Chapter 12: Strategy Implementation

1. Identify key value drivers that lead company to a competitive advantage:

KSF's, extraordinary resources, vision and mission

Balanced Scorecard:

an implementation method that considers a wide variety of stakeholders in the performance of the company 1.Driven by *strategy* •All activities and metrics consistent with strategic approach 2.Develops "cause-and-effect logic" across four levels of the organization •Central notion of balanced SC = financial measures of performance are the result of a variety of activities that people in the company engage in •Actions and performance in each level contribute to and enable the next level •Success in each level enables the next level of performance 3. Requires developing "lead" and "lag" performance metrics for each level •Consistent with Value Chain focus on activities

The metrics a company decides to employ should reflect

its mission and the strategic approach it is taking. Example: If the company is pursuing a differentiation approach, then capturing information about efforts to reduce costs will be unproductive in allowing top management to understand whether progress is being made on the true strategic agenda.

Clear and compelling objectives

relevant to all employees • Get everyone in the organization moving in the same direction • Make sure clear to employees • Make sure every employee feels that he/she has the ability to contribute to the achievement • Use definable metrics that are relevant and important to employees

Fit

strategy, structure, value chain, resources • Most important concept • The complete alignment of strategy, structure, resources, and value chain • Vision, mission, values

Break down of the term "Balanced Scorecard":

*Balanced* - way to think holistically • Contains the 4 perspectives *Scorecard* - monitoring/measuring of strategic plan

Financial Perspective

*how are we looking at shareholders* • Increase customer value • Build franchise • Improve cost structure • Improve asset use

Internal Process Perspective:

*internal processes to thrive* •Customer Management •Operations and logistics •Innovation •Corporate citizenry

Learning and Growth Perspective:

*people - skills/capabilities* management considers the skills and competencies that the company develops in employees, as well as the facilitating of systems, structure, and culture in which employees do the work of the company •Employee competences •Systems •Structure •Culture

Customer Perspective:

*values have to provide for the financial goals* • Product/Service leadership • Operational excellence • Customer intimacy

Implementation metrics should meet the following criteria:

1. Are tied to the overall mission/vision of the organization 2. Are balanced across the organization so that all areas are covered 3. Can be translated to all value chain functional activities and levels of employees a. Balanced: All departments / functions included b.Appropriate for the level within the function 4. Are composed of both quantitate and qualitative measures of performance a. Whether Qual/quant - all performance measures need to account for two aspects: i. Its current state (so can assess change going forward) ii. Its comparability across time and to competitors 5. Can be meaningfully connected to incentives on individual and group behaviors

There are 3 Implementation Models (developing an implementation plan)

1. Balanced Scorecard Model 2. Value-Driver-Action Model 3. McKinsey 7-S Framework

Five Keys to Implementation and Control

1. Fit 2. Clear and compelling objectives 3. Single currency 4. Top management involvement 5. Resource allocation

Value-Driver-Action Model 5 components/steps

1. Identify *key value drivers* that lead company to a competitive advantage 2. Outline desired *stakeholder experience* for each driver dimension 3. Translate stakeholder experience to business/market position (*translation to position*) 4. Identify *actions* to take to achieve position 5. Develop *metrics* to assess progress toward position

Four different levels of an organization (Balanced Scorecard):

1. Learning and Growth Perspective 2. Internal Process Perspective 3. Customer Perspective 4. Financial Perspective

Establishing appropriate metrics for each functional level fosters greater control over __1__ by creating the opportunity for _________________________2____________________________

1. Strategy outcomes 2. organizational learning as well as an understanding of when and where to take corrective actions if something is not working out as planned A is expected, but B occurs So next steps: 1. Diagnose if more of activities is needed OR 2. Change activities Company can more closely monitor progress on the critical activities that are tied directly to the strategy of the business and can make changes more quickly if progress is not apparent

Strategic metrics should be:

1. Tied to vision, mission, overall corporate objectives 2. Translated down to all levels and value chain activities 3. Include quantitative & qualitative measures 4. Can be used as part of a uniform incentive system

Putting together the balanced scorecard, VAD model, or the 7-S framework for company is as much ______ as it is _______

Art Science

5. Develop metrics to assess progress toward position

Both qualitative and quantitative Measure progress toward the accomplishment of each value driver

4. Identify actions to take to achieve position

Creating a list of actions to be taken - both short-term and long-term that answer the Question: "What must we do now to ensure success?"

2. Outline desired stakeholder experience for each driver dimension

Customers, suppliers, employees, etc.

Core Responsibilities of Strategic leadership:

List that all good strategic leaders should be doing • Establish vision, mission, principles, goals • Establish code of ethics • Build senior management team • Establish structure for communication, coordination, control • Establish culture and match leadership style • Ensure process exists to recognize new opportunities • Rational decision making • Motivation through style, and incentive

Lead Metrics:

Represent the observable actions of employees that will lead to the results we are trying to achieve • actions we can directly affect • actions company takes to impact lag metrics • activities performed

Lag Metrics:

Represent the results that we expected to observe for each sub-division in a balanced scorecard • results that we would hope and expect to observe for each subdivision • results we cannot directly change • results of activities

7-S Framework definition and 7S's:

a method for examining the various aspects of the organization in such a way that alignment can be achieved. • 7 S's: o Strategy o Structure o Systems o Style o Skills o Staff o Superordinate Goals (shared values)

Top management involvement

execution of top management • Well-designed strategy that is not effectively executed (involvement of senior management) = useless • Demonstrates importance and commitment

Resource allocation

matched to goals, support incentives accomplishment • Includes people, finances, plant and equipment, knowledge, time, and support • Mismatch of resources = recipe for disaster

Effective strategy implementation must build upon and reflect:

the tenets of value chain and the complexity of the company's resources and capabilities

Key Value Driver:

those elements of the organization that provides the company with the best opportunity for success in their industry The first and most critical element in VDA model Can be identified from three sources: • List of KSFs developed through industry analysis • Resource-based analysis that pinpoints extraordinary resources o Extraordinary resource positions • Vision and mission statements Are a combination of current industry demands, current company capabilities, and future company aspirations

Single currency

uniform incentive system • Consistency • Applied to all - where everyone gets a reward of some kind • Fastest way to dismantle an effective plan = to provide different employees different types of incentives • Reward as many people as possible in the org using the same incentive

Systems

• Alignment of systems to support strategy and structure

*Learning Objectives Review* Develop effective metrics for the control and growth of the organization.

• Are tied to the overall mission/vision of the organization. • Are translated appropriately to all functions and levels of employees. • Are balanced across all functions. • Are composed of both quantitative and qualitative measures. • Are connected to a unifying incentives system.

• Aligning the systems so they support the new structure = critical step in implementation Skills

• Core capabilities and related training/learning • Dominant skills of organization

Style

• Culture and how it supports the type of work done • Alignment of style with the desired strategy, structure, and systems has ability to propel organization fwd

Shared Values and Goals

• Embodied in vision, mission, principle • Overarching goals of the organization

*Learning Objectives Review* List and describe the core responsibilities of strategic leadership.

• Establish vision, mission, goals. • Build senior management team. • Establish structure for communication, coordination, and control. • Exert control over direction. • Establish a code of ethics for conduct and decision making. • Evaluate, decide, act. • Rational decision making. • Establish top-management team process that challenges assumptions, surfaces alternatives. • Establish a match between the culture and personal leadership style.

Strategy

• Examination of value chain, resources, type of strategic approach • Written set of statements that constitutes the strategic direction of the company • The means by which the company intends to be successful

Value-Driver-Action Model

• Focuses (on value creation efforts): o Values important to deliver to customers o Actions taken to create value • Develop metrics to assess accomplishment of value creation • Easier to implement vs. balanced scorecard • Has 5 components/steps

Structure

• How structures help coordinate and organize • The design of the organization = the combination of knowing: o What constitutes the core, techno structure, and support staff or the organization o Hoe you will coordinate their activities o What organizational structures you will use

Staff

• Onboarding process and continuity of support • Staffing = examination of the means and processes for bringing in new employees o Shortening the time it takes a new employee to start providing value to the organization and aligning the process with the rest of the company

Balanced Scorecard Layout:

• Should have goals for each category - things you think are most important to measure • Dashboard - Visual representation of measures/targets • Work from the bottom up

*Learning Objectives Review* Describe the differences between the models used for implementing a strategic plan.

• The balanced scorecard connects long term competitive and financial performance to short term actions. It relies on a cause-effect logic that requires lead and lag metrics on activities engaged in by a wide variety of stakeholders. • The value-drive-action model builds more directly on strategy formulation efforts. Value creation goals drive actions to enable the company to move from its present position to a desired future position. • The 7-S framework seeks to align seven important dimensions of the organization.

*Learning Objectives Review* Translate strategy into functional area goals and activities using the keys to implementation control.

• There are five keys to success against which strategy implementation should be evaluated: Fit; Clear and compelling objectives; Single company currency for incentives; Top management involvement; Resource allocations to support direction and commitments. • Implementation begins with mission and vision. The strategic approach which will accomplish the mission leads to specific strategic initiatives. Value chain activities relevant to these initiatives are conducted. Metrics evaluating value-creating activities can monitor progress on the accomplishment of strategy.

The 7-S Framework Description

• popular model dating from 1970s • focuses on alignment and fit across the organization • Seven S's o "Hard" 3 - easier to identify strategy, structure, systems o "Soft" 3 - more difficult to pin down exactly skills, style, staff o Centered around "Shared values and goals"