Managing internal operations strategy/tutorialoutlet
- 1. Managing Internal Operations Strategy FOR MORE CLASSES VISIT tutorialoutletdotcom Managing Internal Operations Strategy execution involves the alignment of the company’s day-to-day operations with the strategy or ensuring that internal elements of the organization are orchestrated in harmonious pursuit of its strategy: “Alignment must include linking cultural practices, strategies, tactics, organizational systems, structure, pay and incentive systems, building layout, accounting systems, job design, and measurements systems— everything” (Watson, 2005). The concept of policy management or deployment looks at the strategy execution process another way. Once management decides on a strategy, they will decide on an approach or policies to pursue the strategy (Watson, 2005). Witcher (2003) described a process he called “policy management,” or hoshin kanri as it is called in Japan, which in part is back-and-forth communication and collaboration between managers and upper management to translate policies laid out by upper management into objectives the manager could work on. Watson (2005) described nichijo kanri as different from hoshin kanri, although both of these concepts are part of “policy deployment.” Nichijo kanri translates
- 2. objectives into employee tasks needed to accomplish daily operations but controls the tasks, moving the company in its strategic direction. So, both hoshin kanri and nichijo kanri encourage operational excellence in pursuit of the company’s strategy. Firms like HP, Xerox, and Proctor and Gamble have used their own forms of policy deployment. These concepts help explain how upper management’s ideas for strategy flow down through the organization into actions and tasks performed by employees at all levels in the pursuit of that strategy, or “strategy execution.” In addition, there are a number of well-known, widely used methods to make business processes more efficient in general, including Six Sigma, Lean Six Sigma, TQ or TQM, Kaizen, ISO 9000, Baldrige Criteria, and other quality initiatives. You can find out more about Baldrige Criteria at Baldrige Performance Excellence Program. Implementing a quality improvement initiative like TQ or Six Sigma can be the company’s main strategy, or it can be used in conjunction with a traditional strategy, like acquiring a new MBA 700 Module Ten 1 business. When you incorporate the new business, you want to improve the quality of new processes your company will now use. Quality improvements to internal operations became part of Capital One’s strategy several years ago. Capital One had acquired a number of businesses since its IPO in 1997. In early 2005, Capital One had decided to refocus its strategy because its new banking division, with its Direct Banking business, resulted in significantly more customer activity (opening accounts, making deposits and withdrawals, transferring funds between
- 3. accounts, etc.) and a different set of internal processes to support direct banking. Capital One executives implemented a new strategy of “process management” to move away from their older system and culture of traditional business units; their internal operations had grown more complex with significantly more customer interactions, and it became necessary to view entire processes rather than tasks. They implemented Six Sigma in order to redesign their new processes in a more efficient manner, resulting in higher customer satisfaction. Part of the Six Sigma implementation’s Analyze phase included analyzing customer surveys, which revealed that a primary reason why customers never finished the new account application process was because they forgot to mail an opening deposit. Capital One introduced a process to follow up with customers who simply do not complete the application (Immaneni, McCombs, Cheatham, & Andrews, 2007). As part of this Six Sigma implementation, Capital One installed an information system, the Total Customer Complaint System, to record any customer complaint across all functional areas that interact with customers. Capital One saw significant results using Six Sigma across processes including customer complaint handling, opening new accounts, and marketing processes (Immaneni, McCombs, Cheatham, & Andrews, 2007, p. 49). The DMAIC phases, for existing processes, are the most commonly used Six Sigma implementation.
- 4. The Six Sigma’s DMAIC phases are (ASQ, n.d.): 2 Define: During this optional phase, define the process to be improved. Measure: In this phase, take measurements of the performance of the process. Analyze the data and the process. Use root cause analysis to determine causes for process performance issues. Improve: Here, you identify areas that require improvement based on a root cause analysis and improve. Control those improvements to ensure that the gains stick over time. MBA 700 Module Ten For example, in the Define phase, Capital One inventoried all of its processes and then identified customer expectations for several dozen key processes. It then began the MAIC phases to improve these processes beginning with the most critical processes (Immaneni, McCombs, Cheatham, & Andrews, 2007, p. 46). The methods or tools the organization uses to improve its operations and performance, like Six Sigma or Baldrige Criteria, are useful, but Nohria, Joyce, and Roberson (2003) recommended focus on strategy, flawless operational execution, growing the right company culture that promotes a good performance, and creating an efficient structure. Corporate Culture and Leadership The definition of corporate culture is “the system of shared actions, values, and beliefs that develops within an organization and guides the behavior of its members” (Schermerhorn, Hunt, Osborn, & Uhl-Bien, 2010, p. 366). For our purposes, we are most interested in those aspects of the organization’s culture that promote strategy execution. All too often strategists will introduce a new strategy, and even seek to
- 5. change organizational culture to some degree without attending to one of the key ingredients of making real changes in the culture—the artifacts (symbols, ceremonies, sagas, values, norms, etc.) which help define the culture. (Higgins & McAllaster, 2004) Consider Apple, cofounded in 1976 by Steve Jobs. By 1983, this single- product company was growing and needed a new CEO from the outside with marketing experience. They hired John Sculley, a Wharton MBA, away from PepsiCo, believing him to be a good fit with Apple’s culture and the right CEO to lead the still-young company and coach its youthful cofounder, Jobs (Simmons, 2007). Apple quickly made its product line broader, but with it came a change in strategy, as well as Steve Jobs’s ouster. Sculley led the company for many profitable years but was replaced in 1994 when it became apparent that Apple’s innovation star was fading along with market share. He was replaced by Michael Spindler, who was himself replaced by Gil Amelio. And Apple’s culture changed as needed during this these transitions. After a 12-year absence, Apple cofounder Jobs returned to the company’s helm (Simmons, 2007). In an interview, Apple CEO Steve Jobs said this about realigning Apple’s culture to fit his strategy after his return: That's why you don't see any big posters on the walls around here, stating our mission statement. Our corporate culture is simple. So the key is to have good people MBA 700 Module Ten 3 with a passion for excellence. When I got back, Apple had forgotten who we were.
- 6. Remember that "Think Different" ad campaign we ran? It was certainly for customers, but it was even more for Apple. That ad was to remind us of who our heroes are and who we are. Companies sometimes do forget. (“Voices of Innovation,” 2004) One of the first things Jobs did after his return to Apple was to reset the myths and the values of the company back to his vision and strategy. Do you believe the culture for any company, including your own, helps in the execution of the organization’s strategy? Consider Apple, with its slogan “Think Different” and the myth it has created around its announcements of new, innovative products—iPod, iPad, iPhone. Or the way Walt Disney Company refers to employees as “cast members” as they service customers at stores or theme parks (Higgins & McAllaster, 2003). Or Southwest Airlines with a 129-employee strong “Culture Committee” and whose flight attendants have rapped flight safety instructions to passengers (Gwynne, 2012). Setting the right culture can be part of executing the company’s strategy. But who leads the strategy making and execution within the organization? Typically, the CEO runs the shop and delegates strategy execution to a chief operating officer (COO). The COO is concerned with ensuring that strategy is executed within the operations of the organization. But is that the most effective way to ensure that the right strategy is executed? The chief strategy officer or CSO is a new position that many companies are adding to their chain of command as a top-level company leader. With rapidly changing global markets,
- 7. frequent macro-environmental changes, and the need to compete with rivals introducing new products and services all contributing to a growing workload for the CEO, it makes sense to create a position tasked solely with strategy oversight (Breen, Nunes, & Shill, 2007, p. 86). The CEO is still responsible for strategy, but the CSO is charged with exploring strategic alternatives and adding value, perhaps from prior experience in setting and executing strategy. The CSO may have more flexibility to visit the trenches, returning to the corporate office with fresh strategy ideas to debate and refine with the CEO. The CSO resides near the top of the organization on the organizational chart, often as a director with his or her own reports or as an advisor to the CEO (Angwin, Paroutis, & Mitson, 2009). With a rapidly changing world that includes natural and manmade disasters, it makes sense for a company to dedicate responsibility to a position that is dedicated to strategy. Scenario planning is not considered a mainstream strategy tool yet (Courtney, 2009). 4 MBA 700 Module Ten Scenario planning would proactively consider more possibilities and more details on how the company could respond to different situations (and then the most likely situations that result after that situation, and so on). You may soon find the CSO role on your own organizational chart overseeing the formulation and execution of strategy at your own organization. MBA 700 Module Ten 5 ************************************************