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Building an Organization Capable
of Good Strategic Execution
Chapter Summary
Chapter Ten examines the process of executing an organizational strategy. It has an emphasis on the conversion
of a strategy into actions and good results for organizations. The chapter explores how executing strategy is an
operations-driven activity that revolves around the management of people and business processes. It denotes that
successfully executing a strategy depends on doing a good job of working with and through others, building and
strengthening competitive capabilities, motivating and rewarding people in a strategy-supportive manner, and
instilling a discipline of getting things done.
Lecture Outline
I. Introduction
1. Just because senior managers announce a new strategy does not mean that organizational members will
agree with it or enthusiastically move forward in implementing it. It takes adept managerial leadership
to convincingly communicate the new strategy and the reasons for it, overcome pockets of doubt and
disagreements, secure the commitment and enthusiasm of concerned parties, build consensus on all the
hows of implementation and execution, and move forward to get all the pieces into place.
2. Executing strategy is a job for the whole management team, not just a few senior managers.
3. Strategy execution requires every manager to think through the answer to “What does my area have
to do to implement its part of the strategic plan and what should I do to get these things accomplished
effectivelyandeciently?”
II. A Framework for Executing Strategy
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Themanagerialapproachtoimplementingandexecutingastrategyalwayshastobecustomizedtot
the particulars of a company’s situation.
CORE CONCEPT
Good strategy execution requires a team effort. All managers have strategy-executing
responsibility in their areas of authority, and all employees are participants in the
strategy execution process.
233
CHAPTER 10
Chapter 10 Building an Organization Capableof Good Strategic Execution
234
2. Thespecicactionsrequiredtoexecuteastrategy—the“to-dolist”thatconstitutesmanagement’saction
agenda—always represent management’s judgment about how best to proceed in light of prevailing
circumstances.
A. The Principal Management Components of the Strategy Executing Process
1. Despite the need to tailor a company’s strategy-executing approaches to the particulars of its situation,
certain managerial bases have to be covered no matter what the circumstances.
2. Figure 10.1, The Ten Basic Tasks of the Strategy Execution Process, depicts the eight managerial
tasksthatcomeuprepeatedlyinacompany’seffortstoexecutestrategy.
3. Thetenmanagerialtasksthatcropuprepeatedlyincompanyeffortstoexecutestrategyinclude:
a. Stangtheorganizationwithmanagersandemployeescapableofexecutingthestrategywell.
b. Developing the resources and organizational capabilities required for successful strategy execution.
c. Creating a strategy-supportive organizational structure.
j. Exercising the internal leadership needed to propel strategy implementation forward.
4. In devising an action agenda for implementing and executing strategy, the place for managers to start
iswithaprobingassessmentofwhattheorganizationmustdodifferentlyandbettertocarryoutthe
strategy successfully. They should then consider precisely how to make the necessary internal changes
as rapidly as possible.
5. Whenstrategiesfail,itisoftenbecauseofpoorexecution—thingsthatweresupposedtogetdoneslip
through the cracks.
6. The bigger the organization, the more that successful strategy execution depends on the cooperation and
7. Regardless of the organization’s size and the scope of the changes, the most important leadership trait is
astrong,condentsenseofwhattodoandhowtodoit.
8. What’s Covered in Chapters 10, 11, and 12—This chapter and the next two will explore what is involved
in performing the ten key managerial tasks that shape the process of implementing and executing
Chapter 10 Building an Organization Capableof Good Strategic Execution
235
b. Chapter 11: Tasks of allocating resources (budgetary and otherwise), instituting strategy-facilitating
policies and procedures, employing business process management tools and best practices, installing
operating and information systems, and tying rewards to the achievement of good results
c. Chapter 12: Two remaining tasks: instilling a corporate culture conducive to good strategy execution,
and exercising the leadership needed to drive the execution process forward
III. Building an Organization Capable of Good Strategy Execution: Where to Begin
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Building a capable organization is always a top priority in strategy execution. Three types of organization-
building actions that are paramount include:
2. Figure 10.2, Building an Organization Capable of Procient Strategy Execution: Three Key
Actions, looks at the three components necessary for building a capable organization.
IV. Stang the Organization
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. No company can hope to perform the activities required for successful strategy execution without
attracting and retaining talented managers and employees with suitable skills and intellectual capital.
A. Putting Together a Strong Management Team
this company’s approach to developing a high-caliber management team.
Chapter 10 Building an Organization Capableof Good Strategic Execution
236
ILLUSTRATION CAPSULE 10.1
Management Development at Deloitte Touche Tohmatsu Limited
Discussion Question: Identify the process each potential partner navigates as they develop their
career within the firm moving from Analyst to Principle or Director.
Answer: The company has created a three stage process that allows the new hire (undergraduate
hire) to (1) gain broad exposure to multiple areas in the firm to gauge their interest and aptitude then
B. Recruiting, Training, and Retaining Capable Employees
1. Stangtheorganizationwiththerightkindsofpeoplemustgomuchdeeperthanmanagerialjobsin
ordertobuildanorganizationcapableofeffectivestrategyexecution.
2. Inhigh-techcompanies,thechallengeistostaffworkgroupswithgifted,imaginative,andenergetic
people who can bring life to new ideas quickly.
3. In many industries adding to a company’s talent base and building intellectual capital is more important
to strategy execution than additional investments in plants, equipment, and capital projects.
5. Companieshaveinstitutedanumberofpracticesaimedatstangjobswiththebestpeopletheycan
nd:
a. Spendingconsiderableeffortonscreeningandevaluatingjobapplicants
b. Providing employees with training programs that continue throughout their careers
c. Offeringpromisingemployeeschallenging,interesting,andskill-stretchingassignments
g. Striving to retain talented, high-performing employees
h. Coaching average performers to improve their skills and capabilities, while weeding out under-
performers
V. Developing and Building Critical Resources and Capabilities
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. High among the organization-building priorities in the strategy execution process is the need to build
and strengthen the company’s portfolio of resources and capabilities with which to perform strategy-
critical value chain activities.
Chapter 10 Building an Organization Capableof Good Strategic Execution
237
A. Three Approaches to Building and Strengthening Capabilities
1. Buildingthe right kinds of core competenciesand competitive capabilities and keeping them nely
honed is a time-consuming, managerially challenging exercise. The capability building process has
three common approaches.
2. Developing Capabilities Internally
a. First,theorganizationmustdeveloptheabilitytodosomething,howeverimperfectlyorineciently.
3. Acquiring capabilities through mergers and acquisitions
a. Sometimes a company can refresh and strengthen its competencies by acquiring another company
4. Accessing capabilities via collaborative partnerships Sometimes a company can access capabilities
via collaborative partnerships with suppliers, competitors, or other companies having the cutting-edge
expertise.
a. First, Outsource the function requiring the capabilities to a key supplier or another provider
B. The Strategic Role of Employee Training
1. Training and retrainingareimportantwhenacompanyshiftstoastrategyrequiringdifferentskills,
competitive capabilities, managerial approaches, and operating methods.
2. Over 4,000 companies around the world have established internal “universities” to lead the training
effort,facilitatecontinuousorganizationallearning,andupgradetheircompany’sknowledgeresources.
C. Strategy Execution Capabilities and Competitive Advantage
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238
3. Illustration Capsule 10.2 shows how Zara’s used strategy execution to achieve competitive
advantage.
ILLUSTRATION CAPSULE 10.2
Zara’s Strategy Execution Capabilities
Discussion Question: In what way does Zara develop competitive advantage through excellent
strategy execution?
Answer: Students should identify key areas where the firm focuses its eorts. First, Zara has a quick
production process based upon nearly real time feedback from stores with manufacturing centers
located close to management and design teams. Second, the company excels at driving customers
ACTIVITY
Consider adding a File Attachment assignment requiring the student to fully explore and explain how
Zara uses strategy execution to develop competitive advantage.
Ask the student to describe specific areas of operation where Zara’s execution is unique and effective
in gaining competitive advantage. You can send the student to the following links to supplement the
information in the Illustration Capsule:
http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html
http://www.bloomberg.com/news/articles/2013-11-14/2014-outlook-zaras-fashion-supply-chain-edge
http://www.theatlantic.com/business/archive/2012/11/zaras-big-idea-what-the-worlds-top-fashion-
retailer-tells-us-about-innovation/265126/
VI. Matching Organizational Structure to the Strategy
ACTIVITY
Consider adding a LearnSmart assignment requiring the student to review this section of the chapter as
an interactive question and answer review. The assignment can be graded and posted automatically.
1. Arm’sorganizationalstructureshouldbematched to the particular requirements of implementing the
2. Figure 10.3, Structuring the Work Effort to Promote Successful Strategy Execution, looks at some
of the considerations that are common to most all organizations.
A. Deciding Which Value Chain Activities to Perform Internally and Which to Outsource
1. Outsourcing assorted administrative support activities and perhaps even core or primary value chain
Chapter 10 Building an Organization Capableof Good Strategic Execution
239
ILLUSTRATION CAPSULE 10.3
Which Value Chain Activities Does Apple Outsource and Why?
Discussion Question: What key value chain activities does Apple outsource and not outsource,
and why did the firm select them?
Answer: Apple has chosen to focus their internal resources on their key success factors in new
product development and product design as these provide the company with a sustainable
2. When a company uses outsourcing to zero in on even better performance of those truly strategy-critical
of those truly strategy-critical activities where its expertise is most need, then it may be able to realize
threeverypositivebenets.
a. The company improves its chances for outclassing rivals in the performance of those activities and
turning a core competence into a distinctive competence.
b. Thestreamliningofinternaloperationsthatflowsfromoutsourcingoftenactstodecreaseinternal
execution.
3. As a general rule, companies refrain from outsourcing those value chain activities over which they
need direct strategic and operating control in order to build core competencies, achieve competitive
advantage,andeffectivelymanagekeycustomer-supplier-distributorrelationships.
4. A company that goes overboard on outsourcing can hollow out its knowledge base so as to leave itself
1. Thedesignoftherm’sorganizationalstructureisacriticalaspectofthestrategyexecutionprocess.
2. Goodorganizationaldesignmayevencontributetotherm’sabilitytocreatevalueforcustomersand
realizeaprot.
3. Making Strategy Critical Activities the Main Building Blocks of Organizational Structure
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b. The rationale for making strategy-critical activities the main building blocks in structuring a business
4. Matching Type of Organizational Structure to Strategy Execution Requirements
a. Organizationalstructurescanbeclassiedintoalimitednumberofstandardtypes.Thetypethatis
mostsuitableforagivenrmwilldependontherm’ssizeandcomplexityaswellasitsstrategy.
b. Simple Structure—A simple structure is one in which a central executive (often the owner-
manager) handles all major decisions and oversees the operations of the organization with the help
ofasmallstaff.
c. Functional Structure—A functional structure is one that is organized along functional lines, where
afunctionrepresentsamajorstepintherm’svaluechain,suchasR&D,engineeringanddesign,
assorted support functions, and exercises overall control.
e. Matrix Structure—A matrix structure is a combination structure in which the organization is
organized along two or more dimensions at once (e.g., business, geographic area, value chain
function) for the purpose of enhancing cross-unit communication, collaboration, and coordination.
CORE CONCEPT
A simple structure consists of a central executive (often the owner-manager) who
handles all major decisions and oversees all operations with the help of a small staff.
Simple structures are also called line-and-staff structures or flat structures.
CORE CONCEPT
A functional structure is organized into functional departments, with departmental
managers who report to the CEO and small corporate staff. Functional structures are
also called departmental structures and unitary structures or U-forms.
CORE CONCEPT
A multidivisional structure is a decentralized structure consisting of a set of operating
divisions organized along business, product, customer group, or geographic lines and
a central corporate headquarters that allocates resources, provides support functions,
and monitors divisional activities. Multidivisional structures are also called divisional
structures or M-forms.
CORE CONCEPT
A matrix structure is a combination structure that overlays one type of structure
onto another type, with multiple reporting relationships. It is used to foster cross-unit
collaboration. Matrix structures are also called composite structures or combination
structures.
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C. Determining How Much Authority to Delegate
1. The two extremes are to centralize decision-making at the top (the CEO and a few close lieutenants)
2. Table 10.1, Advantages and Disadvantages of Centralized versus Decentralized Decision-Making,
3. Centralized Decision-Making: Pros and Cons In a highly centralized organization structure, top
executives retain authority for most strategic and operating decisions and keep a tight rein on business-
unit heads, department heads, and the managers of key operating units; comparatively little discretionary
authorityisgrantedtofront-linesupervisorsandrankandleemployees.
a. Key advantages include: (1) Fixes accountability through tight control from the top (2) Eliminates
potentialforconflictinggoalsandactionsonthepartoflower-levelmanagers(3)Facilitatesquick
decision making and strong leadership under crisis situations
b. Key disadvantages include: (1) Lengthens response times by those closest to the market conditions
because they must seek approval for their actions (2) Does not encourage responsibility among
lower-level managers and rank-and- le employees (3) Discourages lower-level managers and
rank-and-leemployeesfromexercisinganyinitiative
4. Decentralized Decision-Making: Pros and Cons In a highly decentralized organization, decision-
making authority is pushed down to the lowest organizational level capable of making timely, informed,
competent decisions. The objective is to put adequate decision-making authority in the hands of those
5. Capturing Cross-Business Strategic Fits in a Decentralized Structure: Diversied companies
striving to capture cross-business strategic ts have to beware of giving business heads full rein to
operate independently when cross-business collaboration is essential in order to gain strategic t
benets.
D. Facilitating Collaboration with External Partners and Strategic Allies
1. Organizationalmechanisms—whetherformalorinformal—arealsorequiredtoensureeffectiveworking
relationships with each major outside constituency involved in strategy execution.
3. Organizing and managing a network structure provides another mechanism for encouraging more
effectivecollaborationandcooperationamongexternalpartners.
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CORE CONCEPT
1. All organization designs have their strategy-related strengths and weaknesses. To do a good job of
matchingstructuretostrategy,strategyimplementersrsthavetopickabasicdesignandmodifyitas
2. Effectively managing both internal organization processes and external collaboration to create and
develop competitively valuable organizational capabilities remains a top challenge for senior executives
