Chapter 11: Building Resource Strengths and Organizational Capabilities

Building Resource Strengths and Organizational Capabilities11ChapterScreen graphics created by:Jana F. Kuzmicki, Ph.D.Troy State University-Florida and Western Region Chapter RoadmapA Framework for Executing StrategyThe Principal Managerial Components of the Strategy Execution ProcessBuilding a Capable OrganizationStaffing the OrganizationBuilding Core Competencies and Competitive CapabilitiesMatching Organization Structure to StrategyOrganizational Structures of the FutureCrafting vs. Executing StrategyCrafting the StrategyPrimarily a market-driven activitySuccessful strategy making depends onBusiness visionPerceptive analysis of market conditions and company resources and capabilitiesAttracting and pleasing customersOutcompeting rivalsUsing company resources and capabilities to forge a competitive advantageExecuting the StrategyPrimarily an operations-driven activitySuccessful strategy execution depends onGood organization-building and people managementCreating a strategy-supportive cultureContinuous improvementGetting things done and delivering good resultsExecuting the StrategyAn action-oriented, make-things happen task involving management’s ability toDirect organizational changeAchieve continuous improvement inoperations and business processesMove toward operating excellenceCreate and nurture astrategy-supportive cultureConsistently meet or beat performance targets Tougher and more time-consuming than crafting strategyImplementation involves . . .What Are the Goals of the Strategy Implementing-Executing Process?Unite total organization behind strategy See that activities are done in a manner that is conducive to first-rate strategy executionGenerate commitment so an enthusiasticcrusade emerges to carry out strategyFit how organization conducts itsoperations to requirements of strategyFig. 11.1: The Eight Actions of Implementing and Executing StrategyFig. 11.2: The Three Components of Building a Capable OrganizationPutting Together a Strong Management TeamAssembling a capable management team is a cornerstone of the organization-building taskFind the right people to fill each slotExisting management teammay be suitableCore executive groupmay need strengtheningPromote from withinBring in skilled outsidersRecruiting and Retaining Talented Employees: Implementation IssuesAssemble needed human resources and knowledge base for effective strategy executionBiggest challenge facing companiesHow to recruit and retain the bestand brightest talent with strongskill sets and management potentialIntellectual capital, not tangible assets, is increasingly being viewed as the most important investmentTalented people are a prime source of competitive advantage Building Core Competencesand Competitive CapabilitiesCrafting the strategy involvesIdentifying the desired competences and capabilities to build into the strategy and help achieve competitive advantageGood strategy execution requiresPutting desired competences and capabilities in place,Upgrading them as needed, andModifying them as marketconditions evolveStrategically-Relevant CompetencesGreater proficiency in product developmentBetter manufacturing know-howCapability to provide better after-sale serviceFaster response to changing customer needsSuperior cost-cutting skillsCapacity to speed new products to marketSuperior inventory management systemsBetter marketing and merchandising skillsSpecialized depth in unique technologiesGreater effectiveness in promotingunion-management cooperationThree-Stage Process of Developing Competences and Capabilities1. Develop ability to do something2. As experience builds,ability can translate into acompetence or capability3. If ability continues to be polished and refined, it can become a distinctive competence, providing a potential competitive advantage!Approaches toDeveloping CompetenciesInternal development involves eitherStrengthening the company’s base of skills, knowledge, and intellect orCoordinating and networking the effortsof various work groups and departmentsPartnering with key suppliers,forming strategic alliances, or maybe even outsourcing certain activities to specialistsBuying a company that has the required capabilities and integrating these competences into the firm’s value chainMatching OrganizationStructure to StrategyFew hard and fast rules for organizingOne Big Rule: Role and purpose of organization structure is to support and facilitate good strategy execution!Each firm’s structure is idiosyncratic, reflectingPrior arrangements and internal politicsExecutive judgments and preferences about how to arrange reporting relationshipsHow best to integrate and coordinate work effort of different work groups and departmentsVice PresidentVice PresidentVice PresidentCEOFig. 11.3: Structuring the Work Effort to Promote Successful Strategy ExecutionStep 1: Decide Which Value Chain Activities to Perform Internally and Which to OutsourceInvolves deciding which activities areessential to strategic successMost strategies entail certain crucial business processes or activities that must be performed exceedingly well or in closely coordinated fashion if the strategy isto be executed with real proficiencyThese processes/activities usually need to be performed internallyOther activities, such as routine administrative housekeeping and some support functions, may becandidates for outsourcingCriticalactivitiesAppeal of OutsourcingOutsourcing non-critical activities allows a firm to concentrate its energies and resources on those value-chain activities where itCan create unique valueCan be best in the industryNeeds direct control toBuild core competencesAchieve competitive advantageManage key customer-supplier-distributor relationshipsPotential Advantagesof PartneringBy building, improving, and then leveraging partnerships, a firm enhances its overall capabilities and builds resource strengths thatDeliver value to customersRivals can’t quite matchConsequently pave the wayfor competitive successPartnering makes strategic sense when theresult is to enhance a company’s competences and competitive capabilities.Step 2: Make Strategy-CriticalActivities the Main Building Blocks Assign managers of strategy-critical activities a visible, influential positionAvoid fragmenting responsibility for strategy-critical activities across many departmentsProvide coordinating linkages between related work groupsMeld into a valuablecompetitive capabilityAssignmanagerskey rolesPrimary activitiesStrategicrelation-shipsCoordi-nationValuablecapabilitySupportfunctionsStep 3: Determine How MuchAuthority to Delegate to WhomIn a centralized structure Top managers retain authorityfor most decisionsIn a decentralized structureManagers and employees areempowered to make decisionsTrend in most companiesShift from authoritarian to decentralizedstructures stressing empowermentStep 4: Provide for InternalCross-Unit Coordination Classic method of coordinating activities – Have related units report to single managerUpper-level managers have clout tocoordinate efforts of their unitsSupport activities should bewoven into structure toMaximize performance of primary activitiesContain costs of support activitiesFormal reporting relationships often need to be supplemented to facilitate coordination Coordinating Mechanisms to Supplement the Basic Organization StructureCross-functional task forcesDual reporting relationshipsInformal networkingVoluntary cooperationIncentive compensation tiedto group performanceTeamwork and cross-departmental cooperationStep 5: Provide forCollaboration With Outsiders Need multiple ties at multiple levels to ensureCommunicationCoordination and controlFind ways to produce collaborative efforts toenhance firm’s capabilities and resource strengthsWhile collaborative relationships present opportunities, nothing valuable is realized until the relationship develops into an engine for better organizational performanceOrganizational Structures ofthe Future: Overall ThemesRevolutionary changes in how work is organized have been triggered byNew strategic prioritiesRapidly shifting competitive conditionsTools of organizational design includeEmpowered managers and workersReengineered work processesSelf-directed work teamsRapid incorporation of InternettechnologyNetworking with outsidersThe future structurewill be . . . Drawbacks of Centralized Authoritarian StructuresCentralized or authoritarian structures have often turned out to be a liability whereCustomer preferences shift fromstandardized to customized productsProduct life-cycles grow shorterFlexible manufacturing replaces mass productionCustomers want to be treated as individualsPace of technological change acceleratesMarket conditions are fluidCharacteristics ofOrganizations of the FutureFewer barriers betweenDifferent vertical ranksFunctions and disciplinesUnits in different geographic locationsCompany and its suppliers, distributors,strategic allies, and customersCapacity for change and rapid learningCollaborative efforts among people in differentfunctions and geographic locationsExtensive use of Internet technologyand e-commerce business practicesChange &Learning