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The Managerial Process ofCrafting and Executing Strategy

2

Chapter

Screen graphics created by:

Jana F. Kuzmicki, Ph.D.Troy State University-Florida and Western Region

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Chapter Roadmap

What Does the Process of Crafting and Executing Strategy Entail? Developing a Strategic Vision: Phase 1of the Strategy-Making,

Strategy-Executing Process

Setting Objectives: Phase 2of the Strategy-Making, Strategy-

Executing Process Crafting a Strategy: Phase 3of the Strategy-Making, Strategy-

Executing Process

Implementing and Executing the Strategy: Phase 4of the Strategy-

Making, Strategy-Executing Process

Initiating Corrective Adjustments: Phase 5of the Strategy-Making,

Strategy-Executing Process

Corporate Governance: The Role of the Board of Directors in the

Strategy-Making, Strategy-Executing Process

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Fig. 2.1: The Strategy-Making,Strategy-Executing Process

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Developing a Strategic Vision

Involves thinking strategicallyabout

Futuredirection of company

Changesin companys product-market-

customer-technology to improve

Current market position

Future prospects

Phase 1 of the Strategy-Making Process

A strategic visionis a road map showing the route acompany intends to take in developing and strengthening

its business. It paints a picture of a companysdestination and provides a rationale for going there.

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Delineates managements aspirations for the business

Charts a strategic path for the futureWhere are we going?

Steers energies of employeesin a common direction

Molds organizational identity

Is distinctiveand specificto

a particular organization Avoids use of gener ic language

Triggers strong emotions

Is challenging, uncomfor table, nai l biting

Key Elements of aStrategic Vision

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The mission statementof

most companies focuses on

currentbusiness activities -

who we are and what we

do Current product and

service offerings

Customer needs beingserved

Technologicaland businesscapabilities

Astrategic visionconcerns a

firmsfuturebusiness path -

where we are going

Markets to be pursued

Future technology-product-customer focus

Kind of company

management is

trying to create

Strategic Vision vs. Mission

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Defines currentbusiness activities, highlightingboundariesof current business

Present products and services

Types of customers served

Conveys

Whowe are,

Whatwe do, and

Whywe are hereA companys mission is notto make a profit! Its true mission

is its answer to What will we do to make a profit?

Making is profit is an objectiveor intended outcome!

Characteristics ofa Mission Statement

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Key Elements ofa Mission Statement

Three factors to consider

Customer needs

What is being satisf ied

Customer groups

Who is being satisf ied

Technologies/resources/business approaches used andactivities performed

How customer needs are satisf ied

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A statement of valuesis often provided to guide thecompanys pursuit of its vision

ValuesBeliefs, business principles, and ways of doing

things that are incorporated into

Companys operations

Behavior of workforce

Values statements

Contain between four and eight values

Are ideally tightly connected to and reinforce companys

vision, strategy, and operating practices

Linking the VisionWith Company Values

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Overcoming Resistance toa New Strategic Vision

Mobilizing supportfor a new visionentails

Reiterating basis for the new direction

Addressing employee concerns head-on

Calming fears

Lifting spirits

Providing updates and progress

reports as events unfold

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Setting Objectives

Purposeof setting objectives

Converts vision into specific performance targets

Creates yardsticks to track performance

Pushes firm to be inventive, intentional, andfocused in its actions

Setting chal lenging, achievable

objectives guards against

Complacency

Internal confusion

Status quo performance

Phase 2 of the Strategy-Making Process

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Characteristics of Objectives

Represent commitment to achieve specif ic performancetargets

Spell out how muchof what kindof performance by when

Well-stated objectives are

Quantifiable

Measurable

Contain a deadlinefor achievement

Establishing objectives convertsthe

visioninto concrete performance outcomes!

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Outcomes focused

on improving financial

performance

Outcomes focused onimproving long-termcompetitivebusinessposition

Financial Objectives Strategic Objectives

$

Types of Objectives Required

l d S d h

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Balanced Scorecard Approach Strategic and Financial Objectives

Balanced scorecard approachfor measuringcompany performance requiresboth Financial objectives

Strategic objectives

Emphasison f inancial performancemay assume

priorityover strategic performance whencompanys Financial performance is dismal and

Survival is threatened

Otherwise,management is advised to put more emphasison

achieving strategic objectivesThe surest pathto sustained future prof i tabil i ty

year after year is to relentlessly pursue strategic outcomesthat strengthen a companys business position andgive it a growing competi tive advantageover rivals!

Sh t T

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Short-Term vs.Long-Term Objectives

Short-term objectives

Targets to be achieved soon

Milestones or stair steps for reaching long-rangeperformance

Long-term objectives

Targets to be achieved within3 to 5 years

Prompt actions now that willpermit reaching targetedlong-range performance later

Obj ti A N d d

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1.First, establish organization-wideobjectives and

performance targets

2.Next, set businessandproduct l ineobjectives

3.Then, establish functional

and departmentalobjectives

4.Individualobjectives are established last

Objectives Are Neededat All Levels

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Crafting a Strategy

Strategy-makinginvolves entrepreneurship

searching for opportunities

To do new things or

To do existing things in new or better ways

Strategizinginvolves

Picking up on happenings in the external environment and

Steering company activities in new directions dictated by

shifting market conditions

Phase 3 of the Strategy-Making Process

Strategizing: An Individual

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Strategizing: An Individualor Team Responsibility?

Teamsare increasingly used because Finding market- and customer-driven solutions is

necessary

Complex strategic issues cut across

functional areas and departmental units

Ideas of people with different

backgrounds and experiences

strengthen strategizing effortGroups charged with crafting the

strategy often include the people

charged with implementing it

Fig. 2.2: A Companys Strategy-Making Hierarchy

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Fig. 2.2: A Company s Strategy Making Hierarchy

Levels of Strategy Making

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Levels of Strategy-Makingin a Diversified Company

Corporate

Strategy

Business Strategies

Functional Strategies

Operating Strategies

Two-Way Influence

Two-Way Influence

Two-Way Influence

Corporate-Level

Managers

Business-LevelManagers

Functional

Managers

Operating

Managers

Levels of Strategy Making in

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Levels of Strategy-Making ina Single-Business Company

BusinessStrategy

Two-Way Influence

Functional Strategies

Operating Strategies

Business-LevelManagers

OperatingManagers

FunctionalManagers

Two-Way Influence

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Tasks of Corporate Strategy

Moves to achieve diversification

Actions to boost performanceof individual businesses

Capturing valuable cross-business synergiesto provide1 + 1 = 3 effects!

Establishing investment

prioritiesand steeringcorporate resourcesinto the

most attractive businesses

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Initiating approaches to produce successful performancein a specific business

Crafting competitive moves to build

sustainable competi tive advantage

Developing competi tively valuable

competencies and capabilities

Uniting strategic activitiesof functional areas

Gaining approval of business strategiesby corporate-

level officers and directors

Tasks of Business Strategy

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Game planfor a strategically-relevantfunction, activity, or business process

Detail how key activities

will be managed

Provide supportfor

business strategy

Specify how functional objectives

are to be achieved

Tasks of Functional Strategies

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Tasks of Operating Strategies

Concern narrower strategiesformanaging grassroots activities and

strategically-relevant operating units

Add detailto business

and functional strategies

Delegationof responsibilityto frontline managers

Wh t I St t i Pl ?

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Itsstrategic vision

and business mission

Itsstrategy

Itsstrategicand

f inancial objectives

What Is a Strategic Plan?

A

CompanysStrategic

Plan

Consists

of

Implementing and Executing Strategy

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Action-or iented, operations-drivenactivity aimed atshaping performance of core business activities in astrategy-supportive manner

Tougherand more time-consumingthan crafting strategy

Key tasksinclude

Improving efficiency of the strategy being executed

Showing measurable progress in achieving targeted results

Phase 4 of the Strategy-Making Process

Implementing and Executing Strategy

What Does Strategy

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Building a capable organization

Allocating resourcesto strategy-critical activities

Establishing strategy-supportive policies

Instituting best practicesand programs for

continuous improvement Installing information, communication,and operating

systems

Motivatingpeople to pursue the target objectives

Tying rewardsto achievement of results Creating a strategy-supportive corporate cul ture

Exerting the leadershipnecessary to drive the process forward

and keep improving

What Does StrategyImplementation Involve?

Characteristics of Good

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Characteristics of GoodStrategy Execution

Involves creating strong fits between strategyandOrganizational capabilities

Reward structure

Internal operating systems

Organizations work climate and culture

The stronger the fits the

Better the execution

Higher a companys odds of achieving its performance

targets

Evaluating Performance and

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Tasksof crafting and implementing the strategy are notaone-time exercise

Customer needs and competitive conditions change

New opportunities appear; technology

advances; any number of otheroutside developments occur

One or more aspects of executing the

strategy may not be going well

New managers with different ideas take overOrganizational learning occurs

All these trigger the need for corrective actions andadjustments on an as-needed basis

Phase 4 of the Strategy-Making Process

gMaking Corrective Adjustments

Corporate Governance: Strategic

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Corporate Governance: StrategicRole of a Board of Directors

Exercise strong oversightto ensure the five tasks ofstrategic management are executed to benefit

Shareholders or

Stakeholders

Make sure executive actionsare not only properbut alsoalignedwith interests of stakeholders