13.1 Introduction

In this chapter, you learn what implementing strategy entails. Then you analyze a strategy-implementation gap. Next you learn how to formulate strategic goals. Then you learn the importance of allocating resources to strategy implementation and broadly communicating and cascading strategy. Next you learn how to implement strategy through organizational design and organizational control systems. Then you learn how to combine soft and hard implementation factors and hardwire strategy. Next you learn how to align strategy and corporate culture and how to implement strategy through systematic change management. Finally, you learn why strategy implementation is important to business graduates.

By now, you know that there are three stages to the strategic management process: strategic analysis, strategy formulation, and strategy implementation. You are deeply familiar with strategic analysis (“Where are we?”) and strategy formulation (“Where are we going?”). Strategy implementation is the process of executing every strategy a company has formulated, answering the question “How are we going to get there?” Every strategy that a company has formulated needs to be successfully implemented and should follow some common best practices.

13.2 Analyze Strategy-Implementation Gap

These quotes provide good insight into what many companies face after formulating their strategy: a subpar implementation of the strategy. There are many reasons for a suboptimal or failed strategy implementation. One reason may be an unanticipated and rapidly changing external environment. For example, geopolitical environments can change quickly and impact strategy implementation, with wars, tariffs, and regional disputes greatly impacting strategy implementation.

Another reason why businesses may struggle with successful strategy implementation may be the difference in the pace that an organization moves at the top and throughout the rest of the firm. Depending on organizational size, management style, organizational design, and company culture, some businesses may move slowly in response to change. Some C-suites may move much more quickly compared to the rest of their organizations. The resulting gap between a few fast-moving senior executives and the more inert rest of the organization leads to frustration on both sides.

Still another reason that strategies may not realize their hoped-for results may be an underinvestment of sufficient resources to effectively implement a well-formulated strategy. Once a strategy is formulated, it is essential to invest in its implementation. As you are about to learn, strategy formulation requires a thought out implementation plan.

Imagine that company executives have invested significant resources into formulating a great strategy. Then the company executives communicate the strategy to employees with a PowerPoint presentation in a townhall meeting. Now imagine that these executives do not invest sufficiently in a robust strategy implementation plan. What do you think the likelihood of success is going to be?

One study found that, on average, companies only realize around 63 percent of their planned performance improvements targeted through their strategy (Makins & Steele, 2005). This is a concerning and sobering statistic considering that a strategy should be the source of a sustainable competitive advantage that helps the company to win in its chosen markets. Seemingly, many companies fail to translate a great strategy into operative performance improvements. They strategize beautifully but inadequately implement.

On the surface, failed strategy implementation leads to subpar financial performance and a lot of work and money wasted. On a deeper level, the failure leads to a negative learning effect in the organization, instilling the idea that new strategies announced with a big media fanfare do not really change the way the organization works. As a result, employees may just keep their heads down instead of fully embracing new strategies. Change fatigue sets in, and the organization continues to operate in the old way instead of making changes in support of the new strategy.

For example, one senior executive in the chemical industry stated that he prefers 80 percent of a strategy implemented 100 percent rather than a perfect strategy only implemented 80 percent. So, what causes this implementation gap? What can be done to avoid prevalent implementation issues? How can an organization drive true performance improvements via a new strategy and avoid the strategy-to-performance gap?

The formulation of a new strategy does not happen in a vacuum. All companies, except brand-new startups, have an existing strategy that needs to be factored into the formulation of the new strategy. The new strategy is often not entirely dissimilar to a firm’s business model and go-to market approach; rather, it is an adjustment, fine tuning, and course correction in light of things that worked well or that do not work well with a firm’s current strategy. Hence, understanding whether the current strategy is working and how it is successfully implemented becomes important input in the formulation of a new strategy.

The decisive questions regarding the current strategy are whether it delivered the top-line growth, bottom-line growth, and the market evaluation that the strategy promised. If the promises of the current strategy have been met, the success factors for driving successful strategy implementation should be factored into the development of the new strategy.

However, current strategies often fail to fully deliver on the promises made in strategy formulation. Current performance is not at the promised level, and there is a gap between where the firm should be according to the current strategy and where it is in terms of sales, net profit, cash flow, market share, international presence, innovation success, share price, earnings per share, and other metrics.

Consider figure 13.1. There are multiple gaps to analyze, including the strategic gap, implementation gap, and the performance gap.

The strategic gap is the difference between a firm’s strategic objective, what it would like to accomplish, and its formulated strategy, which is based on the improvements the firm expects to realize given the expected operating conditions. A strategic gap analysis analyzes the strategic gap and its causes. What a firm would like to accomplish must be tempered with a realistic assessment of what it may expect to accomplish given current conditions. This is important because a company needs to understand what may constrain its desired results. The firm may be able to address the current conditions to maximize more of its strategic objective or at the least monitor the constraining conditions for opportunities when those conditions change.

The implementation gap is the difference between the formulated strategy, which considers the improvements the firm expected given the expected operating conditions when the strategy was formulated and the implemented strategy, which is based on projected improvements if the current operating conditions remain the same. Implementation gap analysis analyzes this gap and its causes. It is useful to understand how the operating conditions have changed in the time between strategy formulation and strategy implementation. It also is useful to understand the improvements that will likely continue from the current strategy if the current operating conditions remain unchanged. This indicates the likelihood of the currently implemented strategy’s continued success under the current conditions and suggests whether it is time to consider revising the current strategy.

The performance gap is the difference between the implemented strategy, which considers projected improvements if the current operating conditions remain the same, and organizational performance under the strategy. A firm needs to understand the difference between what it projected it would accomplish with its strategy and what it accomplished. Performance gap analysis looks at the gap between where the firm should be according to the current strategy and where it is. Hence, the performance gap analysis is the process that companies use to compare their current strategy performance with their desired, expected performance. A performance gap analysis is used to determine whether a company is meeting expectations and using its resources effectively. After understanding the gap in success-critical strategic metrics and KPIs, the firm conducts a thorough root cause analysis to understand why the strategy was not as successful as it was intended. The lessons learned and the identification of specific root causes that impeded full strategy implementation are then factored into the development of the new strategy to prevent similar challenges from materializing again.

After the strategic, implementation, and performance gaps have been analyzed, root causes are analyzed and then an improvement plan that addresses the root causes is formulated and implemented. For the root cause analysis, it is important that the firm analyzes more than the symptoms of the gap, such as a gap in revenue growth or market share growth. Instead, the company needs to dig deeper into the real root causes that need to be addressed. The root cause analysis (RCA) is a structured process for identifying the underlying causes of a problem and developing solutions to prevent it from happening again. RCA assumes that it is much more effective to systematically prevent and solve underlying issues rather than just treating symptoms when necessary and putting out fires or repeating the same mistakes in the formulation and implementation of the new strategy.

Analyze Root Causes

As a prerequisite for improving strategy delivery and bringing an organization closer to its stated vision, the formulated strategy needs to be robust. It needs to be specific and state clear strategic objectives that are substantive and truly differentiating. The strategy needs to address a specific and clear right to win for the organization. This means that the strategy needs to be unique, with a specific source of winning in the market and a clear source of competitive differentiation. While this sounds obvious, many strategies are rather broad or just state ambitious targets in the form of a wish list. If you can replace the logo on the strategy documents with the logo of a competitor and the strategy still makes sense, the strategy is neither unique nor truly differentiating. Hence, some strategy implementation processes are doomed to fail because of a subpar strategy that simply is not specific and unique enough to drive superior performance.

Beyond this foundational flaw, there are various factors that lead to possible strategy-to-performance gap. As depicted in figure 13.2, there are a variety of issues that block the translation of a great strategy into improved operative performance (Makins & Steele, 2005), including both hard factors like a lack of resources and soft factors like poor communication of the strategy. If the strategy is not translated to specific and measurable objectives, there is a high risk that the organization does not commit appropriately to necessary change, action, and performance improvements.

Clustering the different root causes into bigger blocks, there are six barriers to strategy implementation to avoid.

1. Vision barrier: Only 5 percent of the workforce understands the strategy.
2. Leadership barrier: Executive teams and leaders do not spend enough time discussing and implementing strategy.
3. People barrier: Only 25 percent of managers have incentives linked to strategy.
4. Resource barrier: 60 percent of organizations do not link budgets to strategy, leaving the strategy implementation underfunded.
5. Skill barrier: Only 40 percent of organizations provide sufficient new skills and competencies to implement the new strategy. Insufficient development of employee skills and competencies hinders the ability to realize the strategic “where to play” and “how to win” directives.
6. System barrier: 45 percent of organizations do not have a formal strategy implementation process in place. There are no appropriate processes, structures, and rules in place to build organizational capabilities to implement the new strategy.

13.3 Formulate Strategic Goals

Clear strategic goals are part of any good strategy. To achieve the firm’s broader aspirations stated in its mission, purpose, vision, and values and to successfully implement strategy, companies need to set specific, actionable objectives. These objectives guide the firm’s strategic action plans and employees in their day-to-day work and help align their efforts with the organization’s overall strategy. The organization needs to translate strategy into strategic goals. These strategic goals are usually:

• Financial goals like revenue, net profit, share price, cash flow, and net working capital.
• Customer and market goals like market share, customer acquisition, customer retention, and strength of the firm’s brand.
• Internal goals like efficiency of operations, innovation processes, the value-adding use of technology, cost management, and the optimization of other success-critical processes.
• Other goals like mergers & acquisitions, corporate culture, talent management, and globalization of business.

It is important to quantify these strategic goals using metrics and key performance indicators (KPIs) that are linked to financial success. Following the approach of “what you measure is what you manage,” a clear set of metrics and KPIs guides strategy implementation. The most effective goals follow the SMART framework, which stands for specific, measurable, attainable, realistic, and time-bound. SMART goals make it easier for employees to stay focused and accountable, increasing the likelihood of success. Robust and actionable strategic goals ideally meet the criteria of SMART goals.

• Are the goals specific?
• Are the goals measurable?
• Are the goals attainable?
• Are the goals realistic?
• Are the goals time-bound?

The period following the achievement of a major goal is often overlooked, yet it is a critical moment for strategic decision-making. This is when an organization must choose whether to maintain its current success or pursue new challenges.

An example can be seen in Apple’s shift after successfully launching the iPhone. The iPhone revolutionized the tech industry and brought Apple unparalleled success, but the company didn’t rest on its laurels. After achieving dominance in the smartphone market, Apple launched the Apple Watch and AirPods, both of which became key contributors to its revenue. The company also expanded its services sector with offerings like Apple Music, iCloud, and Apple TV+, ensuring continued growth and innovation.

This approach highlights a key principle: organizations that continually set new goals remain competitive and dynamic. Apple’s move beyond its original success into new products and services allowed it to remain at the forefront of the tech industry. In contrast, companies that fail to embrace new goals risk stagnation, as demonstrated by industries that rest on past achievements instead of looking to the future. To avoid getting lost in the complexity of too many goals and metrics, it is advisable that firms focus on the few success-critical objectives that require management attention.

After a company-specific and strategy-specific set of meaningful and robust strategic goals have been formulated and communicated, the firm defines specific plans to achieve its strategic goals over the time horizon of the new strategy. Since strategy implementation is always a multi-year process, companies usually define the final strategic objectives as the outcome of successful strategy implementation and also the result of intermediate goals and milestones on the way to reaching the final goals. These strategic milestones act as checkpoints that mark significant achievements or turning points in a firm’s strategy implementation process.

Strategic action plans (STRAPs) will drive the operative implementation of the strategy. Strategic action plans define specifically what a company must do in all parts and at all levels of the organization to bring the strategy to life, reach defined milestones, and eventually achieve the final strategic goals. STRAPs and strategic objectives provide a specific compass and guiding star for the whole organization, and they define clear expectations in terms of actions and behaviors.

Ultimately, successful strategy needs to be reflected in tangible improvements in the organization’s financial performance. Beyond the quantitative financial metrics, it is also important to include qualitative measures. This balanced scorecard, detailed in Chapter 3, is an excellent way to measure and monitor strategy implementation.

13.4 Allocate Resources to Strategy Implementation

When the strategic direction is clear and after quantitative and qualitative objectives have been defined, the organization needs to allocate sufficient resources to strategy implementation in support of the defined objectives. Usually, a strategy calls for doing things differently, often with the target of profitable growth. Doing things differently and realizing top-line and bottom-line growth requires dedicated budgetary resources.

Strategy implementation needs to be clearly linked to budget, specific resource plans, and a project management approach. Top leadership needs to create a strategy-supporting structure, staff the organization with the needed expertise, and develop and strengthen strategy-supporting resources and capabilities.

Doing things differently requires different skills and competencies for employees responsible for strategy implementation. It is important that employees are supported in acquiring these skills through training and development programs that are fully aligned with the new strategies.

For example, if a company’s strategy states that the firm’s right to win is their customer-centric innovation approach, then the company needs to strengthen employees’ skills to identify business opportunities and unmet customer needs that drive innovation. The organization needs to equip employees with customer interaction and relationship-building skills, possibly hire new employees with specific skill sets or use temporary external resources like consultants to drive successful strategy implementation. Additionally, the organization needs to develop a clear strategy implementation plan and may want to allocate appropriate resources to project teams that drive and manage strategy implementation.

13.5 Broadly Communicate and Cascade Strategy

Only employees who fully understand their organization’s strategy can embrace and implement the strategy. Organizations often communicate new strategies in townhall meetings and emails from the desks of CEOs. However, a surprisingly high percentage of employees do not know or understand their companies’ strategies.

According to a Forbes study, up to 80 percent of employees have no clear line of sight between their tasks and corporate goals, up to 70 percent of employees could not correctly identify their corporate strategy, and 45 percent of middle managers could not name one of their company’s top five strategic priorities. Any organization that does not involve and does not take their employees with them on the strategy implementation journey is not positioned to realize the promised performance improvements.

While leaders may communicate strategy, in many cases it is not heard or understood by employees. Consequently, employees are not able to embrace the strategy, cannot connect their own work with the strategy, and are poorly equipped to support the strategy. An effective communication approach for strategy includes the following success factors.

• A good strategy and a good solution are not enough. Effective strategy communication needs to win employees’ hearts and minds.
• Strategy communication needs to include a clear reason and business case for the new strategy. It needs to unambiguously outline the reasons for change, and it needs to provide an emotionally compelling vision for a better future.
• Employees do not get out of bed to improve the firm’s net profit margin or other financial metrics. Strategy communication needs to make an emotional case for change and provide a “what’s in it for me” connection to employees. Linking strategy to a compelling company purpose that instills employees with a sense of pride and with making a positive difference can be a powerful vehicle to successfully implementing a strategy.
• Use storytelling and symbolic action, which makes strategy messages stick much better than just PowerPoint slides, data, and written communication.
• Customize strategy messages to different employee audiences according to professions and reporting lines.
• As much as possible, make communication two-way, personal, consistent, and inspirational.
• Use a variety of managers to communicate the strategy. Including middle management, top talent, change agents, and informal leaders helps to cascade the strategy throughout the whole organization. Involving key employees early and making them part of the strategy rollout increases their buy-in and support for the new strategy.

Leadership plays a key role in strategy communication and rollout. Leaders are very visible in an organization, and their behaviors are closely observed by employees. Beyond verbal communication, leaders on all levels need to model the new behaviors they want to see in the organization. They need to lead by example, and they need to link new behaviors to the new strategy. They must become the ambassadors of the new strategy, showcasing new skills and competencies in support of the new strategy. They must also publicly recognize and reward these behaviors in others and celebrate examples of successful strategy implementation.

13.6 Implement Strategy through Organizational Design

The guiding principle for organizational design is that structure follows strategy. There is not an inherently better or worse organizational design. The best organizational design is the one that best supports the organization’s mission, purpose, vision, values, and strategy. Organizational designs can have a functional structure, a multidivisional structure, a matrix structure, or a boundaryless structure.

Functional Structure

In a functional structure, the firm organizes its business activities according to functional areas of the business, such as accounting and information systems, business information technology and cybersecurity, finance, insurance and business law, human resource management, innovation and technology, marketing, and operations.

Organizing business activities by functional business areas, a functional structure offers advantages like reduced conflict and costs, maximized efficiency, and expert creation. A disadvantage of a functional structure is that it is slow to respond to change.

Young and small businesses often organize business activities using a functional structure. Functional organizational structures are best for stable environments and are often the choice of large firms operating with a cost leadership strategy as part of their focused or broad cost leadership strategy.

Multidivisional Structure

In a multidivisional structure, the company organizes its business activities based on product areas and/or geographic regions. A multidivisional structure has the advantage of being more responsive to customer needs and reacting more quickly to change in the environment. A disadvantage of a multidivisional structure is that it is more costly to operate than a functional structure because each unit that focuses on a product or region duplicate each functional activity, such as human resource management and marketing.

As a young, small company grows, it may change its organizational structure to a multidivisional structure. Large firms also may use a multidivisional structure.

Matrix Structure

A matrix structure is hybrid organizational structure that has features of both functional and multidivisional structures.

Complex organizations or firms that engage in projects of limited duration may use a matrix structure in which employees can be put on multiple teams based on their functional areas and current projects, maximizing creativity, idea flow, teamwork, and collaboration. A matrix structure also allows for some degree of standardized policies and procedures by maintaining functional areas, such as finance.

Because a matrix organizational structure supports creativity and collaboration, it nurtures new leaders. Because employees report to two managers, one in their functional area and one leading their current project, it is essential that these leaders communicate well and offer congruent guidance to the employees. This can be a disadvantage of the matrix organizational structure if this congruence of guidance is weak or falls apart.

A matrix structure is most common in large companies that engage in creative and collaborative project-based work.

Boundaryless Structure

A boundaryless organizational structure is flat, with decentralized decision-making and many cross-functional teams. This structure works well in knowledge industries such as IT, where responsiveness to changing environmental and competitive forces must be quick.

Advantages of a boundaryless organizational structure include its quick responsiveness and its ability to share knowledge widely and foster innovation. A disadvantage of a boundaryless organizational structure is the lack of clear lines of accountability.

While mature organizations normally do not fundamentally change their organizational structures (except for a business restructuring), the right choice of organizational design is critical for smaller and startup companies. As a smaller organization grows, it is also possible that the company may change organizational structures, for example, from a functional to a multidivisional structure.

Other important organizational elements of strategy implementation include an overarching and unifying company purpose, the definition of clear roles and responsibilities of organizational units, clearly defined interfaces between the units, an appropriate span of control, and STRAPs that prevent silo thinking and a lack of cooperation in the different units.

Some organizations use the RASCI matrix to define clear roles and responsibilities and avoid a poor interface between different strategic business units, business support functions, and other organizational units.

The RASCI matrix is a responsibility assignment matrix that describes the participation of various roles in completing tasks or deliverables for a project or business process. The RASCI acronym stands for responsible, accountable, supportive, consulted, and informed. The matrix assigns specific roles and responsibilities to stakeholders involved in the management process and strategy implementation. It states in a transparent way who is ultimately responsible for a task, who is accountable, who needs to be involved for support, who needs to be consulted, and who needs to be informed.

Determining the right span of control is another important element of organizational design. The term refers to the number of direct reports for which a supervisor is responsible. A span of control that is too high creates management challenges because it is hard to oversee too many direct reports in performance management and talent development. A span of control that is too narrow creates too many supervisors with direct report relationships. This increases organizational complexity and is inefficient.

A trend in organizations is delayering, which is the reduction of hierarchical levels in a company. Removing layers of management increases organizational efficiency and responsiveness because there are fewer levels between the organization’s leadership and the customers and other external stakeholders, which makes a business more flexible, responsive, and agile.

13.7 Implement Strategy through Organizational Control Systems

Part of strategy implementation is the effective design and use of organizational control systems, which are sets of processes and mechanisms used to monitor and evaluate an organization’s performance against set standards, allowing management to identify deviations from strategy and take corrective actions. Organizational control systems play a critical role in successful strategy implementation by ensuring the organization stays on track to achieve its goals. Organizational control systems track performance and identify adjustments that need to be made.

Output Control

Output control uses measurable results to track and monitor strategy implementation. This approach focuses on breaking down strategy into strategic objectives that are formulated as SMART objectives. Output control starts with the definition of targets for performance; it then measures the performance against these targets.

In the case of strategy implementation, these targets and objectives are the strategic targets formulated in the firm’s strategy. The primary aim is to ensure that the organization meets its goals, improves efficiency, and maximizes profitability. Establishing specific, measurable, achievable, relevant, and time-bound strategic objectives drives accountability and allows for transparent tracking of strategy implementation progress.

Typical strategic objectives include revenue, net profit, profit margins, market share, newly launched innovations, mergers and acquisitions, entrance into new countries, improved brand recognition, and customer satisfaction, to name just a few. These SMART strategic objectives are used to continuously evaluate strategy implementation performance. Performance data is compared against set standards. This comparison helps in identifying gaps, understanding deviations, recognizing areas for improvement, and initiating corrective action.

The benefits of output control include transparent goal alignment that ensures that all parts of the organization are aligned toward common goals. It also drives accountability and creates a sense of responsibility for implementing strategy among employees and management. Lastly, output control improves efficiency and resource allocation, and it enhances decision-making in the strategy implementation process by using data-driven insights that aid in making informed business decisions.

Behavioral Control

As a system, behavioral control regulates activities rather than outcomes. It’s about creating an environment where employees’ actions consistently reflect the company’s values and objectives. The firm actively monitors and influences employee actions and behaviors to achieve desired results through managerial oversight, detailed job descriptions, company policies, training and development, guidelines, and performance expectations.

Supervisors and company leaders play important roles in directing employees. They lead by example, role-modeling behaviors they want to see in the organizations and regulating how employees conduct themselves at work.

Another important element and driver of behavioral control is the corporate culture of an organization, which also has a significant impact on employee behavior. Corporate culture is a set of shared values, expectations, and norms that guides employee behavior. There needs to be strong alignment between corporate culture, strategic analysis, strategy formulation, and strategy implementation.

13.8 Hardwiring Strategy in the Organization and Combining Soft and Hard Implementation Factors

Strategy implementation needs to be “hardwired” into an organization. To achieve this, key processes may need to be redesigned and the organizational structure may need to be adjusted. Different measures of employee performance and reward structures may need to be developed to drive new actions and behaviors on organizational and individual levels. The McKinsey 7-S model provides a good overview of possible areas impacted by strategy implementation. The model, shown in figure 13.7, also highlights the importance of fully aligning the seven factors and their interconnectedness to achieve full success in strategy implementation.

The seven factors are structure, strategy, systems, skills, style, staff, and shared values. At the center of the model is shared value, which considers the firm’s core principles that support this strategy.

The remaining elements of the model are divided into hard Ss and soft Ss. Hard Ss are strategy, structure, and systems. As you are familiar, strategy focuses on strategic analysis, strategy formulation, and implementation.

Structure focuses on the organizational structure that best supports a firm’s strategy implementation. For organizational structure, the paradigm is that “structure follows strategy.” For example, young and small businesses often use a functional structure. Because functional organizational structures are best for stable environments, they are also a good choice of large firms operating with a focused or broad cost leadership business-level strategy. For firms in knowledge industries that are based on intensive use of technology and human capital, the organizational structure should emphasize cross-functional cooperation, and they should avoid organizational silos that often impede successful strategy implementation due to specific interests of business units that put their own interests above the holistic implementation of a new strategy. Thanks to shortening strategy cycles and more externally induced change than in the past, organizational structures that allow for high levels of flexibility and agility and that are market and customer-centric are more effective at implementing strategy than traditional structures that are rigid and siloed. Organizational silos often impede successful strategy implementation because business units may be incentivized to put their own interests above the implementation of new strategy.

The third hard S, systems, refers to the systems a business needs to use or create for strategy implementation. Performance management is critical for successful strategy implementation, as are compensation and rewards systems. For example, knowing what motivates employees is essential. Many employees are happy and motivated upon getting a salary increase, a positive performance evaluation, a high bonus payment, praise, an opportunity to contribute to meaningful and high-impact work, and a sense of belonging in an organization with similar values. Systems that offer these rewards have a high impact on shaping employee behavior. It is important to reward employees for skills, competencies, and behaviors that support strategy implementation and to possibly sanction behaviors that contradict the new strategy.

For example, a company with a customer-centric innovation model should reward employees who spend quality time with important customers, who identify customers’ unmet needs, and who have specific ideas for innovative solutions for these customers. Including skills and behaviors like this in performance reviews and rewarding successful employees drives strategy implementation because it aligns organizational objectives with individual objectives.

The Soft Ss of the McKinsey framework are skills, staff, and style. Skills focuses on identifying the skills employees need in order to implement strategy, some of which may need to be developed. Staff refers to supporting managers in their growth, and style emphasizes leadership style and corporate culture that supports strategy implementation.

Successful strategy implementation is also dependent on the alignment of business support function strategies—for example, human resource management, procurement, production, supply chain, finance—with the unit’s business-level strategy. These functions need to develop or adjust their functional strategies so that they are fully derived from and in support of the overall corporate-level strategy, business-level strategy, and the strategies embedded into business-level strategies.

For the customer-centric, innovation-driven company, here are some ways that business-support functions can drive strategy implementation:

• Human Resources: Hires, trains, and develops employees with specific skill sets to sell innovation to customers.
• Procurement: Partners with strategic suppliers that can support the company’s innovation strategy. Selection criteria for suppliers are focused on strategic alignment, inclusion in innovation process, and reliable supply rather than just focusing on lowest price.
• Finance: Develops financial metrics and balanced scorecard that reflects the innovation-driven business model. Focus on ROI on R&D, such as percentage of sales with products newer than five years (percentage of sales of new launches), percentage of SG&A of sales to measure infrastructure investment in R&D, marketing, etc.

13.9 Aligning Strategy Implementation and Corporate Culture

According to management guru Peter Drucker, even the best strategy fails if it contradicts the organization’s culture. For example, if a highly hierarchical, bureaucratic, and internally focused company wanted to implement a customer-centric innovation model, this strategy would most likely fail. To this point, employees have adhered to long-standing values that do not support agile, entrepreneurial, and customer-centric thinking. Being customer-centric and agile is just not in the company DNA.

Among other things, corporate culture focuses on “the way things are done around here.” Corporate culture defines the rules of the game and the values, beliefs, assumptions, and norms that govern how members behave. This has implications for both successful and unsuccessful strategy implementation. If the strategy calls for new behaviors that are not supported by the corporate culture in the organizational DNA, strategy implementation fails and the culture lives on.

There are some important points to keep in mind when embedding strategy implementation into organizational culture.

• Strategy drives focus and direction, while culture is the emotional, organic habitat in which a company’s strategy lives or dies.
• Strategy is just the headline on the company’s story. Culture needs a clearly understood common language to embrace and tell the story that includes mission, purpose, vision, values, and clear expectations.
• Strategy is about intent and ingenuity, and culture determines desire, engagement, and implementation.
• Strategy lays down the rules for playing the game, and culture fuels the spirit for how the game will be played.
• Strategy is imperative for strategy differentiation, but a vibrant culture delivers the strategic advantage.
• When culture embraces strategy, implementation is scalable, repeatable, and sustainable.

Before a strategy is even formulated, it is critical to understand the organization’s culture as a starting point and the context in which the strategy is brought to life. While culture can be changed over time, it is important to work with the current culture. Ignoring or fighting the current culture leads to resistance and a high probability of failed strategy implementation. It is better to honor the strengths of the existing culture and to change culture as appropriate over time.

There is no perfect culture, but the right culture is the one that supports an organization in reaching its specific vision and implementing its strategy in a given organizational and market context. The right corporate culture supports the organization’s strategy and services the organization’s mission, purpose, vision, and values. An organization needs to be intentional about its culture and ensure it is aligned with strategy.

While there is no perfect culture, an adaptive culture provides a great context for successful strategy implementation. Harvard Business School professor and author John Kotter identifies adaptive cultures as having these characteristics:

• Ensures information flows are unobstructed from all areas and across silos
• Encourages smart risks
• Cares deeply about customers, shareholders, and employees
• Strongly values people and processes that can create useful change
• Encourages leadership from more people
• Encourages culture through actions, such as rewarding testing and learning, including the voices of all stakeholders in evaluating success, and allowing for more dispersed decision-making.

Strategy and culture need to match. If they are not aligned, culture always trumps strategy.

13.10 Strategy Implementation through Systematic Change Management

New strategy normally calls for doing things differently, whether that entails a new business model, globalization, new markets and/or new products, restructuring, strategic partnerships and M&A activities, or new ways to respond to new competitors and new customer needs. In an increasingly global and dynamic market environment, strategy life cycles are shorter. This means that change is the new normal and that strategy needs to respond swiftly to changed market conditions, regulation, and other drivers for a new or adjusted strategy.

Living in the age of disruption, continuous and accelerated change is often met with employee resistance and change fatigue, which becomes a serious barrier to successful strategy implementation. Employees may not see the value of all the change. They may have the tendency to value the known and prefer their comfort zones, and they may not easily embrace change just because there is a new strategy. Often strategy implementation is enthusiastically driven by top management but reaches a sudden halt when mid-management does not buy in and when the new strategy meets passive or even active employee resistance.

Seventy percent of all change initiatives fail, which is an alarming statistic for anyone implementing new strategies. However, there are several systematic approaches available that significantly increase the probability of successful change and strategy implementation. This is where strategy implementation meets systematic change management, which guides an organization in assessing change readiness and implementing change.

Kotter’s 8-step model for successful organizational change is a great approach for implementing strategy successfully. Different employees travel at different speeds on their own individual change journeys, and there needs to be a clear answer to the employee question of “What’s in it for me?” Kotter’s model has been updated over time but remains a widely used framework for effective change management.

Kotter’s 8-step change model includes three phases and eight steps.

• Phase 1: Create the climate for change
  • Step 1 Create urgency
  • Step 2 Form a powerful coalition
  • Step 3 Create a vision for change
• Phase 2: Engage and enable the organization
  • Step 4 Communicate the vision
  • Step 5 Empower action
  • Step 6 Create quick wins
• Phase 3: Implement and sustain the change
  • Step 7 Build on the change
  • Step 8 Make it stick

Following a systematic approach to change management like Kotter’s model significantly increases the probability of successful strategy implementation. The model begins by creating a sense of urgency for the new strategy. A powerful guiding coalition in support of the new strategy is needed to gain the hierarchical momentum and critical mass needed to make the new strategy a reality. Beyond communicating facts, it is important to reach employees’ hearts and minds. Leadership needs to develop an emotionally compelling story that resonates with employees from different hierarchical levels so that employees understand why the strategy is good for the organization and employees. Employees need to be convinced that the new strategy leads to greener pastures on the other side of the strategy implementation process.

After that, the new strategy needs to be communicated and implemented. Planning and celebrating quick wins delivered by the strategy convinces employees and stakeholders that the new strategy works, and this drives continued support for the implementation process.

Finally, it is important that new behaviors and new processes laid out in the new strategy become a habit and part of the new corporate culture. The change induced by the new strategy needs to be sustained, and leaders need to reinforce the new strategy to make it stick in the organization.

13.11 Why Strategy Implementation Is Important to Business Graduates

Sooner than you think, many of you will become part of a strategy formulation team. This could be on the level of corporate strategy for a smaller firm, on the level of functional strategy (like IT, finance, procurement, HR, etc.), or on the level of a division or strategic business unit. Companies are increasingly involving managers from all levels of the organization, which means that you can easily be a member of a strategy formulation or strategy implementation team. Additionally, your career success depends on your ability to understand and implement corporate-level strategy, business-level strategy (and its embedded strategies), and functional-level strategy in your position on a daily basis. You need to embrace strategy, implement strategy, and bring it to life through its implementation. You need to translate strategy to operative actions that add value to the company to drive superior performance. Knowing best practices of strategy formulation and implementation guides your ability to stand out as a manager who links strategy to specific action in your organizational unit, which is a core competency valued and rewarded by the business leaders to which you report.

13.12 Conclusion

It is easy to dedicate a lot of time and energy to strategy formulation while underestimating the barriers to successful strategy implementation. The real work of strategy implementation starts after a meaningful, differentiating, and robust strategy has been formulated. To avoid becoming one of the companies that do not fully reap the benefits of a new strategy, the good practices shown in the table below should be implemented.

Figure 13.9: Best practices for strategy formulation

Figure Descriptions

Figure 13.1: Line graph with four straight, increasing lines. x-axis represents time. y-axis represents target amount (e.g., revenue). From top to bottom (largest slope the smallest slope): strategic objective (blue), formulated strategy (green), implemented strategy (orange), strategy results (gray). Strategic objective represents desired improvements. Formulated strategy represents expected improvements based on expected operating conditions. Implemented strategy represents projected improvements based on unchanged operating conditions. Strategy results represents performance. The gap between strategic objective and formulated strategy is labeled strategic gap. The gap between formulated strategy and implemented strategy is labeled implementation gap. The gap between implemented strategy and strategy results is labeled performance gap.

Figure 13.2: Pie chart showing 63% average realized performance and 37% average performance loss with 11 factors listed for the loss. 7.5% inadequate or unavailable resources. 5.2% poorly communicated strategy. 4.5% actions required to execute not clearly defined. 4.1% unclear accountabilities for execution. 3.7% organizational silos and culture blocking execution. 3.0% inadequate performance monitoring. 3.0% inadequate consequences or rewards for failure or success. 3.6% poor senior leadership. 1.9% uncommitted leadership. 0.7% unapproved strategy. 0.7% other obstacles (including inadequate skills and capabilities). This graphic is purple.

Figure 13.3: Organizational chart with CEO and seven departments listed beneath that position: accounting, business IT and cyber security, insurance and business law, human resource management, innovation and technology, marketing and sales, and operations. This graphic is purple.

Figure 13.4: Organizational chart for PepsiCo. At the top is a single box labeled “PepsiCo.” Below, four branches extend to individual boxes labeled “PepsiCo North America,” “PepsiCo International,” “Frito-Lay North America,” and “Quaker Tropicana Gatorade.” Beneath Frito-Lay North America, there are four boxes: sales, marketing, operations, and product and packaging R&D. Beneath Operations, there are two boxes: HQ operations and field operations. Beneath HQ operations there is one box: facility green teams. Beneath field operations there is one box: energy and environment teams. This graphic is purple.

Figure 13.5: Organizational chart. At the top is a box labeled “President” with lines extending downward to five boxes in the second row, which represent vice presidents of different departments: project management, manufacturing, marketing, finance, and engineering. There are three project managers that report to the VP of project management. There are three employees that report to the VPs for each of the other four categories. These employees also report to the project managers. This graphic is purple.

Figure 13.6: Internal environment: training, human resource management, information technology, customer service, marketing and sales, manufacturing, purchasing, and product design. External environment: advocacy groups, competitors, customers, suppliers, and industry regulation. This graphic is purple.

Figure 13.7: Diagram of six interconnected concepts that center around a “Shared value” box. The six concepts are structure, systems, style, staff, skills, and strategy. Shared value: Which of our principles help us? Why do we do what we do in the way we do it? Structure: What structure do we need to execute the strategy? Systems: What business system do we need to use or invent to execute the strategy? Style: What leadership style and cultural qualities will help us to achieve a strategic objective? Staff: How should we help our managers in their growth? Skills: What are the specific skills that will help us? What skills do we need to develop? Strategy: What should we do to solve the specified business problem? Structure: What structure so we need to execute the strategy? This graphic is purple.

Figure 13.8: (1) create urgency, (2) form a powerful coalition, (3) create a vision for change, (4) communicate the vision, (5) empower action, (6) create quick wins, (7) build on the change, (8) make it stick. Steps 1-3 create the climate for change. Steps 4-6 engage and enable the organization. Steps 7-8 implement and sustain the change. This graphic is purple.

Figure References

Figure 13.1: Gap analysis. Kindred Grey. 2025. CC BY. Adapted under fair use from https://www.ionos.com/startupguide/grow-your-business/gap-analysis

Figure 13.2: Reasons for failed strategy implementation. Kindred Grey. 2025. CC BY. Adapted under fair use from https://hbr.org/2005/07/turning-great-strategy-into-great-performance

Figure 13.3: Functional organizational structure. Kindred Grey. 2025. CC BY.

Figure 13.4: Multidivisional organizational structure. Kindred Grey. 2025. CC BY.

Figure 13.5: Matrix organizational structure. Kindred Grey. 2025. CC BY.

Figure 13.6: Boundaryless organizational structure. Kindred Grey. 2025. CC BY.

Figure 13.7: McKinsey 7-S framework. Kindred Grey. 2025. CC BY.

Figure 13.8: Using Kotter’s change management model to implement strategy. Kindred Grey. 2025. CC BY.