Implementing strategy effectively

Most strategies do not fail because they were badly chosen. They fail because they were badly implemented. Four levers:

• Leadership — someone senior must own the strategy visibly, allocate the resources, and — crucially — behave consistently with it. A leader who announces a quality strategy and then rewards volume has already killed it.
• Communication — every employee needs to know what the strategy is, why it is happening, and what it means for them on Monday morning. A strategy that exists only in the boardroom is not a strategy.
• Organisational structure — the structure must fit the strategy. A rigid functional hierarchy cannot deliver a strategy built on speed and cross-functional innovation.
• Network analysis — plan the sequence and timing of the implementation itself.

Organisational structures

• Functional — departments by function (marketing, finance, operations, HR). Deep specialist expertise and clear career paths — but silos: departments optimise their own objectives at the expense of the firm's, and cross-functional work is slow.
• Product-based — a division per product or brand, each with its own functions. Sharp focus and clear accountability for each product's profit — but functions are duplicated across divisions, and divisions compete for resources.
• Regional — organised by geography. Responsive to local markets, laws and tastes — and therefore the natural fit for a multi-domestic strategy (3.9.3). But it duplicates functions and loses global scale economies.
• Matrix — staff report both to a function head and to a project or product leader. Excellent for complex, cross-functional projects; it pools expertise flexibly. But dual reporting creates conflicting priorities and divided loyalties, and it can be slow and stressful.

"Structure follows strategy" (Chandler). Choose the strategy, then build the structure that can deliver it. Firms that do the reverse — forcing a new strategy through an old structure — find the structure quietly wins.

Which organisational structure?

Tap a feature, then tap the structure it describes.

Network analysis (critical path analysis)

A network diagram shows every activity, how long it takes, and what must finish before it can start. From it you get the shortest possible time to complete the project, and you find out which activities you absolutely must not let slip.

• EST — Earliest Start Time. Work forwards. EST of a node = EST of the previous node + the duration of the activity. Where two or more activities arrive at a node, take the LARGEST value — you cannot start until everything feeding in is finished.
• LFT — Latest Finish Time. Work backwards from the end. LFT of a node = LFT of the next node − the duration of the activity. Where two or more activities leave a node, take the SMALLEST value.
• Total float = LFT (at the activity's end node) − duration − EST (at its start node). It is the amount of slack an activity has.
• The critical path is the chain of activities with zero float. Delay any one of them by a day and the whole project is a day late.

The forward pass — finding the ESTs

Your turn — the forward pass

Your turn — project duration

The backward pass — finding the LFTs and the float

Check activity A: 4 − 4 − 0 = 0 → critical. Activity C: 9 − 5 − 4 = 0 → critical. Activity E: 16 − 7 − 9 = 0 → critical. Activity F: 19 − 3 − 16 = 0 → critical.

Your turn — the backward pass

Your turn — total float

Reading the critical path

Your turn — amending the network

The value — and limits — of network analysis

Value: it identifies the shortest possible completion time; it shows exactly which activities must be protected; it enables JIT, because resources and deliveries can be scheduled against ESTs rather than sitting in stock; it allows resources to be transferred from activities with float to critical ones; and it improves the working-capital position, because money is spent no earlier than necessary.

Limits: the durations are estimates, and one wrong estimate invalidates the whole network. It says nothing about the cost or the quality of an activity, nor about whether the resources will actually be available. Complex projects produce networks too large to be readable. And it is only a planning tool: it does not manage anything — a critical path identified and then ignored is worthless.

Watch this trap: if a delay to an activity exceeds its float, that activity becomes critical and the critical path itself changes. If B (float 1) were delayed by 3 days, the B→D route would take 6 + 3 + 2 = 11 days against A→C's 9 — so B and D would become critical and the project would run to 11 + 7 + 3 = 21 days. The network must be re-drawn, not just adjusted.

Problems with strategy — and why strategies fail

• Planned vs emergent strategy. A planned (deliberate) strategy is designed in advance and executed. An emergent strategy is the pattern that forms from a series of decisions taken in response to events — often a firm's real strategy is only visible in hindsight. Planned strategy brings direction, coordination and a benchmark; but it is rigid, and in a turbulent environment a rigid plan is a liability. Most successful firms combine the two: a clear direction, held flexibly.
• Strategic drift — the firm changes incrementally while its environment changes fundamentally. The gap widens invisibly for years, protected by past success, until performance collapses and only a transformational — and often too late — change can save it. It is caused by complacency, by short-termism, by a culture that suppresses bad news, and by managers who mistake "what worked" for "what works".
• The divorce between ownership and control — in a plc the owners (shareholders) are not the controllers (directors). Managers may pursue their own goals: empire-building, prestige acquisitions, or hitting the short-term targets that trigger their bonus. Corporate governance — non-executive directors, audit and remuneration committees, shareholder votes, disclosure rules — exists to align them. It frequently fails.
• Difficulties of strategic decision making — forecasting a genuinely uncertain future · poor data · the sheer scale of the resource commitment · internal resistance · and the fact that the environment moves while you are deciding.

Match each term to its meaning

Tap an item on the left, then its partner on the right.

Strategic drift

Ownership vs control

Strategic planning, contingency planning and evaluation

The value of strategic planning: it forces the firm to look outwards and ahead; it coordinates the functions; it allocates resources deliberately rather than by whoever shouts loudest; and it creates a benchmark against which performance can later be judged. Its costs: it takes senior time and money, it can produce a false sense of certainty, and — worst — it can become an inflexible ritual that the firm follows off a cliff.

Contingency planning — preparing in advance for events that may never happen: a cyber-attack, a supply-chain collapse, a product recall, the loss of the largest customer, a pandemic. It costs money and management time to prepare for something that probably will not occur. But when it does occur, the firm that has a plan responds in hours rather than weeks, protects its customers and its reputation, and frequently takes share from rivals who did not prepare. It is insurance, and it is judged like insurance: is the premium worth the cover, given the probability and the severity?

Evaluating strategic performance — against the original corporate objectives, against competitors, and across a balanced set of measures (Kaplan and Norton, 3.7.3), because judging a strategy on this year's profit alone is exactly the behaviour that causes short-termism and drift.

Is contingency planning worth it?

Thinking like an examiner

• Structure follows strategy. If the recommended strategy needs cross-functional speed, say what has to change in the structure — otherwise the old structure will win.
• Critical path: protect the zero-float activities. Float tells you where you can safely take resources from. And remember that a delay exceeding the float changes the critical path.
• Most strategies fail in implementation, not in selection. Leadership, communication, structure and culture are where the marks are.
• Drift is invisible from the inside. A firm improving every year can still be dying, if the environment is changing faster.
• Governance is a strategic issue. When incentives and ownership diverge, the strategy will follow the incentives.

The big ideas to know

Press Finish to see your score.