Chapter 15:
Components for successful strategy
implementation
LEARNING OUTCOMES
• Understand the importance of successful strategy implementation
• Differentiate between strategy formulation and strategy
implementation
• Understand the role that the implementation framework plays in
the implementation process
• Assess and discuss the components and drivers for successful
strategy implementation
• Understand the role and building blocks of organisational
structure in strategy implementation
• Identify the role of short-term goals, action plans and functional
strategy implementation
INTRODUCTION
• In order to implement strategies successfully, organisations make
use of various strategy implementation drivers, namely
leadership, organisational culture, reward systems, organisational
structure and resource allocation.
• It is easier to develop a thorough strategic plan, than it is to
execute it successfully.
• Without good strategy implementation, the chosen strategy will
be meaningless and of no value.
• In an environment characterised by rapid change, it can be
extremely challenging to execute a strategy successfully.
• Organisations need to develop the ability to be flexible
throughout the whole strategy implementation process.
INTRODUCTION
• There are two sides to strategy, namely the strategy the organisation
intends to implement and the actual strategy implemented.
• Despite the fact that most organisations have an intended strategy it
does not always go according to the initial implementation plan.
• Because of changes, an alternative route is often needed to get to an
intended destination.
• If the organisation develops the ability to implement strategies
effectively in this dynamic environment, it can gain a competitive
advantage over other organisations that do not possess the same
ability.
• Good strategy implementation is the process of putting the strategy in
place and putting it into action through the participation of the whole
organisation.
INTRODUCTION
• This competency of good strategy implementation depends on:
– The ability to work with and through employees.
– Being able to strengthen and build competitive capabilities in
people and in the organisation.
– Motivating others to support strategy implementation.
– Giving appropriate and deserved rewards.
– Establishing the urgency of strategy implementation among
employees.
• Implementation of the strategy depends on the organisation’s
internal functioning.
IMPLEMENTATION FRAMEWORK
• Strategy implementation is not as clearly divided and neatly
executed in practice as the prescriptive approach of strategic
management suggests – overlap in practice.
• In the organisational environment characterised by high levels of
uncertainty, turbulence and rapid change, a strategy can be
obsolete by the time it has been implemented.
• McKinsey’s 7S framework model can be used to determine how
effectively the organisation is implementing its strategy.
• The basic premise of the model is that there are seven
interdependent internal aspects of an organisation that need to
be aligned if the organisation is to be successful – categorised as
either “hard” or “soft” elements.
IMPLEMENTATION FRAMEWORK
Figure 15.1 McKinsey 7S Framework (Textbook, page 316)
IMPLEMENTATION FRAMEWORK
• The seven components are:
– Strategy: The plan devised to maintain and build competitive
advantage.
– Structure: Indicates the way the organisation is structured and
who reports to whom.
– Systems: Involves the daily activities and procedures (e.g. IT
systems) that staff members engage in to get the job done.
– Shared values: Originally called “super-ordinate goals”. These
are the core values of the organisation evidenced in the
corporate culture and organisational ethics.
– Style: The style of leadership applied in the organisation.
– Staff: The employees and their general capabilities.
– Skills: The actual skills and competencies of the employees
needed to do the work in the organisation.
IMPLEMENTATION FRAMEWORK
• The model is based on the assumption that in order for an organisation
to perform well, these seven elements must be aligned.
• Any change in the strategy, or other changes like restructuring, new
processes, new systems, change of leadership, etc. will influence the
other elements.
IMPLEMENTATION FRAMEWORK
• A number of high-performing organisations have found ways to close
the gap between strategy and the execution of strategy. The seven
rules are:
– Rule 1: Keep it simple, make it concrete.
– Rule 2: Debate assumptions, not forecasts.
– Rule 3: Use a rigorous framework and speak a common
language.
– Rule 4: Discuss resource deployments early.
– Rule 5: Clearly identify priorities.
– Rule 6: Continuously monitor performance.
– Rule 7: Reward and develop execution capabilities.
STRATEGY IMPLEMENTATION PROCESS
– CORE COMPONENTS FOR STRATEGY
IMPLEMENTATION
• Problems that organisations often experience when attempting to
implement their strategy or strategies can be attributed directly to
a lack of some managerial competencies.
• There is no alignment between the organisational structure
and the strategy.
• The information and communication systems are inadequate
to report on the progress of strategy implementation.
• The organisational culture does not support the new strategy.
• The coordination of implementation efforts is not sufficiently
effective.
• The leadership and direction provided by top and middle
managers are inadequate.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
• Goals are not sufficiently defined and not well understood by
employees.
• The formulators of the strategy are not involved in
implementation, or they leave before the implementation is
complete.
• Key changes in the responsibilities of employees are not
clearly defined.
• The strategy implementation components are as follows:
• Build an organisation that grows and develops the needed
competencies, capabilities and resource strengths.
• Strong strategic leadership must be in place.
• Nurture and establish a corporate culture as a strong driver.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
• Link rewards and incentives to the achievement of strategic targets
and milestones.
• Establish an organisational structure that fits the strategy.
• Deploy resources as an important structural driver.
• Establish policies, guidelines and procedures as instruments.
• Develop action plans, short-term objectives and functional tactics
as instruments.
• Design and incorporate information and operating systems that
will empower employees to carry out their strategic
responsibilities and roles skillfully.
• Strive towards continuous improvement in all areas of strategy
implementation through implementing best practices.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
• Implementation management tasks that can be managed directly
are:
– Organisational structure
– People management and reward management systems
– Policies and procedures
– Action plans, short-term objectives and functional tactics
– Management information systems and financial systems
• Implementation management tasks that cannot be managed directly
are:
– Guide and develop excellence and quality
– Instill values
– Develop an effective organisational culture
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
• Reasons why strategy implementation may be unsuccessful –
strategic pitfalls:
– Lack of ownership
– Lack of communication
– Getting stuck in the day-to-day activities
– Out of the ordinary
– An overwhelming plan
– A meaningless plan
– Annual strategy
– Not considering implementation
– No progress report
– No accountability
– Lack of empowerment
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Building an organisation that develops the needed
competencies and capabilities
• The most important components of building an organisation with the
competency and capabilities necessary for good strategy
implementation include:
– Putting the right people in place.
– Developing and maintaining core competencies and competitive
capabilities.
– Good administration.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Building an organisation that develops the needed
competencies and capabilities
People management
• People are the key factors that can minimise the gap between what
was intended and what is really realised.
• Competitive advantage can be achieved by harnessing the knowledge,
skills and ideas of the entire workforce through good people
management.
• Characteristics of strategy supportive employees:
– Committed to the strategy.
– Competent by possessing the needed skills or the ability to
develop the needed skills.
– High performance levels.
– Agree with, and support, the aims of the organisation.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Building an organisation that develops the needed
competencies and capabilities
Empowerment and the participation of people
• To get employees motivated, an empowerment approach should be
followed.
• Employee empowerment – defined as the process of allowing
employees to have input and control over their work, and the ability
and opportunity to openly share suggestions and ideas about their
work and the organisation as a whole.
• Empowerment can be a direct benefit of strategic management if
managed correctly.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Building an organisation that develops the needed
competencies and capabilities
Empowerment and the participation of people
• Benefits of empowerment:
– Relief of management stress.
– Reduce the chance of unionization.
• Risks of empowerment:
– Ineffective empowerment.
– Unclear management roles.
– Employees not ready for empowerment.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Strong strategic leadership to drive the implementation
process
• Strategic leadership is one of the most important drivers for strategy
implementation.
• Creating and implementing strategic change, especially corporate
strategic change, is especially important in strategy implementation.
• The impact that leadership has on every single aspect in the strategy
implementation process should not be underestimated.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish and nurture a strategy-enhancing corporate
culture
• An effective culture that supports strategy implementation is of
vital importance.
• Culture can be defined as a system of shared values that shapes
what is important to people as well as norms that define what
attitudes and behaviours are appropriate.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish and nurture a strategy-enhancing corporate culture
• Strong cultures improve organisational performance in two ways.
– A strong culture energises employees – appealing to their higher
ideals and values and uniting them around a set of meaningful,
unified goals. Such ideals motivate employees’ commitment and
efforts.
– It shapes and coordinates employees’ actions. Values and norms
focus employees’ attention on organisational priorities that guide
their behaviour and decision making.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Link rewards and incentives to the achievement of set-out
strategic targets and milestones
• Rewards embody a principal method by which organisations obtain and
underline desired behaviour from its employees.
• One way to improve employee commitment and encourage behaviour
consistent with the new strategy, is by establishing reward systems.
• Rewards must be utilised correctly by linking them to specific
performance standards.
• Reward practices and preferences are culturally bound – what motivates
one employee won’t necessarily have the same motivating impact on
another.
• The reward system must be tightly linked to the desired strategy to make
sure employees are motivated to achieve the desired outcomes.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Link rewards and incentives to the achievement of set-out
strategic targets and milestones
Processes and practices for rewarding employees
• Reward systems impact directly on the organisations’ capability to
catch, retain and motivate high-potential employees.
• Rewards should support the vision, align with the internal culture
of the organisation and promote the strategy implementation
process while ensuring that the reward systems are relevant for the
long term.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Link rewards and incentives to the achievement of set-out
strategic targets and milestones
Processes and practices for rewarding employees
• Requirements for reward systems:
– Rewards should be created in such a manner that they are closely
linked to the organisation’s chosen strategy.
– They should encourage positive behavioural change among
employees.
– They should reward managers for performance measures
achieved over the long term.
– Rewards should be tied to specific strategic implementation
outcomes.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Link rewards and incentives to the achievement of set-out
strategic targets and milestones
Processes and practices for rewarding employees
• Requirements for reward systems:
– Rewards given should send out a clear message that it rewards
people showing results and not for dutifully performing their
assigned tasks.
– Rewards should be equal, irrespective of differences in gender
and culture.
– Rewards should create performance-oriented employees and
make it possible to institutionalise performance management
systems and performance excellence.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Link rewards and incentives to the achievement of set-out
strategic targets and milestones
Processes and practices for rewarding employees
• Reward management system tools can be divided into both financial
(monetary) and non-financial (non-monetary) rewards – see Figure
15.2 (Textbook, page 327).
• When rewards are used properly, they motivate and energise
employees – if not applied correctly they can demotivate, baffle and
anger employees.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Figure 15.2 Components of a reward-system model (Textbook, page 327)
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish an organisational structure that fits the strategy
• A change in the environment leads to a change in the organisation’s
strategy – requires a change in organisational structure.
• The organisational structure must remain aligned with the strategy at
all times, as the organisational structure serves as a framework for
the setting of short-term objectives, tactics and policies as well as
resource allocation.
• Structure follows strategy.
• Organisational structure needs to be flexible and able to respond to
changes in strategy and/or in the environment.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish an organisational structure that fits the strategy
• Relationship between strategy and structure is a matter of give and
take – with the same intensity that structure influences strategy,
strategy influences structure.
• It is important that when a strategy is chosen, the organisational
structure is taken into consideration by ensuring that the strategy is
compatible with the structure.
• Good organisational structures will:
– enable the implementation of new ideas
– effectively deploy human resources
– properly empower managers
– facilitate strategy implementation actions.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish an organisational structure that fits the strategy
• Organisational design in the organisation consists of three
components – five basic parts of an organisation, six basic
coordinating mechanisms and the essential parameters of design.
• Important to remember that there is not really a “one-size-fits-all”
structure, but rather a best structure that meets the requirements of
the organisation in terms of its strategy.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish an organisational structure that fits the strategy
The five building blocks of the organisation
– The operating core
– The middle line
– The strategic apex
– The techno structure
– Support staff
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Figure 15.3 The five building blocks of the organisation (Textbook, page 328)
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish an organisational structure that fits the
strategy
Six basic coordinating mechanisms
• Mutual adjustment
• Direct supervision
• Standardisation of work processes
• Standardisation of work outputs
• Standardisation of employees’ skills
• Standardisation of employees’ norms
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establish an organisational structure that fits the strategy
Essential parameters of design
• Job specialisation
• Behaviour formalisation
• Training
• Socialisation
• Centralisation/decentralisation
• Unit grouping
• Unit size
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Allocate the resources that are necessary for successful
strategy implementation
• For successful strategy implementation, it is essential that resources
are allocated in such a way that it supports the organisation’s long-
term goals, chosen strategy, structure and short-term objectives.
• Resource allocation is an important structural driver for strategy
implementation.
• Types of resources needed in strategy implementation.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Allocate the resources that are necessary for successful
strategy implementation
Table 15.1 Types of resources needed in strategy implementation (Textbook, page 331)
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Allocate the resources that are necessary for successful
strategy implementation
• The contribution of resources has changed over the past few
decades – source of valuable resources has shifted from tangible to
intangible assets.
• Kaplan and Norton (2004) emphasised that if an organisation’s
intangible assets represent more than 75% of its total value, then
strategy implementation needs to focus on the mobilisation of
human capital, information capital and organisational capital.
• The important contribution that the vision can make in an
organisation if all employees are focused on the vision and values of
an organisation – Strategy in action 15.5 (textbook, page 331).
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Allocate the resources that are necessary for successful
strategy implementation
• The allocation of financial resources plays an important role in
strategy implementation.
• Budgets form the plan according to which the different financial
resources available to an organisation are allocated in order to
achieve the organisation’s objectives.
• Budgets can only be developed after there is a clear understanding
of the strategic direction the organisation is following.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establishing policies, guidelines and procedures that
support the strategy implementation process
• Policies act as important instruments for supporting the successful
implementation of strategies.
• Policies can be defined as the specific guidelines, methods,
procedures, rules, forms and administrative practices that direct the
thinking, decisions and actions of managers and employees and
serve as instruments to aid the strategy implementation process.
• Important that policies, guidelines and procedures support the
chosen strategy.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Establishing policies, guidelines and procedures that
support the strategy implementation process
• Policies can be divided into two groups of rights and duties in the
organisational structure.
– Authorisation policies – specify what activities an employee is
permitted to perform in the framework of the strategy or, on the
contrary, actions that are forbidden during strategy
implementation.
– Obligation policies – set of actions that employees must or must
not perform based on a set of objectives.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Develop action plans, short-term objectives and functional
tactics
• Long-term or strategic goals indicate what the organisation wants to
achieve in the next five or ten years.
• Short-term objectives are set in order to provide more specific
guidance and a clear indication of the actions needed to translate
the vision into action.
• Relationship between long-term goals and short-term objectives,
functional tactics and policies – Strategy in action 15.6: Relationship
between long-term goals and short-term objectives, functional
tactics and policies (textbook, page 334).
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Develop action plans, short-term objectives and functional
tactics
• The reason managers set goals and objectives is to convert the
strategic vision into specific performance targets.
• Goals and objectives show management’s commitment to
supporting the strategy by achieving specific results and outcomes.
• Goals and objectives should be concrete and measurable to serve
as yardsticks for tracking the company’s performance and progress
throughout strategy implementation and other activities.
• Strategic and financial goals are two distinct performance yardsticks
to assist during the strategy implementation process. Table 15.2
(textbook, page 335) demonstrates examples of strategic and
financial goals that managers can set to fulfil the organisation’s
vision and mission.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Table 15.2 Strategic and financial goals (Textbook, page 335)
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Design and incorporate information and operating systems
• Over the past few years, information provision within organisations
has changed and evolved immensely through advances in
technology.
• In modern organisational settings information is considered a key
corporate resource.
• Management needs information systems to communicate with
employees and to keep everyone updated with regards to the
current position of the strategy implementation process.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Design and incorporate information and operating systems
• Effective communication enhances efficiency and effectiveness.
• Information systems can be defined as a set of interrelated elements
of components that collect (input), manipulate (process) and
disseminate (output) data and information and also provide the
opportunity for feedback in order to meet an objective.
• Aspects that will have an influence on whether the information
system will be effective or not include:
– the information system’s capabilities,
– the characteristics of the organisation,
– the organisation’s work systems, and
– the people and the culture among personnel.
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Design and incorporate information and operating systems
• The purpose is to keep organisations up to date on changes in
customer preferences, new developments in the ever-changing and
complex markets and to help organisations be proactive and adapt to
changes.
• There are three levels of information that managers should develop
and exploit:
– Operating information systems
– Competitive information systems
– Strategic information systems
STRATEGY IMPLEMENTATION PROCESS – CORE
COMPONENTS FOR STRATEGY IMPLEMENTATION
Striving towards continuous improvement through
implementing best practices
• Continuous improvement is a company-wide process of focused and
incremental innovation.
• Implementing continuous improvement in itself is not easy, and it is
influenced by a number of organisational factors:
– A clear strategic framework for incorporating continuous
improvement.
– The foundation of a supportive culture.
– An enabling infrastructure.
– A supporting toolkit.
– Recognition of the importance of managing continuous
improvement as an ongoing process.
• It is not a short-term commitment, but an ongoing course of action.
STRATEGY IMPLEMENTATION AND
CORPORATE GOVERNANCE
• The King IV Report states that it is the board’s responsibility to
ensure that management not only implements the formulated
strategy, but also monitors that implementation.
• Organisational leaders and managers should ensure that social
responsibility, environmental responsibility, stakeholder
engagement and economic sustainability form the fundamental
components during the implementation process of the strategy.
• Corporate governance is especially applicable to strategic
leadership and the establishment and nurturing of an
organisational culture as being ethical in its day-to-day operations.
• Important that the design of reward systems must be in such a way
that it ensures the instilment of good corporate governance
practices within an organisation.
SUMMARY
• The real value of strategy is only visible and experienced through
its effective and efficient implementation.
• If an organisation can master the challenge of successfully
implementing the strategy, this will give it a competitive
advantage.
• Different components for strategy implementation have been
discussed.
• Important to build an organisation that grows and develops the
needed competencies, capabilities and resource strengths.
• Strong strategic leadership must be in place to drive the
implementation forward to achieve operating excellence.
