Strategy Implementation
Module 1
Introduction into Strategy
Implementation
Translating Strategy into Goals
and Metrics
Nicolai Pogrebnyakov, PhD
Strategy Implementation Examples
Around 70% of change initiatives do not deliver
expected results
On average, acquisitions of public firms result in
5.9% losses in value
US 19802001: $257 billion shareholder value lost in
acquisitions
(Beer and Nohria 2000; Moeller, Schlingemann and Stulz 2003)
Implementing Strategy
Structures:
Goals and measures
Organizational structure
Organizational culture
Managerial skills:
Communication and knowledge sharing
Managing resistance to change
Power and informal networks
Goals of a Performance Management System
Define key objectives central to the organizations
success
Specify strategies and activities the organization
needs to achieve these objectives
Specify measures of performance on these activities
Define targets of performance on these activities
Specify how achieving these targets results in
rewards for managers and employees
Identify information flows that allow the organization
to learn from its experience
(Otley 1999)
Balanced Scorecard
Financial
Objectives Measures Targets Initiatives
Customer Internal business processes
Objectives Measures Targets Initiatives Objectives Measures Targets Initiatives
Learning
Objectives Measures Targets Initiatives
(Kaplan and Norton 1996)
Balanced Scorecard Dimensions
Customer
Time, quality, performance, cost
Internal business processes
Delivery time, time to new product introduction etc.
Learning
Employee skills, data
Financial
Cost reduction, revenue increase
(Kaplan and Norton 1992)
Balanced Scorecard Example: Internal
Internal business processes
Objectives Measures Targets Initiatives
Decrease the Delivery time 20 min. Study cooking
time to serve a (vs. 30 min. process
customer now) Rearrange
kitchen layout
if needed
You are in charge of a restaurant targeting mid-
income clients
Overall strategy: start targeting clients in the upper
segment
Develop 23 objectives and corresponding
measures, targets and initiatives for Customer
Customer
Objectives Measures Targets Initiatives
Overall strategy: start targeting clients in the upper
segment
Customer
Objectives Measures Targets Initiatives
Enhance Menu items 1 new item each Research tastes and
customer for upper- for starters, main preferences
experience segment course and Shortlist 3 candidates
customers dessert Focus groups
Live music 1 live Find a band
performance per Construct stage
week Buy audio equipment
Enhance Share of 50% of Identify local
restaurant local ingredients local suppliers
image ingredients (vs. 20% now) Match to menu item
ingredients or modify
menu
Cascading Measures
Internal business processes
Objectives Measures Targets Initiatives
Organization Reduce Production Reduce Employee
costs costs by 10% training
Administrative Reduce New
costs by 7% equipment
Department / Reduce Production Reduce Upgrade
unit production costs by 5% equipment
costs Reduce
defects
Individual Reduce Number of Reduce Learn to
defects defective by 5% operate
parts upgraded
equipment
Objectives and Key Results
Objective
Medium/longer term
Key results
What to do to fulfill the objective
Shorter term
Measurable
Track progress
(Grove 1995; Schmidt & Rosenberg 2014)
OKR example
Objective:
Open 5 new bank branches in Paris by November
Key results:
Identify branch locations (by Aug 1)
Draft building leasing agreements (by Sep 1)
Renovate buildings (by Oct 15)
Hire (by Oct 1) & train staff (by Oct 25)
Purchase & install equipment (by Oct 25)
Cascade OKRs through levels of organization
Head of EMEA region:
Increase bank presence in Europe
by 5% in the current year
France manager: Germany manager:
Open 5 new bank branches Open 7 new bank branches
in Paris by November in Germany by December
Good Practices in Objectives
1) Measurable or quantifiable
2) Deadline for achievement
3) Responsibility
Increase profits in Shampoo products by 10% in Q3
Decrease employee attrition rate at Manufacturing
By Nov 1 prepare 5 recommendations to
reduce attrition rate by 10% within 6 months
Make retail more efficient
Reduce the time to serve a customer by 5
minutes by Dec 1
Reduce administrative costs by 5% by Dec 1
Sources for Measures
Inside the company:
Discussions with people impacted by the objective
(customers, employees, managers)
Experts
Past performance
Outside the company:
Customers
Market trends
Competitors
(Likierman 2009; Hubbard 2010; Neely et al. 1995)
Stretch objectives: General Electric
1960s1980s 1995 target 1995 actual
Operating margin ~10% 16% 14.4%
Inventory turns ~5 / year 10 7
Immeasurables and Intangibles
Quality
Customer experience
Company image
Customer
Objectives Measures Targets Initiatives
Enhance Share of 50% of Identify local
restaurant local ingredients local suppliers
image ingredients (vs. 20% now) Match to menu item
ingredients or modify
menu
