, team- or project-based structures which create a bilateral set of management relationships in respect of each more fluidly organized operating subsidiary or area. A further development from this is the transnational structure that seeks to achieve for international organizations the most advantageous simultaneous combination of local responsiveness to particular geographical circumstances and at the same time appropriate global co-ordination. Within the transnational organization structure each national unit operates with considerable independence while being the source of ideas and capabilities for the whole organization. National units may therefore specialize and achieve scale economies in providing output for the whole organization or a significant part of it. However, the corporate centre manages the global network by establishing the position of each national unit with a corporate business portfolio and also providing certain core facilities in the areas of product development or finance.
In addition to the issue of formal organization structure, structural or organizational strategy implementation also involves the choice of an appropriate businesses processes and relationships. Earlier analysis of this considered the balance between such contrasts as centralization and decentralization, bureaucratic and entrepreneurial styles of management, and what were referred to as mechanistic or organic styles of management. These ideas have been extended to a wider consideration of organization etc culture, and have led to the acceptance of a ‘cultural Chandler Hypothesis’. That is, the profit etc performance of an organization is influenced by the choice of an appropriate culture linked to the chosen strategy.
Leadership or Personal Implementation
This involves – within the chosen organization structure - the appointment of appropriate senior managers to implement a chosen strategy. This is part of the broader management process of establishing managerial responsibility for a chosen task. In the context of strategy implementation, ‘appropriate’ means choosing managers for strategy implementation who not only have the relevant technical qualifications and experience but also the appropriate outlook or personality for a particular strategy, such as management of a bold growth strategy (‘Star’) in contrast to overseeing exit from a particular market (‘Cash Dog’). In addition to this, managers in charge of implementing a chosen strategy should be appropriately remunerated. This relates not only to the manner in which their income is attached to the performance outcomes but also the choice of performance indicators themselves. For example, executive remuneration at the Question Mark-Star stage in the development of a market should not be related to return on investment but to sales growth and market share. Indeed in these circumstances an undue emphasis upon profitability as a managerial reward goal would undermine the implementation of the strategy. Recent events within the UK banking sector suggest that senior managers have been inappropriately motivated, being encouraged to undertake activities that raised the level of business undertaken by banks but which also significantly increased their risks.
Functional Strategy Implementation
Finally, functional strategy implementation involves the alignment of the functional strategies with the chosen business or corporate strategies, and a co-ordination of such strategies across all of the business functions. For example, a chosen generic strategy of differentiation across the market will have to be reflected in all of the procurement, production, sales, finance and HRD strategies and activities in the value chain. That is, what the differentiating business is selling in terms of the price and quality of the product (such as a motor car) must be reflected in the quality of the purchased component parts, the quality of assembly activity, the brand image of the product and any after-sales activities. This must be recognized at the level of each of the functional activities. This area of functional strategy implementation is particularly important during a period of strategic change, when there is a danger that not all functions may move from, for example, a cost leadership generic strategy for, say, household furniture retailing to a differentiation strategy in terms of merchandise range and quality, retail outlet location, ambience and services, quality of sales staff, retail marketing and promotion brand image, and standard of after-sales activities such as delivery, fitting etc.
In respect of all of these levels of strategy implementation it is important that a system and procedures for strategy performance appraisal are introduction. Thus one of the advantages of the M-form organization structure is that it lends itself to more comprehensive business performance appraisal systems applies at the personal implementation level. It should also allow individual business functions to be appraised in a particular strategic context.
Styles of Strategy Implementation
In addition to the issue of the level or area at which strategy is implemented there is the matter of the style of implementation itself. Bourgeios and Brodwin identify five ‘models’ of strategy implementation.
• The Commander Approach
• The Organizational Change Approach
• The Collaborative Approach
• The Cultural Approach
• The Crescive Approach
The Commander approach emphasizes the supreme role of strategy formulation in the area of strategic decision making within a power culture, almost to the exclusion of strategy implementation. The ‘hypothesis’ here is that ‘implementation follows strategy’.
The Organizational Change approach places some emphasis upon strategy implementation, but this is essentially achieved through changes in the organization structure and reward systems. Thus, along with the Commander approach, it is largely based upon the traditional ‘hard Ss’ of strategy, structure and systems.
By contrast the Collaborative approach seeks to involve a range of managers in both strategy formulation and implementation within an essentially task cultural environment. The assumption here is that such involvement will lead both to a better quality of strategic choice and to greater commitment in strategy implementation. The Cultural approach essentially extends the Collaborative approach, with more emphasis upon necessary changes in organization culture in both strategy formulation and implementation.
Deriving its title from the Latin crescere, to grow, the Crescive approach blends together strategy formulation and implementation. The emphasis here is upon strategies emerging (growing) from lower levels within the organization. This approach acknowledges that the information required for strategy formulation lies in the middle of the organization – in what J K Galbraith refers to as the ‘technostructure’ – and that the quality of both strategy formulation and implementation depend considerably upon the culture of the organization. This approach obviously draws heavily upon the perspective or lens that emphasizes strategy as experience and learning rather than design. This is an approach within which little distinction is made between strategy formulation and implementation, or between strategists and line managers.