CHAPTER 5

Strategy Implementation — Comprehensive Study Notes

These notes cover the full content of Chapter 5, enriched with deeper analytical insight. Topics include the
formulation-implementation relationship, levels of strategic change, organizational structure and culture,
five implementation approaches, and execution skills.

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TIO TOPIC
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1 Strategy Formulation vs. Implementation

2 The 2×2 Implementation Matrix

3 Analyzing Strategic Change — 5 Levels

4 Organizational Structure — 5 Types

5 Organizational Culture

6 5 Implementation Approaches

7 Execution Skills for Successful Implementation

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 1 STRATEGY FORMULATION VS. IMPLEMENTATION

Implementation is the process of putting logically developed strategies — those that emerged from the
strategic management process — into action across the organization.

For an organization to achieve its objectives, it must both formulate and implement its strategies
effectively. Poor performance in either stage is likely to result in failure of the overall strategy.

■ Deeper Insight: Many managers are trained primarily in strategic analysis and formulation (MBA
curricula, case studies) but underestimate implementation. In practice, research consistently shows that
execution is where most strategies fail — not in design. McKinsey studies suggest over 70% of strategic
transformations fall short due to implementation gaps.

The 2×2 Implementation Outcome Matrix

Outcomes depend on two variables: quality of strategy formulation and quality of implementation.
The four possible combinations produce four distinct outcomes:

Good Implementation Poor Implementation

■■ TROUBLE Strategy is sound but

■ SUCCESS Optimal outcome. Strategy
Good Strategy poorly executed. Root cause often
delivers intended results.
misdiagnosed.

■ ROULETTE Good execution may ■ FAILURE Worst case. Very hard to

Poor Strategy temporarily mask poor strategy or recover — changing only one dimension
accelerate failure. still fails.

■ Key Point: Trouble cell insight: Managers are trained to focus on formulation, so when implementation
fails, they often misdiagnose the problem as a strategy flaw rather than an execution flaw — delaying the
real fix.

■ Deeper Insight: The 'Roulette' outcome is particularly dangerous because short-term success from
good execution can create false confidence in a flawed strategy. Organizations may only discover the
strategic flaw once circumstances change (e.g., competitors respond, market shifts). This is why ongoing
strategy evaluation is essential.

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 2 ANALYZING STRATEGIC CHANGE — 5 LEVELS

A useful first step in implementing a strategy is understanding how much the organization must change.
Strategic change can range from no change at all to a complete transformation of the organization's
mission. It is analytically useful to divide this spectrum into five stages:

1. Continuation Strategy

The same strategy from the previous planning period is repeated. No new skills or unfamiliar tasks are
required. Successful implementation mainly involves monitoring that activities are performed on schedule.

■ Deeper: Example: A supermarket that runs the same seasonal promotions year after year. Low risk,
minimal disruption.

2. Routine Strategy Change

Normal changes in how the firm attracts customers — advertising appeals, packaging, pricing tactics,
distributors, or distribution methods. A key example is product repositioning (e.g., 7-Up repositioned as
the 'Un-Cola').

■ Deeper: Insight: Repositioning is an operational strategy: it changes customer perception without

altering the product itself. It uses steps — identify competitors, evaluate perceptions, analyze customers,
select and monitor position.

3. Limited Strategy Change

Offering new products to new markets within the same general product class. Products can be 'new' in
various ways — new features, new packaging, new channels.

■ Deeper: This level requires moderate organizational adaptation — new market research capabilities,
possibly new sales channels, but core competencies remain the same.

4. Radical (Fundamental) Strategy Change

A major reorganization within the firm. Common when mergers and acquisitions occur between firms in
the same industry. May involve structural overhauls and multiple acquisitions and divestitures of
subsidiaries.

■ Deeper: Radical change demands deep leadership attention and cultural alignment. Integration failures
in M&A; are common here — see the culture section.

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 5. Organizational Redirection

The most extreme level: mergers/acquisitions across different industries, or a firm completely leaving one
industry and entering another. The degree of change depends on how different the industries are and
how centralized management will be.

■ Deeper: Example: Nokia's transformation from a paper/rubber company to a global telecom giant. Or a
tobacco company diversifying into food. These redirections involve re-training talent, rebuilding brand
identity, and reconstructing value chains.

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 3 ANALYZING ORGANIZATIONAL STRUCTURE

Formal vs. Informal Structure

Formal organizational structure — the relationships between resources as designed by management,
represented in an organizational chart.

Informal organizational structure — the social relationships based on friendships or shared interests,
evidenced in communication patterns known as the 'grapevine.'

■ Key Point: When implementing a strategy, managers must consider both structures for three reasons:
(1) Will the structure promote or delay implementation? (2) Which levels/personnel bear responsibility? (3)
Can the informal organization be used to facilitate success?

The 5 Types of Organizational Structure

Simple Structure

Two levels only: owner-manager and employees. Typical in small firms with one product or a few related
ones.

✔ Rapid, flexible strategy implementation — key competitive advantage vs. larger firms

✖ Heavy dependence on one person's skills; many do not survive long-term

Functional Structure

As firms grow, departments form around functions: production/operations, marketing, R&D.; Greater
specialization emerges in each functional area.

✔ Promotes deep expertise and efficiency within departments

✖ Can create silos — poor coordination across functions; slow response to multi-market needs

Divisional Structure

Each division operates semi-autonomously under a division manager reporting to the CEO. Divisions can
be organized by product lines, markets, geography, or distribution channels. Each division formulates and
implements its own strategy (subject to CEO approval).

✔ Allows focus on diverse markets/products; clear profit accountability per division

✖ Duplication of resources across divisions; potential rivalry between divisions

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 SBU Structure

When a CEO has too many divisions to manage, divisions are grouped into Strategic Business Units
(SBUs) based on similarity of product lines or markets. Vice Presidents typically head each SBU.

✔ Reduces the span of control for the CEO; better coordination within SBUs

✖ Adds an extra management layer; HQ may become too distant from operations

Matrix Structure

Project managers cut across departmental lines to facilitate program/project execution. Combines
functional expertise with project focus. No universal rule determines the best structure.

✔ Promotes efficient implementation across departments; flexible resource allocation

✖ Dual authority creates confusion ('two-boss problem'); high coordination cost

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 4 ANALYZING ORGANIZATIONAL CULTURE

Organizational (corporate) culture is defined as a set of shared values and beliefs that influences the
effectiveness of strategy formulation and implementation.

Culture influences employee behavior and — ideally — motivates them to achieve or surpass
organizational objectives. Cultures develop through a variety of mechanisms, categorized as primary and
secondary.

Five Secondary Culture Development Mechanisms

› The organization's design and structure
› Organizational systems and procedures
› Design of physical space, facades, and buildings
› Stories, legends, myths, and moral tales about important events and people
› Formal statements of organizational philosophy, beliefs, and charters

■ Key Point: Changing an organizational culture is an extremely difficult task that, if achievable at all, may
require many years. Continuation, routine, or limited strategy changes must usually be implemented within
the existing culture.

Culture Clashes in Mergers & Acquisitions

Cultural incompatibility is a leading reason why 50–67% of all mergers fail. Research by Prokesch and
Powell identifies three traits of successful M&As;:

Factor Explanation

Closely related businesses Cultural similarity reduces the integration burden

Financed by stock swaps or cash Avoiding heavy debt reduces financial pressure during transition

No lofty price premium + management staysFair valuation + continuity preserves operational knowledge

■ Deeper Insight: Culture is arguably the most underestimated variable in strategic management. Edgar
Schein's framework distinguishes three levels of culture: visible artifacts (behaviors, rituals), espoused
values (stated mission/strategy), and underlying assumptions (deep unconscious beliefs). Strategy
implementation often fails because managers address only the surface level, while underlying assumptions
remain unchanged and resist the new direction.

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 5 SELECTING AN IMPLEMENTATION APPROACH

Brodwin and Bourgeois (researching management practices across companies) identified five
fundamental approaches to implementing strategies. Each reflects a different manager role and
assumption about how strategy should move through an organization.

The Commander Approach

Manager role: Analyst / Decision-Maker Best for: Strategy continuation / routine changes

Manager applies rigorous logic to formulate strategy alone or with a small team, then commands
implementation. Three conditions required: (1) enough power to command compliance; (2) accurate,
timely info and stable environment; (3) manager free from personal biases.

■ Critical Analysis: Major risk: reduces employee motivation and innovation. Employees excluded from
formulation are unlikely to show creative ownership. Works best for low-change strategies
(continuation/routine).

The Organizational Change Approach

Manager role: Architect Best for: Routine to limited changes

Assumes a good strategy exists and focuses on mobilizing the organization toward new goals. Tools
include: restructuring, re-staffing, revising planning/control systems, and other behavioral change
techniques.

■ Critical Analysis: Limitations: Does not help managers respond to rapid environmental change.
Struggles when politics and personal agendas compromise objectivity. Best suited for smaller,
stable-industry firms.

The Collaborative Approach

Manager role: Coordinator Best for: Limited to radical changes

The manager in charge calls in the full management team to brainstorm both formulation and
implementation. Multiple perspectives are encouraged; the manager acts as coordinator of group
dynamics.

■ Critical Analysis: Advantages: better information quality, broader buy-in. Limitation: may produce a
weaker (compromise) strategy. Critics note upper management often retains centralized control — making
it only partially collective.

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 The Cultural Approach

Manager role: Coach Best for: Long-term culture-driven change

Enlarges collaboration to include lower-level employees. Manager communicates a vision/mission and

allows employees to design their own work activities accordingly. Uses 'third-order control' — shaping
norms, values, symbols, and beliefs. Control levels: 1st-order = direct supervision; 2nd-order =
rules/procedures/structure; 3rd-order = culture/norms.

■ Critical Analysis: Works only in organizations of informed, intelligent people. Takes enormous time to
install. Risk of excessive culture: suppresses deviance, discourages change, fosters homogeneity and
groupthink.

The Crescive (Powerful/Coercive) Approach

Manager role: Judge Best for: Radical change / redirection

Manager encourages subordinates to develop, champion, and implement strategies on their own.
Strategy moves upward from doers and lower/middle managers — not downward from the top. Strategy =
the sum of all individual proposals surfacing during the year. Top management shapes 'premises' (what
makes a project worth pursuing) and evaluates proposals.

■ Critical Analysis: Requires: funds available without bureaucratic hurdles; tolerance for failure.
Increases middle-manager motivation and strategic ownership. Risk: the approach does not specify how
implementation should be carried out — this is left to individuals.

Comparative Summary of the 5 Approaches

Approach Strategy Direction Employee Role Key Risk

Commander Top → Down Execute only Low motivation

Org. Change Top → Down Structural adaptation Ignores politics

Collaborative Top ↔ Middle Input & buy-in Weak compromise

Cultural Vision-driven Design own work Groupthink

Crescive Bottom → Up Formulate & implement No exec. guidance

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 6 IMPLEMENTATION & EXECUTION SKILLS

Professor Thomas of Harvard Business School identifies four essential execution skill sets required for
successful strategy implementation:

Interacting Skills
■
Managing one's own and others' behavior to achieve objectives. Depending on the level of
strategic change, managers may need to influence stakeholders both inside and outside the
organization.

■ Application: These skills draw on emotional intelligence, negotiation, and political savvy. At radical
change levels, a manager's ability to build coalitions and manage resistance can determine implementation
success. Kotter's 8-step change model heavily emphasizes these skills — forming coalitions, creating
urgency, communicating vision.

Allocating Skills
■
Scheduling tasks and budgeting time, money, and other resources efficiently across the
implementation process.

■ Application: Poor resource allocation is a silent strategy killer. Even an excellent plan fails when critical
resources (people, capital, time) are misallocated to low-priority initiatives. Prioritization frameworks like
OKRs (Objectives & Key Results) are modern tools that operationalize allocating skills.

Monitoring Skills
■
Using information efficiently to correct problems arising during implementation. Good
implementers maintain feedback systems that track progress and flag issues in real time.

■ Application: In modern strategy execution, Balanced Scorecards and real-time dashboards

operationalize monitoring skills. The danger of poor monitoring: problems go undetected until they become
crises. Strategy implementation should be treated as a dynamic feedback loop, not a linear execution plan.

Organizing Skills
■
■ Creating new informal networks or customizing the informal organization to match each problem
that arises. Good implementers know people throughout the organization (and outside it) who —
through mutual respect or shared goals — will help solve problems that formal structures cannot
address.

■ Application: This skill reflects the insight that formal authority is often insufficient in complex
organizations. Research in social network analysis shows that well-connected 'brokers' in informal
networks can accelerate information flow and problem-solving far more than hierarchical escalation.

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 ■ Key Point: Good implementers 'customize' the informal organization to facilitate execution. Throughout
implementation, managers must simultaneously evaluate how well the strategy is being executed and
whether it is achieving organizational objectives — bridging monitoring and organizing skills.

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 ★ KEY TAKEAWAYS — CHAPTER 5 AT A GLANCE

1 Strategy implementation is equally critical as formulation — failure in either leads to strategic failure.

The 2×2 matrix (formulation × implementation quality) predicts four outcomes: success, roulette,
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trouble, or failure.

Strategic change spans 5 levels — from continuation to full organizational redirection — requiring
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progressively more change management.

Organizational structure must match strategy — no single structure fits all firms; choice depends on
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size, diversification, and environment.

Organizational culture is a powerful enabler or barrier — changing it takes years and must be
5
approached carefully, especially in M&As.;

The five implementation approaches (Commander → Crescive) reflect a spectrum from top-down
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control to bottom-up empowerment.

Successful execution requires four skill sets: interacting, allocating, monitoring, and organizing —
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applied simultaneously.

Chapter 5 — Strategy Implementation | Compiled Study Notes | Strategic Management

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