CFO, entepreneur, Finance, Innovation, Strategic Finance

How & Why Tech companies today are seeking help today

It may come as no shocker to tech firms across the world that ‘Tech development’ as an industry has been slowing down. Large enterprises don’t seem to be buying as frequently and fervently as before. Smaller development projects seem to have dried up. Growth estimates (Gartner Q1 2017) to 2020 hint at a 3% CAGR over the next 3 years.  At the same time, for the first time in history, 6 among the 10 most valuable firms in the world are technology companies! If the logic of stock price being indicative of future earnings, something seems to not add up. What is really happening and what should a tech company be doing?

Understanding it takes some retrospection.

What happened while I was working?

Over the 20-year period beginning in the mid-80s, there was a flurry of businesses which jumped on the convergence of affordable computing and leap in telecommunication and the opportunity it threw up for businesses across the world. Large enterprise technology development efforts with large organizations starting to implement technology as infrastructure to add efficiency in operations and bring data sets together became the new age conquerors of this portion of the information revolution. Some big names that emerged were the IBMs & Oracles of the world and closer to home, the Patni, Infosys and TCSs of the country.

Around 2005, a new buzzword emerged with the improvement in telecommunication ecosystems across the country – Cloud. Information could now be stored anywhere and accessed anywhere. One did not have to maintain physical infrastructure to be able to house information, which meant that a small business could now hire only the infrastructure they needed at the efficiency of a large data center. Smaller organizations now jumped in as infrastructure costs and setup costs was virtually nil and barriers to entry were virtually eliminated. A few years in, a tiny revolution was brewing with the name of SaaS. A new revenue model of charging for use and value rather than the committed models that existed. This picked up immediately as now the cost of subscribing to technology solution was close to nil. The ‘innovators’ and ‘early adopters’ of early 2005 now made way for the ‘late majority’ in less than 5 years.

Business as usual was threatened for the first time.

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A Critique on the 9 Crucial Factors for Successful Strategy Implementation using Dilbert

The success of a plan is not in the planning but in the execution. It is estimated that over 60% of strategies fail because they are not implemented. When asked about challenges, managers responded that their biggest concern is “It’s the successful implementation of a strategic plan” or “It’s getting your strategy done.”

With the number of management executives who are trained on building strategy plans and attend executive programs on various strategies, the one thing that needs to be emphasized is the ‘act of getting things done’ as outlined in the book ‘Execution:  The Discipline of Getting Things Done’  by Larry Bossidy and Ram Charan.

According to Larry Bossidy and Ram Charan, the heart of any Strategy Execution lies in 3 core processes: Strategy, People and Operations.

STRATEGY

1. STRATEGY FORMULATION

1The process of laying out the strategy is a significant factor, but not the only crucial factor. However, it defines all the other factors and how they can be achieved. As laid out in the paper, the central conclusion of research indicates the importance of procedural justice. All levels of the organization have different perceptions of strategy and interests in the formulation process. Unifying them is the task of the management function. Thus, unifying strategy must be consistent and accommodative.

 

2.ORGANIZATIONAL STRUCTURE

2Organizations are continuously thinking of adapting to times. Having a strongly thought out Strategy supported by an organizational structure is half the process in successful implementation. Further, different strategies require different organizational structures that can allow action items to flow down smoothly across levels. For example, executing a strategy to permeate leadership requires having a structure that allows more decentralisation of decision making activities. As pointed out by Olson, Slater and Hult (2005) four different combinations of structure/behaviour types of: management dominant, customer-centric innovators, customer-centric cost controllers and middle ground have to be matched with behaviours that best serve to facilitate the process of implementing a specific strategy.

PEOPLE

3.EXECUTORS

3

Organizations are made up of people. People in an organization take up responsibilities and become responsible for certain activities. According to the paper, enrolment of the top, middle and lower level management is essential for the purpose of rolling out a strategy. However, organizational structures are dynamically changing to become more flat so that they can be quicker and more responsive. While the hierarchical structures worked in the 20th century. In the 21st century organizations, people at various levels are required to take ownership of functions that work directly with the strategy as well.

Further, the most important part of the execution with relation to the executors will be the selection of the team of executors and arriving at how they need to be motivated to ensure that they work proactively for the success of the strategy.

 

4.COMMUNICATION

4While the strategy and team can be put in place in an organization, what makes the glue is establishing the right channel and mode of communication. Once the strategic plan is in motion, the organization needs to be brought into a single binding communication philosophy which ensures that right things are escalated as and when they become critical and avoiding failures due to inaction/ indecision. Further, organizations need to also be aware the importance in learning from one another to avoid future failures at the granular level. As put very beautifully by Alexander (1985), the content of such communications includes clearly explaining what new responsibilities, tasks, and duties need to be performed by the affected employees. It also includes the why behind changed job activities, and more fundamentally the reasons why the new strategic decision was made in the first place.

 

5.CONSENSUS

5Getting the buy-in from the organization and all levels is extremely important to ensure that the strategy is played out as envisioned. This can only happen when the organization feels that they are in on the decision making consensus. People care only about leadership that they have willingly provided, be it on strategies or on the leader itself. Further, a lack of consensus can lead to creation of obstacles in the implementation of a strategy.

As Floyd and Wooldridge argue, strong consensus exists when managers have both, a common understanding of, and a common commitment to their strategy.

 

6. COMMITMENT

6No amount of consensus can lead to execution unless supported by commitment.  As pointed out in the paper, strategy implementation efforts may fail if the strategy does not enjoy support and commitment by the majority of employees and middle management. This will hold true irrespective of whether or not consensus was achieved at each and every level of the planning. Commitment means that degree or extent to which each owner feels associated in order to support it without an immediate benefit accruing to him/ her. In flatter organizations, authority has no place. It’s all about accountability and ownership. Hence, commitment needs to be existent and permeating across the organization to ensure that the plan gets implemented.

OPERATIONS

7.RELATIONSHIP ACROSS FUNCTIONS AND LEVELS

7The relationship between corporate business units and inter-functional processes defines the functional competencies, allocation of resources, decision-making participation and influence, inter-functional conflict and coordination. As pointed out by Slater & Olson (2001), the relationships between different strategy levels also reflect the effect of relationships among different cross-organizational levels on strategy implementation (Slater & Olson, 2001). There is a significant trust required between functions in order to understand the long term implications of a strategy. If any lose sight of the end goals or get disheartened, the implementation may fail completely.

 

8.IMPLEMENTATION TACTICS

8The planners and executors both need to be a part of the implementation. The planners need to facilitate an environment that is conducive for the smooth implementation. Nutt (1986) identified four types of implementation tactics used by managers in making planned changes: intervention, participation, persuasion, and edict. In order for implementation to work, there must be sufficient direct and indirect motivational methods that need to be used as well as a certain sense of urgency to facilitate the change in thinking and direction of efforts.

 

9.ADMINISTRATIVE SYSTEMS

9While strategy is being implemented, the organization needs to have a strong enough review function that ensures that progress is monitored and managed. In the absence of review, there is absence of control over the manner in which the organization is carrying on implementation. Further, a strategy without accountability cannot be successful and monitoring systems are the only way to ensure accountability is taken seriously. In the absence of proper administrative systems, you cannot have cohesive and sustained implementation.

 

This document is a critique on the paper ‘Making Strategy Work: A Literature Review on the Factors Influencing Strategy Implementation’ (written in 2006 by Yang Li, Sun Guohui & Martin J. Eppler at the Business School, Central University of Finance and Economics, Beijing, China in collaboration with Institute of Corporate Communication, University of Lugano (USI), Lugano, Switzerland) which puts together a synopsis drawing out the nine most acknowledged crucial factors for a successful strategy implementation.