Strategic implementation - strategic management - Manu Melwin Joy

Strategic ImplementationStrategic Management

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

McKinsey 7s Model• McKinsey 7s model is a

tool that analyzes firm’s organizational design by looking at 7 key internal elements: strategy, structure, systems, shared values, style, staff and skills, in order to identify if they are effectively aligned and allow organization to achieve its objectives.

McKinsey 7s Model

Strategy• Strategy is a plan developed

by a firm to achieve sustained competitive advantage and successfully compete in the market. In general, a sound strategy is the one that’s clearly articulated, is long-term, helps to achieve competitive advantage and is reinforced by strong vision, mission and values.

Structure• Structure represents the

way business divisions and units are organized and includes the information of who is accountable to whom. In other words, structure is the organizational chart of the firm. It is also one of the most visible and easy to change elements of the framework.

Systems• Systems are the processes

and procedures of the company, which reveal business’ daily activities and how decisions are made. Systems are the area of the firm that determines how business is done and it should be the main focus for managers during organizational change.

Skills• Skills are the abilities that

firm’s employees perform very well. They also include capabilities and competences. During organizational change, the question often arises of what skills the company will really need to reinforce its new strategy or new structure.

Staff • Staff element is

concerned with what type and how many employees an organization will need and how they will be recruited, trained, motivated and rewarded.

Style• Style represents the way

the company is managed by top-level managers, how they interact, what actions do they take and their symbolic value. In other words, it is the management style of company’s leaders.

Shared Values • Shared Values are at the

core of McKinsey 7s model. They are the norms and standards that guide employee behavior and company actions and thus, are the foundation of every organization.

Example of McKinsey 7s Model

Strategy

• Imagine that your

organization is planning

to implement lean

culture.

Strategy

• Focus on the firms core

competencies and

deploying lean

manufacturing principles

throughout the firm,

targeting and

eliminating waste.

Structure

• A small hierarchy is

needed, which

encompasses self

directed work teams.

Daily interdepartmental

stand up meetings to be

held daily.

Systems

• A bonus system which

supports Lean

improvement and the

new ways of working, a

pay grade structure that

is aligned to the new

team structure.

Skills

• Develop new team skills,

problem solving, waste

elimination and process

analysis skills,

empowerment to make

decisions, the ability to

run and close out Kaizen.

Staff

• Team players, goal

sharing, acting as

change agents and

driving improvements

on an individual level.

Style• Leadership that is

trained in Emotional Intelligence and the courage to delegate and empower subordinates. Leadership that leads by example and can coach and mentor employees in Lean techniques.

Shared Values • Creating an organization

that respects each and every employee, committed to the environment and continuously strives for waste elimination and perfection in everything it does.

Leadership in strategic management

Strategic leadership• The term strategic

leader is used to describe the manager who head the organization and who are primarily responsible for creating and implementing strategic change.

Themes of strategic leadership

Strategic Vision• A well crafted, appreciated

and supported mission is at the heart of a leader’s strategic vision. It may reflect his own current assessment of where the firm should go or how he may continue to carry out the long term plans established by his predecessor.

Pragmatism

• Pragmatism is the ability

to make things happen

and achieve positive

results. This can happen

only when leader utilize

resource in an efficient

and effective way.

Structure and policies

• A visionary strategic

leader, as an agent of

change, should lay down

the rules of the game in

concrete terms and

resolve all contentious

issues in a proper way

Communication network• Both formal and informal

network should be used by the leader to inform people about priorities and strategies and ensure that these are implemented expeditiously. Lateral communication should be encouraged, in addition to upward and downward communication channels, between various departments and divisions.

Culture• A strategic leader can

influence the culture of a company significantly. In fact, every company reflects the character and personality of its leader. The beliefs and values of the leader have a strong bearing on how employees behave and react to situations on a daily basis.

Managing change• Effective leaders are

responsible for initiating necessary changes that ensure continued organizational success. To manage change effectively, the leader need to have a clear vision of the future – where the organization is heading together with the means for creating and reaching this future.

Governance and Management• The major responsibilities of

strategic leaders with respect to corporate governance are provide direction in the form of mission, formulate and implement changes, monitor and control operations, provide policies and guidelines to other team members and achieve results in a manner acceptable to society at large.

Portfolio Analysis

Portfolio Analysis

• Executives in charge of

firms involved in many

different businesses

must figure out how to

manage such portfolios.

Portfolio Analysis• General Electric (GE), for

example, competes in a very wide variety of industries, including financial services, insurance, television, theme parks, electricity generation, lightbulbs, robotics, medical equipment, railroad locomotives, and aircraft jet engines. When leading a company such as GE, executives must decide which units to grow, which ones to shrink, and which ones to abandon.

The Boston Consulting Group (BCG) Matrix

(BCG) Matrix• The Boston Consulting

Group (BCG) matrix is the best-known approach to portfolio planning. Using the matrix requires a firm’s businesses to be categorized as high or low along two dimensions: its share of the market and the growth rate of its industry.

Question Marks• Divisions in Quadrant I have a

low relative market share position, yet they compete in a high-growth industry. Generally these firms’ cash needs are high and their cash generation is low. These businesses are called Question Marks because the organization must decide whether to strengthen them by pursuing an intensive strategy.

Stars• Quadrant II businesses (Stars)

represent the organization’s best long-run opportunities for growth and profitability. Divisions with a high relative market share and a high industry growth rate should receive substantial investment to maintain or strengthen their dominant positions. Forward, backward, and horizontal integration; market penetration; market development; and product development are appropriate strategies for these divisions to consider.

Cash Cows• Divisions positioned in

Quadrant III have a high relative market share position but compete in a low-growth industry. Called Cash Cows because they generate cash in excess of their needs, they are often milked. Many of today’s Cash Cows were yesterday’s Stars. Cash Cow divisions should be managed to maintain their strong position for as long as possible.

Dogs• Quadrant IV divisions of the

organization have a low relative market share position and compete in a slow- or no-market-growth industry; they are Dogs in the firm’s portfolio. Because of their weak internal and external position, these businesses are often liquidated, divested, or trimmed down through retrenchment.

GEC Model

GEC Model• In consulting

engagements with General Electric in the 1970's, McKinsey & Company developed a nine-cell portfolio matrix as a tool for screening GE's large portfolio of strategic business units (SBU).

GEC Model• The GE matrix attempts to

improve upon the BCG matrix in the following two ways:– The GE matrix generalizes the

axes as "Industry Attractiveness" and "Business Unit Strength" whereas the BCG matrix uses the market growth rate as a proxy for industry attractiveness and relative market shares as a proxy for the strength of the business unit.

– The GE matrix has nine cells vs. four cells in the BCG matrix.

GEC Model

Strategic Implications

• Grow strong business

units in attractive

industries, average

business units in

attractive industries, and

strong business units in

average industries.

Strategic Implications

• Hold average businesses

in average industries,

strong businesses in weak

industries, and weak

business in attractive

industries.

Strategic Implications

• Harvest weak business

units in unattractive

industries, average

business units in

unattractive industries,

and weak business units

in average industries.

Strategic control

Strategic control• Strategic control is concerned

with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises and making necessary adjustments. The most important purpose of strategic control is to help top achieve organizational goals through monitoring and evaluating the strategic management process.

Types of strategic control

Premise control • Premise control is

designed to check systematically and continuously whether the premises on which the strategy is based are still valid. If an important premise is no longer valid, the strategy may have to be changed.

Premise control • It involves the checking of

environmental conditions. Premises are primarily concerned with two types of factors: – Environmental factors (for

example, inflation, technology, interest rates, regulation, and demographic/social changes).

– Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry).

Implementation control • Implementation control is

aimed at assessing whether the plans, progammes and policies are actually guiding the organization towards its predetermined objectives or not. If the resources that are committed to a project at any point of time would not benefit an organization as envisaged, corrective steps should be undertaken immediately.

Implementation control • The two basis types of

implementation control are: – Monitoring strategic thrusts -

to agree early in the planning process on which thrusts are critical factors in the success of the strategy or of that thrust.

– Milestone Reviews. Milestones are significant points in the development of a programme, such as points where large commitments of resources must be made.

Strategic surveillance• Strategic surveillance aims at a

more generalized overreaching control designed to monitor “ a broad range of events inside and outside the company that are likely to threaten the course of firm’s strategy”. It is done generally through a general kind of monitoring based on selected information sources to uncover events that are likely to affect the strategy of an organization.

Strategic surveillance• For example, the success

of Arvind Mill’s Ruf and Tuf brand encouraged rampant sale of spurious products under the same brand name forcing the company to constitute vigilance squads to crack down on the unscrupulous businessmen

Strategic alert control• A strategic alert control is the

thorough and often rapid consideration of the firm’s strategy because of a sudden unexpected event. Examples of such events can be the sudden fall of the government, a natural calamity etc. In the face of such unexpected events, the firm should respond immediately, and releases it strategies quickly.

Control Process Analysis

Control Process Analysis

• Setting performance

standards.

• Measuring the

performance.

• Variance Analysis.

• Taking corrective action.

Setting performance standards

• This is the starting phase of

control process where the

strategists lays down

foundation for comparing

actual performance with the

planned one, variance

analysis and taking of

corrective action if needed.

Measuring the performance• Operationally, measurement of

performance is done through

accounting, reporting and

communication systems. What

is important is that

performance evaluation should

reflect the actual position

which may be plus, minus or

nil.

Variance Analysis• Variance analysis is to point out the

variation of actual performance

from the standard one. Variation

can be positive, negative or

matching. The main idea behind

variation analysis is to find out the

extent of deviation and the causes

for the same so to hold responsible

the person in charge of cost or

profit centres.

Taking corrective action

• Findings of variance analysis

paves way for taking

necessary corrective actions.

Correcting the performance

calls for further details as to

the organizational structure

and systems plus behavioral

implementations.

Evaluation Strategy

Activity one: Reviewing Bases of Strategy

• Develop a revised External

Factor Evaluation EFE Matrix

- A revised EFE Matrix should

indicate how effective a

firm’s strategies have been in

response to key

opportunities and threats.

Activity one: Reviewing Bases of Strategy

• Develop a revised Internal Factor

Evaluation IFE Matrix – A revised

IFE Matrix should focus on

changes in the organization’s

management, marketing,

finance/accounting

production/operations, R&D, and

management information systems

strengths and weaknesses.

Activity two – Measuring Organizational Performance

• Another important strategy-

evaluation activity is measuring

organizational performance. This

activity includes comparing

expected results to actual results,

investigating deviations from plans,

evaluating individual performance,

and examining progress being made

toward meeting stated objectives.

Activity Three – Taking Corrective Action

• The final strategy-evaluation

activity, taking corrective actions,

requires making changes to

competitively reposition a firm for

the future. Examples of changes

that may be needed are altering an

organization’s structure, replacing

one or more key individuals, selling

a division, or revising a business

mission.