Strategic Management Process
Strategic Management Process
Strategic Management Process is a management process concerned with strategic decision-making and creation of strategy content - a system of strategic decisions, actions to be performed, and goals to be achieved. The process is comprised of the following stages: formulation, Implementation, Execution, Evaluation. These stages define separate logical areas of concern for the strategic management functions. The strategic management functions map to the managerial process functions as follows: strategy formulation (planning the future direction of the organization), implementation (planning and organizing resources), execution (Leading, and directing people in the implementation), and evaluation (controlling performance). These functions are logically separable, but they are inter-dependent, each element/function ties into the the overall strategic management process through the goals set in the plan. The plans help maintain managerial effectiveness by guiding future actions.
Strategic Management Process is a management process concerned with strategic decision-making and creation of strategy content - a system of strategic decisions, actions to be performed, and goals to be achieved. The process is comprised of the following stages: formulation, Implementation, Execution, Evaluation. These stages define separate logical areas of concern for the strategic management functions. The strategic management functions map to the managerial process functions as follows: strategy formulation (planning the future direction of the organization), implementation (planning and organizing resources), execution (Leading, and directing people in the implementation), and evaluation (controlling performance). These functions are logically separable, but they are inter-dependent, each element/function ties into the the overall strategic management process through the goals set in the plan. The plans help maintain managerial effectiveness by guiding future actions.
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Goals Setting
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Formulation
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Implementation
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Execution
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Evaluation
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Goals Setting
The purpose of setting strategic goals is to define the organization's strategic direction in terms of desired outcomes the organization hopes/aims to accomplish. These goals convert managerial statements of business mission, values, company direction (strategic vision), and strategy into goals. There are several areas in which most organizations establish goals including: Market Share, Productivity, Profitability, Innovation, Resources, Management Performance, Employees Performance, and Social Responsibility.
Strategic goals are set by and for top management and focus on the organization as a whole. Strategic goals are general statements of what needs to be accomplished to implement a strategy, and may include for example; growing faster than the industry average, overtaking key competitors on product quality, better customer service or increasing market share. Strategic goals define a place - destination or focus area - where the organization wants to be, and they are comprised of corporate level strategic goals, and business level strategic goals. Goals are typically, outcome statements that define what an organization is trying to accomplish, both through its programs and organizationally.
Organizational Goals
Organizational goals are statements of strategic intentions that an organization's leadership team establishes to outline expected future outcomes towards which present efforts are directed. Organizational goals are compelling statements about where the organization is going that conveys a sense of what that organization wants to achieve in the long term. These goals not only drive the organization as whole, but also guide employees' efforts towards achieving the company's vision. They can be classified into two (2) categories namely, "official" and "objective" goals.
Operative Goals
The Operative Goal concept can be differentiated in three different dimension; level, area, and time-frame. In the levels dimension, the Operative goal is a layered concept comprising three (3) levels namely; strategic goals, tactical goals, and operational goals.
The three (3) levels of goals within an organization are different and form a layered hierarchy of goals, with the lower-level operational goals forming a means-end chain with the (tactical) goals in the next level above it.. For example, "Increase profit and market share" is a strategic goal which is suitable for top-level managers but not for lower-level managers. "Increase output by 12%" is an Operational Goal which is suitable for lower-level managers.. .
Performance Goals
These are statements of standards/targets set at which the organization will perform its process goals. These are the actual results the processes produce that affect the bottom line. E.g., not simply making sales calls but actually converting customers to buyers.
Setting Objectives
The purpose of setting objectives is to convert managerial statements of business mission and company direction into specific performance targets, something the organization's progress can be measured by. Objective setting implies challenge, establishing performance targets that require stretch and disciplined effort. The objectives set must ideally embrace a time horizon that is both short-term and contributes to the long-term. Short-term objectives spell out the immediate improvements and outcomes desired by management. These measures make it explicit that management not only must deliver good financial performance but also must deliver on strengthening the organization's long-term business and competitive positions.
Strategic Objectives
Objectives are very precise, time-based, measurable actions that support the completion of a goal. Objectives are derived from goals, giving more specific ideas on how the organization will achieve its goals. Objectives typically must (1) be related directly to a goal; (2) be clear, concise, and understandable; (3) be stated in terms of results; (4) begin with an action verb; (5) specify a date for accomplishment; and (6) be measurable. Strategic objectives are derived from strategic goals and serve as yardsticks for tracking the progress of performing the goals.
Measures
Measures are the actual metrics used to gauge performance on objectives. For example, the objective"improve financial performance" can be measured using a number of metrics, ranging from improvement in total sales, profitability, efficiencies, or stock prices. Without measurement, you cannot tell where you have been, where you are going now, or if you are heading in the direction you intended to go.
Benefits of Goals
Goals are critical to organizational effectiveness as they serve variety of different purposes. Organizations have a variety of different goals, all of which must be appropriately managed. Goals are important for the following reasons:
An Operative goal model is a layered hierarchy of goals with strategic goals at the top; tactical goals, created and cascaded beginning from the strategic goals to functional areas/departments, it the next layer; and operational goals in the bottom layer. The model allows the organization leadership to set goals reflecting the outcomes (results) they desire, set process goals (behavior) that establish the behaviors or strategies that will help the organization perform well and increase its changes of achieving the desired outcome goals.
The purpose of setting strategic goals is to define the organization's strategic direction in terms of desired outcomes the organization hopes/aims to accomplish. These goals convert managerial statements of business mission, values, company direction (strategic vision), and strategy into goals. There are several areas in which most organizations establish goals including: Market Share, Productivity, Profitability, Innovation, Resources, Management Performance, Employees Performance, and Social Responsibility.
Strategic goals are set by and for top management and focus on the organization as a whole. Strategic goals are general statements of what needs to be accomplished to implement a strategy, and may include for example; growing faster than the industry average, overtaking key competitors on product quality, better customer service or increasing market share. Strategic goals define a place - destination or focus area - where the organization wants to be, and they are comprised of corporate level strategic goals, and business level strategic goals. Goals are typically, outcome statements that define what an organization is trying to accomplish, both through its programs and organizationally.
Organizational Goals
Organizational goals are statements of strategic intentions that an organization's leadership team establishes to outline expected future outcomes towards which present efforts are directed. Organizational goals are compelling statements about where the organization is going that conveys a sense of what that organization wants to achieve in the long term. These goals not only drive the organization as whole, but also guide employees' efforts towards achieving the company's vision. They can be classified into two (2) categories namely, "official" and "objective" goals.
- Official Goals - Official goals are statements described in an organization's public statements such as corporate charter, mission statements and annual reports. Official goals help build the organization's public image and reputation. Official goals help communicate the general purpose of the organization and describe what the organization would like or hopes to achieve.
- Operative Goals - These goals are statements of the concrete steps an organization plans to take to achieve its vision and purpose. They are the outcomes the organization actually seeks to attain through its operating policies and undertakings. These goals describe what the organization needs to do to successfully achieve their mission; they are derived from a strategic planning initiatives.
Operative Goals
The Operative Goal concept can be differentiated in three different dimension; level, area, and time-frame. In the levels dimension, the Operative goal is a layered concept comprising three (3) levels namely; strategic goals, tactical goals, and operational goals.
- Strategic Goals - These are broad statements of the outcomes the organization hopes or aims to achieve in the long-term horizon. These are outcome goals in key areas such as:.market share, productivity, profitability, innovation, resources, management performance, employee performance, social responsibility. These goals are set by and for top-management of the organization. They are usually long-term and from this goal other goals are made and set for different time-frames and functional areas
- Tactical Goals - Tactical goals focus on how to operationalize actions necessary to achieve the strategic goals. They are established by top management for middle managers in various areas (functional and product service) who are held responsible for their attainment.
- Operational Goals - Operational goals are statements of process targets set to determine what business processes can help realize the outcomes goals. They define the business processes/activities needed to tackle short-term issues associated with tactical goals, and line managers are responsible for their attainment in order to achieve the outcomes goals. They are akin to core values which spell out how the organization will behave to achieve its goals. These goals help determine the productivity, profitability and quality goals. Productivity goals focus on improving the way the product is created or delivered. Operational goals are set by and for lower-level or line managers.
The three (3) levels of goals within an organization are different and form a layered hierarchy of goals, with the lower-level operational goals forming a means-end chain with the (tactical) goals in the next level above it.. For example, "Increase profit and market share" is a strategic goal which is suitable for top-level managers but not for lower-level managers. "Increase output by 12%" is an Operational Goal which is suitable for lower-level managers.. .
Performance Goals
These are statements of standards/targets set at which the organization will perform its process goals. These are the actual results the processes produce that affect the bottom line. E.g., not simply making sales calls but actually converting customers to buyers.
Setting Objectives
The purpose of setting objectives is to convert managerial statements of business mission and company direction into specific performance targets, something the organization's progress can be measured by. Objective setting implies challenge, establishing performance targets that require stretch and disciplined effort. The objectives set must ideally embrace a time horizon that is both short-term and contributes to the long-term. Short-term objectives spell out the immediate improvements and outcomes desired by management. These measures make it explicit that management not only must deliver good financial performance but also must deliver on strengthening the organization's long-term business and competitive positions.
Strategic Objectives
Objectives are very precise, time-based, measurable actions that support the completion of a goal. Objectives are derived from goals, giving more specific ideas on how the organization will achieve its goals. Objectives typically must (1) be related directly to a goal; (2) be clear, concise, and understandable; (3) be stated in terms of results; (4) begin with an action verb; (5) specify a date for accomplishment; and (6) be measurable. Strategic objectives are derived from strategic goals and serve as yardsticks for tracking the progress of performing the goals.
Measures
Measures are the actual metrics used to gauge performance on objectives. For example, the objective"improve financial performance" can be measured using a number of metrics, ranging from improvement in total sales, profitability, efficiencies, or stock prices. Without measurement, you cannot tell where you have been, where you are going now, or if you are heading in the direction you intended to go.
Benefits of Goals
Goals are critical to organizational effectiveness as they serve variety of different purposes. Organizations have a variety of different goals, all of which must be appropriately managed. Goals are important for the following reasons:
- Goals provide guidance and direction for action - They show employees where the organization is going and why getting it is important.
- Goals direct and channels employee efforts
- Goals justify a company's activities
- Goals identify development opportunities
- Goals define performance standards - These act as mechanism for control and evaluation; performance can be measured and evaluated in the future in terms of how today's goals are being accomplished.
- Goals provide a basis for allocating resources
- Goals define standards of performance
- Goals provide constraints and parameters
- Goals provide incentives and a source of motivation - Goals should be specific and moderately difficult to inspire people to work harder; especially, if attaining the goal is going to result in a reward. There should be an appropriate reward system in place.
An Operative goal model is a layered hierarchy of goals with strategic goals at the top; tactical goals, created and cascaded beginning from the strategic goals to functional areas/departments, it the next layer; and operational goals in the bottom layer. The model allows the organization leadership to set goals reflecting the outcomes (results) they desire, set process goals (behavior) that establish the behaviors or strategies that will help the organization perform well and increase its changes of achieving the desired outcome goals.
Strategy Formulation
Strategy formulation - Strategy Making - is a stage in the strategic management process involved in defining and selecting strategic alternatives to be implemented and executed. This stage of the Strategic Management/Planning process involves the planning function of the managerial process. It involves analyzing the external environment factors, competitive opportunities and threats, as well as internal factors such as strengths and weaknesses of the organization in order to determine how best to position the organization to compete effectively in that environment. This stage includes formulation of mission statement, vision statement, as well as strategy statement and strategic goals and objectives. The organization’s mission, which is its fundamental reason for existence.
Strategy formulation is sometimes referred to as 'strategic planning' because they both basically follow the same concept. Through strategic planning, management is able to evaluate organization's resources to determine the best ways to maximize the company's return on investment (ROI). Strategy formulation is a process for analyzing the organization's internal and external environment and identifying and selecting the optimum set of grand strategies and long-term goals and objectives.
The output of strategic planning - strategic plan - serves as the framework or guide the members of the organization in carrying out their respective roles.
There are three (3) aspects to strategy making/formulation such as:
Management formulates strategies to guide how the organization conducts its business and how it will achieve its target objectives; and to deal with those identified strategic issues facing the organization.
Formulation Process
This stage is defined by a process involving the following activities and tasks jn creating s strategy concept.
Successful strategy formulation produces a clear set of recommendations, with supporting justifications, that revise as necessary the organization's mission, its supply of resources and objectives (in meeting the expectations of the stakeholders).
Strategy Hierarchy and Strategic Options
The output of the formulation process is a set of strategic options from which the strategic choice is selected. In crafting a strategic option, one has to consider options about resources, capabilities, and competencies as well as those for markets and products. A strategic option is comprised of a hierarchy of options from the following:
Evaluation of Strategic Choices
The evaluation is based on a set of selection criteria that ensures the chosen strategies will be effective. A viable strategy is defined in terms of the degree to which the strategy meets those criteria i.e.,:
The whole point about strategy is that the critical factors determining its quality are often not directly observable or simply measured; and by the time strategic opportunities/threats do directly affect operating results, it may well be too late for an effective response.
SWOT Analysis
This involves analyzing the organization's external/internal environments to identify any opportunities and/or threats; and strengths and weaknesses. It involves continuous monitoring of environments conditions for changes in environments' factors that may affect your organizations performance. The SWOT analysis helps executives summarize the major facts and forecasts derived from external and internal analyses. Strengths - The internal positive attributes of your company that are within your control; Weaknesses - These are negative factors that detract from your strengths; Opportunities - These are external factors in your business environment that are likely to contribute to your success; Threats - These are external factors you have no control over that negatively influences your success. Identify any areas of which the business must seek external resources.
Strengths
The internal positive attributes of your company that are within your control. These may include: successful business processes; assets you have in your teams i.e., knowledge, education, networks, skills, and reputation; physical assets the organization has, such as customers, equipment, technology, cash and patents; competitive advantages you may have over the competition.
Weaknesses
These are negative factors that detract from your strengths. These are factors that relate to things you might need to improve on, to be competitive. For example, things your business needs to be competitive; business processes needing improvement, tangible assets i.e., money or equipment that your company needs.
Opportunities
These are external factors in your business environment that are likely to contribute to your success. These may include factors such as, is your market growing and are there trends that will encourage people to buy more of what you are selling? Are there upcoming events that your company may be able to take advantage of, to grow the business? Are there upcoming changes to regulations that might impact your company positively? For an existing business up and running, do you customers think of you highly?
Threats
These are external factors you have no control over that negatively influences your success. You may need to put in place contingency plans for dealing with them if they occur. These factor may include: potential competitors who may enter your market; will suppliers be able to supply the raw materials you need at the prices you need? Is consumer behavior changing in a way that could negatively impact your business? Are there market trends that could become a threat?
Strategy formulation - Strategy Making - is a stage in the strategic management process involved in defining and selecting strategic alternatives to be implemented and executed. This stage of the Strategic Management/Planning process involves the planning function of the managerial process. It involves analyzing the external environment factors, competitive opportunities and threats, as well as internal factors such as strengths and weaknesses of the organization in order to determine how best to position the organization to compete effectively in that environment. This stage includes formulation of mission statement, vision statement, as well as strategy statement and strategic goals and objectives. The organization’s mission, which is its fundamental reason for existence.
Strategy formulation is sometimes referred to as 'strategic planning' because they both basically follow the same concept. Through strategic planning, management is able to evaluate organization's resources to determine the best ways to maximize the company's return on investment (ROI). Strategy formulation is a process for analyzing the organization's internal and external environment and identifying and selecting the optimum set of grand strategies and long-term goals and objectives.
The output of strategic planning - strategic plan - serves as the framework or guide the members of the organization in carrying out their respective roles.
There are three (3) aspects to strategy making/formulation such as:
- strategy process - Strategy process refers to the manner in which strategies come about;
- strategy content - Strategy content is the actual strategy - i.e., the system of decisions, actions to be performed, and goals to be achieved - the product or output of the strategy process;
- strategy context - Strategy Context is the environment within which strategy operates and develops; it is the set of circumstances in and under which both strategy process and strategy content are determined. (DeWit & Meyer, 2004).
Management formulates strategies to guide how the organization conducts its business and how it will achieve its target objectives; and to deal with those identified strategic issues facing the organization.
Formulation Process
This stage is defined by a process involving the following activities and tasks jn creating s strategy concept.
- Review or Develop Vision and Mission - To review or develop the company's Vision and Mission with the involvement of other stakeholders to ensure it is still current with the business changes and new challenges. This session is used as a means for communication of mission, vision, and values statements.
- Review or Develop Organizational Goals - Organizational goals are compelling statements about where the organization is going that conveys a sense of what that organization wants to achieve in the long term. These goals not only drive the organization as whole, but also guide employees' efforts towards achieving the company's vision. They can be classified into two (2) categories namely,
- "official" - These are statements described in an organization's public statements such as corporate charter, mission statements and annual reports. Official goals help build the organization's public image and reputation.
- "objective" goals - These goals are statements of the concrete steps an organization plans to take to achieve its vision and purpose. They are the outcomes the organization actually seeks to attain through its operating policies and undertakings. These goals describe what the organization needs to do to successfully achieve their mission; they are derived from a strategic planning initiatives.
- SWOT Analysis - This involves synthesizing the results of the analyses of the organization's external environment, internal environment, and industry to identify any opportunities and/or threats based on established strengths and weaknesses. The environments and organizational scans involve continuous monitoring of environments conditions for changes in environments' factors that may affect your organizations performance. The SWOT analysis helps executives summarize the major facts and forecasts derived from external and internal analyses. SWOT - Strengths (The internal positive attributes of your company that are within your control); Weaknesses (These are negative factors that detract from your strengths); Opportunities (These are external factors in your business environment that are likely to contribute to your success); (Threats - These are external factors you have no control over that negatively influences your success).
- Developing Strategic Goals - These are broad statements of the outcomes the organization hopes or aims to achieve in the long-term horizon. These are outcome goals in key areas that the organization wants to change, such as:.market share, productivity, profitability, innovation, resources, management performance, employee performance, social responsibility. These goals are set by and for top-management of the organization. They are usually long-term and from this goal other goals are made and set for different time-frames and functional areas.
- Strategic Options Development- This involves analyzing strategic issues and crafting strategies to respond to identified problems in areas such as corporate strategy, business/competitive strategies, and possibly operations strategies and developing options or strategic alternatives to address identified issues. Options development involves identification of practical and creative alternatives for resolving identified strategic issues. For each of the alternatives, enumerate the barriers to achieving the alternative. Prepare proposals for achieving the alternatives subject to the barriers. Corporate strategy is about domain selection; and includes decisions and choices about the following: (1) What should be the capabilities that distinguish the company? (2) What should be the company's comparative advantage in adding value to its individual businesses? (3) What businesses should the company be in?. Business/competitive strategy is comprised of answers to fundamental questions such as: (1) Who should be the customers that define our target market? (2) What should be the value proposition that differentiates our products and services with those customers? (3) What should be the capabilities that make our business better than any other in delivering that value proposition? Corporate strategy options are fundamental choices comprising corporate strategy that that frame and guide all the decisions that a company's corporate executives, functions, and staff make every day. Business strategy options are choices comprising the business strategy that should drive the decisions of business units' management teams, functions, and staff that make every day decisions on pricing, R&D, where to manufacture, etc.
- Selection/Choice of Strategy - Selection of strategic options based on evaluation criteria that look at factors such as described in the evaluation section below. Strategic choice refers to the decision-making process of selecting strategic option from a number of alternatives for implementation. Selecting a given approach from "approaches" (or means) among all options and choices that can be made at a given point in time; that "approach" becomes the "strategy" (strategic option). Every decision, every action taken from then on, will be based on (or aligned with) that "strategy". Strategic choice is a set of related options (typically combining options for products/markets and services, and resources) that form a potential strategy. The simplest form of choice is therefore between taking an option or not taking it - doing it or not doing it. Most choices have more shades of possibility than this. An option is a course of action that it appears possible to take. A strategic option is a set of of related options from a options network that address a strategic issue.
- Document Strategy Statement - The strategy statement describes what the organization's competitive game plan will be. A strategy statement communicates the company's intended strategy to everyone within the organization. A well written strategy statement will help employees and the organization to understand their roles when executing the company's strategy.
Successful strategy formulation produces a clear set of recommendations, with supporting justifications, that revise as necessary the organization's mission, its supply of resources and objectives (in meeting the expectations of the stakeholders).
Strategy Hierarchy and Strategic Options
The output of the formulation process is a set of strategic options from which the strategic choice is selected. In crafting a strategic option, one has to consider options about resources, capabilities, and competencies as well as those for markets and products. A strategic option is comprised of a hierarchy of options from the following:
- Corporate Strategy Options - Corporate level strategy is actions taken to gain competitive advantage through the selection and management of a mix of businesses competing in several industries or product markets. Corporate level strategy can be categorized into three (3) types: Growth, Stability, and Liquidation. The option selected is informed by answers to the following questions:
- (1) What should be the capabilities that distinguish the company?
- (2) What should be the company's comparative advantage in adding value to its individual businesses?
- (3) What businesses should the company be in?.
- Business Strategy Options - Business strategy refers to the actions and decisions that a company takes to reach its business goals, and be competitive in its industry. According to Porter's Generic Strategies, there are three (3) basic strategic options available to organizations for gaining competitive advantage; and they are: Cost Leadership, Differentiation, and Focus. The choice of option is informed by answers to fundamental questions such as:
- (1) Who should be the customers that define our target market? This is the market need and includes any group of potential customers whether defined by their needs, inclinations, or income bracket;
- (2) What should be the value proposition that differentiates our products and services with those customers?
- (3) Market geography? These business strategy choices guide the decisions of business units' management teams, functions, and staff that make decisions on hiring, pricing, R&D, where to manufacture, etc.
- Operations Strategy Options - Options to Improve Resources and Capabilities - What should be the capabilities that make our business better than any other in delivering that value proposition? Strategic assessment may have identified strengths and weaknesses in existing resources and capabilities in comparison with competitors; this may lead to identification of the improvements needed either to shore up weakness or build on existing strengths. It is also likely that potential market/product options will require supporting changes in resources and capabilities.
Evaluation of Strategic Choices
The evaluation is based on a set of selection criteria that ensures the chosen strategies will be effective. A viable strategy is defined in terms of the degree to which the strategy meets those criteria i.e.,:
- Consistency - The strategy must not represent mutually inconsistent goals and policies.
- Suitability (Appropriateness) - Is the strategy consistent with the organization's mission, values, and operating principles? Does it fit with the vision and mission?
- Consonance - The strategy must represent adaptive response to the external environment and to the critical changes occurring within it as defined by the SWOT Analysis information..
- Value - Will the strategy contribute to meeting agreed-upon goals?
- Advantage - The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected areas of activity.
- Feasibility . Is the strategy practical, given personnel and financial resources and capacity? The strategy must neither overtax available resources not create unsolvable sub-problems.
- Acceptability - Does it fit with the values of the company and the employees? Is the strategy acceptable to the Board, key staff, and other stakeholders?
- Flexibility - Can it be adapted and changed as needed?
- Cost-Benefit - Is the strategy likely to lead to sufficient benefits to justify the costs in time and other resources?
- Timing - Can and should the organization implement this strategy at this time, given external factors and competing demands?
The whole point about strategy is that the critical factors determining its quality are often not directly observable or simply measured; and by the time strategic opportunities/threats do directly affect operating results, it may well be too late for an effective response.
SWOT Analysis
This involves analyzing the organization's external/internal environments to identify any opportunities and/or threats; and strengths and weaknesses. It involves continuous monitoring of environments conditions for changes in environments' factors that may affect your organizations performance. The SWOT analysis helps executives summarize the major facts and forecasts derived from external and internal analyses. Strengths - The internal positive attributes of your company that are within your control; Weaknesses - These are negative factors that detract from your strengths; Opportunities - These are external factors in your business environment that are likely to contribute to your success; Threats - These are external factors you have no control over that negatively influences your success. Identify any areas of which the business must seek external resources.
Strengths
The internal positive attributes of your company that are within your control. These may include: successful business processes; assets you have in your teams i.e., knowledge, education, networks, skills, and reputation; physical assets the organization has, such as customers, equipment, technology, cash and patents; competitive advantages you may have over the competition.
Weaknesses
These are negative factors that detract from your strengths. These are factors that relate to things you might need to improve on, to be competitive. For example, things your business needs to be competitive; business processes needing improvement, tangible assets i.e., money or equipment that your company needs.
Opportunities
These are external factors in your business environment that are likely to contribute to your success. These may include factors such as, is your market growing and are there trends that will encourage people to buy more of what you are selling? Are there upcoming events that your company may be able to take advantage of, to grow the business? Are there upcoming changes to regulations that might impact your company positively? For an existing business up and running, do you customers think of you highly?
Threats
These are external factors you have no control over that negatively influences your success. You may need to put in place contingency plans for dealing with them if they occur. These factor may include: potential competitors who may enter your market; will suppliers be able to supply the raw materials you need at the prices you need? Is consumer behavior changing in a way that could negatively impact your business? Are there market trends that could become a threat?
Strategy Implementation
Strategy implementation is a stage or function in the strategic management process. The strategy implementation function viewed within the P-O-L-C framework is an organizing function and provides the process by which established plans are moved closer to realization. Once planning goals are set in the formulation stage, managers organize the human resources and other resources that are identified as necessary by the plan to reach the planned goals. Organizing involves resource/staff planning to establish the organization structure and organizational capabilities needed to implement the plan. Organizing involves determining how activities and resources are to be assembled and coordinated. Organizing produces a structure of relationships in an organization and it is through these structured relationships that plans are pursued. This is the process by which the established plans are moved closer to realization.
Strategy Implementation Process
Implementation provides the connecting loop between strategy formulation and strategy execution; and provides the context for strategy execution. Strategy Implementation consists of all the decisions and actions, and plans required to turn strategic choices into reality, and requires competencies such as leadership skills, precision planning, organizing of resources and activities, as well as motivation to ensure people's commitment to the new strategy. The implementation process involves the following steps.
Step #1 - Evaluate and Communicate the Strategic Plan
Evaluate the strategic plan and the selected strategic choices with respect to the initiatives, budgets and performance objectives prior to distribution to areas of the organization responsible for implementation. The following are the sub-steps to be undertaken in this step.
Step #2 - Develop an Implementation Structure
Create a structure that will serve as a framework and guide the implementation and execution of strategies. The structure must be clearly defined with well established lines of authority and responsibility within the organization's "chain of command" structure. Each member of the organization must know who s/he is accountable to, and who s/he is responsible for. The development sub-steps include:
The structure is intentional in the sense of making sure that all the tasks necessary to accomplish the goals are assigned to people who can do them the best. Staffing is part of organizing, it involves filling and keeping filled the positions in the organization structure.
Step #3 - Develop an Implementation-Support Policies and programs
These are policies and procedures that would be employed in aid of strategy execution. The policies help define the guidelines to how members of the organization should behave. This establishes the organizational culture - the overall atmosphere within the company, particularly with respect to its members.
Step #4 - Budgeting and Allocation of Resources
The focus of this step is to equip the managers, responsible for implementing strategy, with the tools and other capabilities to perform their tasks and functions. This step includes the following sub-steps:
Step #5 - Discharge of Functions and Activities - [Execution]
This step involves making the tactics operational and putting the strategies into action, aided by strategic leadership, utilization of participatory management and leadership styles. This step involves actual performance of tasks and activities; as well as management providing leadership and controlling the performance of activities or tactics in various levels of the organization. Throughout this step, the organization should also ensure the following:
The results of accomplishments in this step #5 will be the input in the third stage of Strategic Management - "Strategy Evaluation"
Strategy implementation is a stage or function in the strategic management process. The strategy implementation function viewed within the P-O-L-C framework is an organizing function and provides the process by which established plans are moved closer to realization. Once planning goals are set in the formulation stage, managers organize the human resources and other resources that are identified as necessary by the plan to reach the planned goals. Organizing involves resource/staff planning to establish the organization structure and organizational capabilities needed to implement the plan. Organizing involves determining how activities and resources are to be assembled and coordinated. Organizing produces a structure of relationships in an organization and it is through these structured relationships that plans are pursued. This is the process by which the established plans are moved closer to realization.
Strategy Implementation Process
Implementation provides the connecting loop between strategy formulation and strategy execution; and provides the context for strategy execution. Strategy Implementation consists of all the decisions and actions, and plans required to turn strategic choices into reality, and requires competencies such as leadership skills, precision planning, organizing of resources and activities, as well as motivation to ensure people's commitment to the new strategy. The implementation process involves the following steps.
Step #1 - Evaluate and Communicate the Strategic Plan
Evaluate the strategic plan and the selected strategic choices with respect to the initiatives, budgets and performance objectives prior to distribution to areas of the organization responsible for implementation. The following are the sub-steps to be undertaken in this step.
- Establish Strategic Objectives Clarifying the organization's strategy - Usually, strategic choices selected for implementation are expressed as high-level statements that resonate with the board, and executive level management. Ensure the strategic choices are sound and described in statements that clearly communicate what top management wants and expects. The statements should be expressed in terms that middle-level and line management would understand; such as the products and services to offer and in which markets; what resources, capabilities, and competencies are needed to support these products and services; how to acquire or build these resources.
- Evaluate Strategic Plan and Choices - Evaluate the difference between the organization's current state/position and desired future state as defined by the strategic plan (defined by strategic goals and desired outcomes) to drive specific strategies and guide allocation of resources to close the gap and achieve the desired future state..
- Aligning the strategies with the initiatives - Evaluate the difference between the current position/state and desired future through gap analysis. Check the strategies to ensure they are following the same path leading to the mission and strategic goals of the organization.
- Aligning budgets to the annual goals and objectives - This involves conducting financial assessments to identify budgetary issues that could impact the attainment of objectives, and ensure the budget provides sufficient support for it. In the event that there are budgetary constraints or limitations, they must first be addressed before launching fully into implementation mode.
Step #2 - Develop an Implementation Structure
Create a structure that will serve as a framework and guide the implementation and execution of strategies. The structure must be clearly defined with well established lines of authority and responsibility within the organization's "chain of command" structure. Each member of the organization must know who s/he is accountable to, and who s/he is responsible for. The development sub-steps include:
- Establish a linkage or coordination mechanism between and among the various departments and their respective divisions and units through Operations Strategy Design. This is mainly for the purposes of facilitating the delegation of authority and responsibility.
- Formulate the work plans and procedures to be followed in the implementation of the tactics in the strategies.
- Determine the key managerial tasks and responsibilities to be performed and the qualifications required of the role who will perform them.
- Determine the key operational tasks and responsibilities to be performed, and the qualifications/role required of the person who will perform them.
- Assign the tasks to the appropriate departments of the organization. Enacting the operations plan involves allocation of resources to carry out the actions in achieving the goals. The implementation of the Operational Plan requires management to regularly monitor achievement and exert control to reduce any variance from the plan
- Evaluate the current staffing structure, checking if you have enough manpower, and if they have the necessary skills and competencies to carry out the tasks. This may result in to some extent in reorganization or reshuffling of people. In some cases, this may also require additional training for current staff members, or even hiring new employees with the required skills and competencies. This sub-step provides the focus to address two questions about the people in the organization essential to effective strategy execution, such as: "Do you have enough people to implement the strategies?", and "Do you have the right people in the organization to implement the strategies?"
- Management should also define the lines of communication throughout the organization. Employees, even those on the lowest tier of the organizational hierarchy ("chain of command"), must be able to communicate with their supervisors and top management, and vice versa. Ensuring an open and clear communication network will facilitate the implementation process.
The structure is intentional in the sense of making sure that all the tasks necessary to accomplish the goals are assigned to people who can do them the best. Staffing is part of organizing, it involves filling and keeping filled the positions in the organization structure.
Step #3 - Develop an Implementation-Support Policies and programs
These are policies and procedures that would be employed in aid of strategy execution. The policies help define the guidelines to how members of the organization should behave. This establishes the organizational culture - the overall atmosphere within the company, particularly with respect to its members.
- Establish Performance Tracking and Monitoring System; the tracking and monitoring system will provide the basis for evaluating the progress of the implementation of strategies, and monitoring the rate of accomplishments of results, or if they were accomplished at all.
- Define the indicators for measuring the performance of every employee, of every unit or section, of every division, and of every department. This may include establishing annual objectives that relate logically to the strategy's long-term objectives. This establishes the basis: for allocating resources; as a mechanism for evaluating managers; as the major instrument for monitoring progress towards achieving long-term objectives; and for establishing organizational priorities.
- Establish Performance Management (Reward and Recognition) System - Encourage employee involvement through a recognition and reward system that enables performance management. Ensure the reward structure has clear and direct links to the accomplishment of results which will be indicated in the performance tracking and monitoring system.
- Establish Information and Feedback System - Establish a system that will enable you to gather feedback and results data, that will be used for strategy evaluation later on.
- Communicate these policies and programs to the members of the organization.
Step #4 - Budgeting and Allocation of Resources
The focus of this step is to equip the managers, responsible for implementing strategy, with the tools and other capabilities to perform their tasks and functions. This step includes the following sub-steps:
- Allocate the Resources - Allocating resources to various departments depending on the results of financial assessments as to their budgetary requirements. Budgets are financial statements of the resources required to achieve a set of finite objectives or put into action a formulated strategy. Resource allocation as expressed in the budget needs to be carefully linked to strategy. BCG Product Portfolio Matrix is one of the tools that can be used to link resource allocation decisions to choice of strategy. Budgets can be classified into the following categories: Capital Budgets, Revenue Budgets, and Expenditure Budgets.
- Disburse Resources - Disburse the necessary resources to the departments, making sure everything is properly and accurately documented.
- Monitoring and Control - Maintain a system of checks and balances to monitor whether the departments are operating within their budgetary limits, or if they have gone above and beyond their allocations.
Step #5 - Discharge of Functions and Activities - [Execution]
This step involves making the tactics operational and putting the strategies into action, aided by strategic leadership, utilization of participatory management and leadership styles. This step involves actual performance of tasks and activities; as well as management providing leadership and controlling the performance of activities or tactics in various levels of the organization. Throughout this step, the organization should also ensure the following:
- Continuous engagement of personnel training and reorientation.
- Enforcing the applicable control measures in the performance of the tasks.
- Evaluating performance at every level and identifying performance gaps, if any, to enable adjustment and corrective actions. It is possible that corrective actions may entail changes in policies, programs and structures established and set in earlier steps. Make these changes when necessary.
The results of accomplishments in this step #5 will be the input in the third stage of Strategic Management - "Strategy Evaluation"
Strategy Execution
Strategy execution is one of the three (3) co-incident determinants of the strategic management process including strategy formulation and strategy implementation. Strategy execution takes place within the context of strategy implementation, and is a change process involving a series of integrated decisions/actions that take place over time, and inextricably changes the organization and its relationship with its environments.
Strategy Execution Process
Strategy execution is the continuous process of decisive strategic decisions that occurs at all levels in the organization and drive the actions/activities undertaken at all levels in the organization to turn implemented strategy into commercial/social success as defined by the mission. The strategy Execution process is a complex mix of decisions and actions on managing people, strategy and operations in creating "fits" between the way things are done and what it takes for effective strategy execution to make the strategy work as intended. The execution process includes the following tasks:
A company's actual strategy is typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures. Strategy execution entails the decisions and activities undertaken at all levels in the organization involving top management through middle management, and front-line managers and workers to turn implemented strategy into commercial/social success.
Emergent Strategy
Emergent strategy development is bottoms up, akin to strategic learning through feedback mechanisms to properly respond to and adapt to changes in the business environment in order to be profitable. Emergent strategy is more of a cumulative effect from bottom-up - the ground engineers, sales people, and other executive staff. These are daily tactical operations decisions made by those who are not in the position or state of mind to conceptualize such strategies. Emergent strategy is realized pattern that was not expressly intended or planned that emerged from execution. Emergent strategies rely on the organization's ability to learn from actual experiences of all employees at all levels.
Emergent strategy development is a learning process in which cycles of events are characterized as an ongoing process of experience, reflection, interpretation, and action (Kim, 1993; Kolb, 1976). Emergent strategy is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” in the original planning of strategy. The company's strategy may also emerge from the day-to-day decisions and actions in areas such as enter new business to diversify, extending geographically to grow, efforts to integrate forwards or backwards, efforts to broaden or narrow product/services, actions to capitalize on new opportunities, and actions to respond to changing industry conditions i.e., shifting demand patterns, new airport regulations, entry of new competitors.
An emergent strategy develops when an organization takes a series of actions that with time turn into a consistent pattern of behavior, regardless of specific intentions.
Strategy Patterns
Emergent strategy is realized pattern (idea) that was not expressly intended or planned that emerged from execution. It is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” in the original planning of strategy. These pattern of decisions and actions of strategic relevance grouped into categories such as:
The how of a strategy tend to be company specific, customized to each company's own situation and performance objectives. A strategy may be a mixture of different kinds as defined above. Emergent strategy is undertaken by an organization that analyzes its environment constantly and implements its strategy simultaneously (Lynch, 2000; 26). Emergent strategy implies that an organization is learning what works in practice.
Strategy execution is one of the three (3) co-incident determinants of the strategic management process including strategy formulation and strategy implementation. Strategy execution takes place within the context of strategy implementation, and is a change process involving a series of integrated decisions/actions that take place over time, and inextricably changes the organization and its relationship with its environments.
Strategy Execution Process
Strategy execution is the continuous process of decisive strategic decisions that occurs at all levels in the organization and drive the actions/activities undertaken at all levels in the organization to turn implemented strategy into commercial/social success as defined by the mission. The strategy Execution process is a complex mix of decisions and actions on managing people, strategy and operations in creating "fits" between the way things are done and what it takes for effective strategy execution to make the strategy work as intended. The execution process includes the following tasks:
- Visualizing the strategy - This helps users understand what the strategy is. One of the most pressing challenges in strategy management is understanding what the strategy is. An effective way to improve understanding is through visualization methods that illustrate the strategy in terms of its components and how they relate to each other and to the mission and end state (vision).
- Measuring the strategy - Key elements of the visualized strategy are assigned easily understood performance measures - i.e., financial and strategic or health measures. The full complement of financial and strategic measures are organized into a scorecard - a system of performance dashboard, so the management can ascertain if progress is being made towards the desired ends.
- Reporting Progress - Review the strategy regularly to determine if the strategy is producing results in line with expectations, opposed to controlling performance. As part of the regular review, leaders must make ongoing strategic decisions to make adjustments to keep the strategy current and on course.
- Monitoring Environment Factors - Management must remain vigilant, and assess the environment, and make decisions that correct and evolve the strategy as the environment conditions change.
- Identify Strategy Projects - Organizations may have scores, if not hundreds, of projects ongoing at any point; to get a firm grasp of the type and range of these projects the organization needs to organize all projects and identify strategy projects in particular to improve project-oriented strategy execution.
- Align Strategy Projects - Once projects are captured, they must then be aligned to the strategies or goals for the organization. Assess all projects - either proposed or ongoing; only those projects that directly impact the strategy should be resources and continued.
- Managing Initiatives - The organization must develop a capability in project management in order to execute the strategy effectively. The full complement of projects in the organization should be coordinated and controlled by a project management office with the responsibility of also monitoring both progress and performance. Monitoring progress creates feedback about the performance of the strategy and its execution allowing organizations to make adjustments accordingly.
- Communicating Strategy - Leadership must communicate visualized strategy to the workforce that will help them understand not only what needs to be done, but why. It is difficult to execute a strategy when it is not well understood, or performance relative to it is not communicated.
- Aligning Individual Roles - Senior leadership must ensure that employees at all levels can articulate and evaluate their personal contribution towards achieving specific strategic goals.
- Rewarding Performance - After explaining the strategy and aligning the workforce to it, senior management institutes the incentives that drive behaviors consistent with the strategy.
A company's actual strategy is typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures. Strategy execution entails the decisions and activities undertaken at all levels in the organization involving top management through middle management, and front-line managers and workers to turn implemented strategy into commercial/social success.
Emergent Strategy
Emergent strategy development is bottoms up, akin to strategic learning through feedback mechanisms to properly respond to and adapt to changes in the business environment in order to be profitable. Emergent strategy is more of a cumulative effect from bottom-up - the ground engineers, sales people, and other executive staff. These are daily tactical operations decisions made by those who are not in the position or state of mind to conceptualize such strategies. Emergent strategy is realized pattern that was not expressly intended or planned that emerged from execution. Emergent strategies rely on the organization's ability to learn from actual experiences of all employees at all levels.
Emergent strategy development is a learning process in which cycles of events are characterized as an ongoing process of experience, reflection, interpretation, and action (Kim, 1993; Kolb, 1976). Emergent strategy is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” in the original planning of strategy. The company's strategy may also emerge from the day-to-day decisions and actions in areas such as enter new business to diversify, extending geographically to grow, efforts to integrate forwards or backwards, efforts to broaden or narrow product/services, actions to capitalize on new opportunities, and actions to respond to changing industry conditions i.e., shifting demand patterns, new airport regulations, entry of new competitors.
An emergent strategy develops when an organization takes a series of actions that with time turn into a consistent pattern of behavior, regardless of specific intentions.
Strategy Patterns
Emergent strategy is realized pattern (idea) that was not expressly intended or planned that emerged from execution. It is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” in the original planning of strategy. These pattern of decisions and actions of strategic relevance grouped into categories such as:
- How to satisfy customers - [Efforts to broaden/narrow the product line; alter product quality; or modify customer service]
- How to out compete rivals - [Fresh offensive moves to strengthen the company's long-term competitive position and secure a competitive advantage; Actions to capitalize on new opportunities - new technologies, product innovation, a change to purchase a rival company, new trade agreements that open up foreign markets; Defensive moves to counter the actions of competitors nd defend against external threats; Efforts to integrate backward and forward]]
- How to respond to changing market conditions - [Actions to respond to changing industry conditions - shifting demand patterns, new government regulations, the globalization of competition, exchange rate instability, entry or exit of new competitors]
- How to manage each functional piece of the business - [Moves and approaches that define how key functions and activities are being managed;
- How to achieve strategic and financial objectives - [Moves to diversify the company's revenue base and enter altogether new industries or businesses; Actions to improve short-term profitability; Efforts to alter geographic coverage]
The how of a strategy tend to be company specific, customized to each company's own situation and performance objectives. A strategy may be a mixture of different kinds as defined above. Emergent strategy is undertaken by an organization that analyzes its environment constantly and implements its strategy simultaneously (Lynch, 2000; 26). Emergent strategy implies that an organization is learning what works in practice.
Evaluation and Control
Evaluation is about being open to continuing feedback and adjusting your program(s) accordingly. Strategic evaluation can help to assess whether the decisions match the intended strategy requirements. The three main types of evaluation methods are goal based, process based and outcomes based. Goal based evaluations measure if objectives have been achieved. Process based evaluations analyze strengths and weaknesses.
Review Process
The review process relies on a system of measures such as provided by the Balanced Scorecard of metrics to guide review decisions. The review process may be formal periodic reviews or informal, however it is the style and openness of the review process that makes all the difference whether the organization will:
The review meeting can be a control tool as well as problem-solving session where the organization examines what it has learned since the last review, with data (the metrics), that serves as a basis for ongoing adjustments for even better performance. These adjustments are in the form of how resources should be allocated, and how people in the organization will use their time. Determine your progress by measuring the actual results versus the plan.
Monitoring Process
Execution control requires constant monitoring of the progress of the strategy, its implementation and execution to assess whether the planned results are being achieved. A firm’s successive strategies are greatly affected by its past history of implemented and executed strategies (actionable decisions) which determine its current state, emergent strategy, and actual/realized strategy. It is important to reexamine past assumptions, and compare actual results with earlier hypotheses.
The control system is comprised of key performance indicators in the following areas:
Performance indicators such as customer satisfaction is influenced greatly by day-to-day decisions of front-line employees (i.e., a barber) responding to a customer requests, and in so doing making a choice about how to represent the company - a choice directly related to the fundamental value proposition the company is offering.
Evaluation is about being open to continuing feedback and adjusting your program(s) accordingly. Strategic evaluation can help to assess whether the decisions match the intended strategy requirements. The three main types of evaluation methods are goal based, process based and outcomes based. Goal based evaluations measure if objectives have been achieved. Process based evaluations analyze strengths and weaknesses.
Review Process
The review process relies on a system of measures such as provided by the Balanced Scorecard of metrics to guide review decisions. The review process may be formal periodic reviews or informal, however it is the style and openness of the review process that makes all the difference whether the organization will:
- quickly seek effective course adjustments
- seek excuses or praise with little real direction change
- ignore much of the scorecard (system of measures)
The review meeting can be a control tool as well as problem-solving session where the organization examines what it has learned since the last review, with data (the metrics), that serves as a basis for ongoing adjustments for even better performance. These adjustments are in the form of how resources should be allocated, and how people in the organization will use their time. Determine your progress by measuring the actual results versus the plan.
Monitoring Process
Execution control requires constant monitoring of the progress of the strategy, its implementation and execution to assess whether the planned results are being achieved. A firm’s successive strategies are greatly affected by its past history of implemented and executed strategies (actionable decisions) which determine its current state, emergent strategy, and actual/realized strategy. It is important to reexamine past assumptions, and compare actual results with earlier hypotheses.
The control system is comprised of key performance indicators in the following areas:
- Planning - These are indicators that allow organizations to monitor and measure planning premises such as environmental factors and industry factors.
- Implementation - These are indicators that provide feed-forward information to inform decisions on whether the strategy should be changed in light of unfolding events and results from incremental steps. The basic types of implementation control are: strategic thrusts (new or key strategic programs/initiatives performance, and Milestones Reviews).
- Strategic Surveillance - These are indicators that provide information designed to safeguard the established strategy in a continuous way. They allow the organization to monitor a broad range of events and conditions inside and outside the company that are likely threaten the successful achievement of the firm's strategic objectives. This provides the opportunity to uncover important, yet unanticipated information.
Performance indicators such as customer satisfaction is influenced greatly by day-to-day decisions of front-line employees (i.e., a barber) responding to a customer requests, and in so doing making a choice about how to represent the company - a choice directly related to the fundamental value proposition the company is offering.
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