Activating Strategy

Activation is the process of stimulating an activity -so that it is undertaken effectively. Activation of strategy is required because only a very small group of people is involved in strategy formulation while its implementation involves a large number of people in the organization. So long as a strategy is not activated, it remains in the mind of strategists. Activation of a strategy or set of strategies requires the performance of following activities:

• Institutionalization of strategy,
• Formulation of derivative-plans and programmers,
• Translation of general objectives into specific objectives. and
• Resource mobilization and allocation.

Institutionalization of Strategy: The first basic role of the strategist in strategy implementation is the institutionalization of the strategy. Since strategy does not become either acceptable or effective by virtue of being well designed and clearly announced, the successful implementation of strategy requires that the leader acts as its promoter and defender. Often what happens is that leader’s role is quite prominent in strategy formulation and his personality variables become influential factors in the strategy formulation. Thus, in practice, it becomes almost personal strategy of the top man in the organization. Therefore, there is an urgent need for the institutionalization of the strategy because without it, the strategy is subject to being undermined. Institutionalization of strategy involves two elements:

• Communication of strategy to organizational members and
• Getting acceptance of strategy by these members.

Strategy Communication: The role of a strategist is not only to make the fundamental analytical and entrepreneurial decisions, but also to present these to the members of the organization in a way that appeals to them and brings their support. Thus, in order to get the strategy accepted and, consequently, implemented requires its communication.

The form of communication may be oral through the interaction among strategist and other persons, particularly at higher level in meetings or in other ways of personal interaction. However, for a large organization with multi-locational units, such a form of communication may not be adequate, and well- documented written form may be required. Such a document may contain

• the context in which the particular strategy has been formulated like organizational mission and objectives, environmental variables, and organizational variables:
• Contents of the strategy such as the contribution of the strategy to the achievement of organizational objectives, changes required in existing organizational processes, and what is expected from personnel at different levels in the organization.

Given below is an example of how BHEL (a multi-unit public- sector company) communicated its strategy (Exhibit ).

Exhibit: BHEL’s Growth Perspectives: BHEL published a 24-page document titled ‘BHEL’s Growth Perspectives in the 1980s’ in April 1982 as a communication from its chief executive, K.L. Puri to the employees of the company. The contents of the documents were as follows:

• BHEL’s objectives;
• Business opportunities and threats-macro environment and sector-wise (thermal. hydro, transmission. and transportation) analysis;
• Directions for business development (sector-wise and exports);
• Resources mobilization (human. financial. and technological);
• Research and development;
• Achieving the targets; and
• Present activity profile of BHEL

Strategy Acceptance: It is not just sufficient to communicate the context and content of a strategy but to get the willing acceptance of those who are responsible for its implementation. This will make organizational members to develop a positive attitude towards the strategy. This helps them to make commitment to strategy by treating it their own strategy than imposed by others.

Creation of such a feeling is essential for the effective implementation of the strategy.

A major problem in strategy acceptance is that people often resist a strategy, particularly when it makes significant departure from the old-established practices. The basic reason of resistance emerges from the feeling that the new way of doing things will put them in some adverse situation. For example, many of the modernization strategies have been opposed by trade unions because of their perception that these would put additional work load on their members or there may be job cuts. Many of the dis-investment and divestment strategies have also been opposed by employees of all sorts and these strategies could not be implemented in many cases.

Formulation of Derivative Plans and Programmes: Once the strategy is institutionalized through its communication and acceptance, the organization may proceed to formulate action plans and programmes. Since these plans and programmes are derived from a strategic choice (strategic plan), these are known as derivative plans and programmes.

Action Plans: Action plans target at the most effective utilization of resources in an organization so that objectives are achieved. These action plans may be of several types like plan for procuring a new plant, developing a new product, and so .on. What types of action plan will be formulated in the organization would depend on the nature of its strategy under implementation, for example, action plans in a takeover strategy would be different from expansion through undertaking green-field projects. However, while formulating action plans, follow-questions should be put so that action plans contribute positively in strategy implementation:

• How does the particular action plan contribute to the objectives of the strategy?
• When will the activities devised under an action plan be undertaken?
• Who will perform the activities?
• What support will be needed to perform those activities?

Programmes: A programme is a single-use plan that covers relatively a large set of activities and specifies major steps, their order and timing, and responsibility for each step. There may be several programmes in an organization; some of them being major, others being minor. These programmes are generally supported by necessary capital and operating budgets. For example, in the case of a takeover strategy, two types of costs are involved: price to be paid for takeover and operating cost involved in takeover process. Further, the activities of takeover are identified and sequence and timing of performance of these activities are also determined so that takeover programme is completed well in time. Since there may be various programmes involved in the implementation of a strategy, these should be well coordinated so that each of them contributes positively to others.

Translating general Objectives into Specific Objectives: Organizational objectives are of general and broad nature. They provide direction for action on continuous basis. However, these objectives are too general and, sometimes, intangible to be transformed into action. In order to make these operative, managers determine specific objectives within the framework of general objectives, which the organization and its various units will seek to achieve within a specific period. For example, growth is one of the vital objectives of every organization. This provides direction for undertaking various activities through which growth can be achieved. However, this is very general and does not provide clue about how much growth in what period of time. In order to overcome this problem, organizations set specific objectives to be achieved in a specified time. For example, Tata Group has set growth objective in terms of doubling group turnover in four years and doubling net profit in three years. Such a specific objective provides sharp focus on the activities that may be undertaken to achieve this volume of growth.

Most of the specific objectives tend to be of short range in character and have definite time limits within which the organization has to achieve these. Translation of general objectives into specific and operative objectives must fulfill two criteria.

• Translation of general objectives into specific objectives should be tangible and meaningful. As far as possible, these objectives should be easily measurable as organizational performance is measured against these objectives.
• Specific objectives should contribute to the achievement of general objectives. In fact, time-bound objectives are set to make the achievement of general objectives more feasible. For example, long-term objectives involving plans for the distant future may fail to make individual objectives tangible and meaningful standards for control. This can be overcome by setting specific objectives at different stages of general long-term objectives.

Management by Objectives: Management by objectives (MBO) is a tool for defining objectives at individual level in an organization. After defining objectives through mutual agreement between a superior and his subordinate, the latter is allocated commensurate resources and his performance is measured against these objectives. Weihrich and Koontz have defined MBO as follows: “MBO is a comprehensive managerial system that integrates many key managerial activities in a systematic manner, consciously directed towards the effective and efficient achievement of organizational objectives.”

Resource mobilization and allocation: For implementing a strategy, an organization should have commensurate resources and these resources should be committed and allocated to various units and functions where these have optimum use. There are different types of organizational resources and each of these has specific nature and characteristics. These resources are broadly classified into two broad categories: financial and human. Financial resources are used to procure various physical resources such as land, building, plant, machinery, raw materials, etc. These resources are the means by which an organization produces goods and services of value through conversion process. The success of the organization depends on the quality of its resources and their utilization. Therefore, the organization should feel concerned about how to mobilize resources and allocate these to various units and subunits.

Resources

It might be said that resources represent those assets, both tangible and intangible, with which the company has to work: its assets, including its people, and the value of its brand, a variety of individual, social, and organisational phenomena. To put it more succinctly, resources represent inputs into a company’s production process, such as capital equipment, the skills of individual employees, brand names, financial resources, and talented managers.

By themselves, or individually, resources generally will not enable a company to achieve a competitive advantage. They must be combined or integrated with other company resources to establish a capability. When these capabilities are identified and nurtured, they can result in core competencies, which may lead to a competitive advantage. A company’s resources can be classified either as tangible or intangible.

Resources
Tangible Resources	What a firm has to work with:
Financial	its assets, including its
Physical	people and the value of its
Human Resources	brand name
Organisational
Intangible Resources	Resources represent inputs
Technological	into a firm’s production
Innovation	process such as capital equipment,
Reputation	skills of employees, brand names, finances and names, finances and

Tangible Resources: Tangible resources are assets that can be seen or quantified, such as a company’s physical assets (for example, its plant and equipment). Tangible resources can be classified in one of four ways as illustrated below:

• Financial resources, such as borrowing capacity is organizational resources, such as its formal reporting structure and systems
• Physical resources, such as location
• Technological resources, such as patents and trademarks

It is interesting to note that tangible resources may be less valuable today than they were in the past. To support this conclusion, economist John Kendrick has found intangible assets to have contributed increasingly to US economic growth since the early 1900s. The ratio of intangible business capital to tangible business capital in 1929 was 30 per cent to 70 per cent, but that ratio was 63 per cent to 37 per cent in 1990. The growth in market capitalization of companies like Infosys and Wipro point to the fact that the same may be true in the case of Indian scenario

Intangible Resources: A company’s intangible resources may be less visible, but they are no less important. In fact they may be more important if a company expects to achieve a competitive advantage. Intangible resources range from innovation resources, such as knowledge, trust, and organizational routines, to the company’s people dependent or subjective resources of knowhow, networks, organizational culture, to the company’s reputation for its goods and services and the way it interacts with others (such as employees, suppliers, or customers). Three primary classifications of intangible resources are presented below:

• Human resources, such as knowledge, trust, and managerial capabilities
• Innovation resources, such as scientific capabilities and capacity to innovate
• Reputational resources, such as the company’s reputation with customers or suppliers

Tangible resources are those that can be seen (such as plants), touched (such as equipment), documented (such as contracts with suppliers of raw materials), or quantified (such as the value of a specific asset). Generally tangible resources will not, by themselves, represent capabilities that will serve as sources of core competencies. However, they still have value and will contribute to development of capabilities and core competencies.

Strategic value of Tangible and Intangible resources: Thus, the strategic value of tangible and intangible resources is important. The strategic value of resources is indicated by the degree or extent to which the resource(s) contribute to the development of capabilities, core competencies, and ultimately, to a competitive advantage for the company. This is another way of saying that a single resource, tangible or intangible, has strategic value only if, in combination with other resources, a capability is established.

The relationship is pretty straightforward. Resources are the source of company capabilities, capabilities are the source of core competencies, and core competencies are the foundation for achieving a competitive advantage and strategic competitiveness.

Because they cannot be quantified, touched, or seen, and are more difficult to explain, intangible resources are more likely to be sources of sustainable competitive advantage. And, if they also are difficult for competitors to identify and/or understand, they also may represent the most likely source(s) of a company’s capabilities, core competencies, and sustained competitive advantage.

Brand Name (Intangible Asset): One intangible resource that may enable a company to create a reputation and serve as a source of competitive advantage is a brand name. Specifically, what a brand name communicates to customers about the performance characteristics or attributes of a company’s product(s) represents a direct link to a company’s reputation with its customers.

When the brand name communicates positive characteristics of a product (for example, superior performance, high quality, or superior value), consumers will tend to purchase the brand name product rather than similar products offered by competing companies. Thus, it is important that companies with strong brand names nurture the core competencies that provide the brand name with value and continually communicate that value through consistent advertising messages.

When a company has a brand name that serves as a foundation for competitive advantage, the company often will try to leverage the power of that brand name. However, the value of a brand name can be lessened or reduced by competitive actions, which the company either does not recognize or to which it fails to respond. Therefore, the companies need to use various strategies to safeguard their brands.

• For companies whose brand names are expected to thrive and continue to provide a competitive advantage (such as Nike or Coca Cola), their challenge is to nurture and exploit the resources, capabilities, and core competencies that are the source of competitive advantage. Resources Tangible Resources What a firm has to work with:
• Financial its assets, including its
• Physical people and the value of its
• Human Resources brand name
• Organisational Intangible Resources represent inputs
• Technological into a firm’s production
• Innovation process such as capital equipment,
• Reputation skills of employees, brand names, finances and talented managers
• For companies whose brands are under fire (such as Surf or Parachute), the challenge is to reestablish the value of the brand. Their challenge is to reconfigure their existing bundle of resources, capabilities, and core competencies to renew them as sources of competitive advantage.
• For companies whose brands are troubled (such as PCL Computer and Purina), because the brands are no longer a source of competitive advantage, the challenge is even greater. They must identify and develop new bundles of resources, capabilities, and core competencies and nurture them to establish a new source of competitive advantage.
• Companies may also choose to package their brand as a way to differentiate themselves from competitors.
• Other companies (e.g., Proctor & Gamble, Hindustan Lever, and ITC) support their brand name products through heavy advertising expenditures.

It is important to remember that resources, both tangible and intangible, represent the primary sources that enable a company to establish capabilities, the capacity for a set or bundle of unique resources to interactively perform a task or activity. In other words, individual resources alone, while they may have some value, will contribute to the development of capabilities only when they are put together in unique combinations to provide the foundation for core competencies and the establishment of competitive advantage.