Unit 4: Strategy implementation and control

• McKinsey 7S framework for implementation: Strategy, Structure, Systems (hard Ss) + Shared values, Style, Staff, Skills (soft Ss) — all must fit.

Issues in implementation

• Designing structure to fit strategy ("structure follows strategy" — Chandler).
• Setting annual objectives, policies and plans (programmes, budgets, procedures).
• Resource allocation and functional strategies.
• Leadership, culture and change management.
• Information and reward systems.

• Chandler (1962): "structure follows strategy" — as strategy changes (growth, diversification), structure must change to support it.

• Stages (Chandler): simple → functional → divisional → SBU and matrix forms.

Resource allocation is distributing financial, physical, human and technological resources among units and activities according to strategic priorities.

• Factors: strategic priorities, availability, past allocations, power and politics, portfolio position (fund stars and question marks; milk cash cows).

Approaches

• Top-down: headquarters decides and distributes.
• Bottom-up: units propose; HQ aggregates.
• Formula-based: fixed percentages.
• Strategic budgeting / zero-based budgeting: every rupee justified from zero.
• Capital budgeting: NPV, IRR, payback for major projects.

Difficulties

• Overprotection of resources by units, emphasis on short-term criteria, organisational politics, vague targets, reluctance to take risks, lack of sufficient knowledge.

• Structure assigns tasks, authority and coordination; systems — planning, budgeting, information, performance management and reward systems — make the strategy operate day to day.
• Alignment: rewards linked to strategic goals, information systems that track KPIs, budgets that fund strategic priorities.

Strategic leadership

• Sets direction, builds commitment, manages change and culture, ensures ethical conduct.
• Style matters: transformational leaders inspire change; transactional leaders manage through rewards.
• Choosing the right top team and changing managers if needed.

Corporate culture

• Culture must support strategy; a mismatch causes resistance.
• Managing culture: link culture with strategy, change it gradually through symbols, stories, reward systems, training and leader behaviour.
• Options when culture and strategy conflict: change strategy, change culture, or manage around the culture.

Power and politics

• Power bases: legitimate, reward, coercive, expert, referent.
• Coalitions and resistance can block implementation — build support and communicate.

Personal values and business ethics

• Values of top managers shape strategic choices.
• Ethical conduct and corporate social responsibility (Section 135, Companies Act — 2% CSR spending) are part of implementation.

Managing change (Lewin)

• Integration: functional plans must be consistent with each other and with business strategy — coordinated through planning cycles, cross-functional teams and common KPIs.

Strategic evaluation checks whether the strategy, as implemented, is meeting its objectives; strategic control takes corrective action.

Types of strategic control (Schreyögg and Steinmann)

• Operational control: day-to-day, using budgets, schedules and key success factors.

Techniques of evaluation and control

• Rumelt's criteria for evaluating strategy: consistency (no conflicting goals), consonance (fits the environment), advantage (creates competitive advantage), feasibility (can be done with available resources).

Kaplan and Norton (1992) proposed measuring performance from four perspectives that translate strategy into objectives and measures.

• Strategy map: cause-and-effect links — learning drives better processes, which delight customers, which improve financial results.