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Executive Summary:

Senior executives have long been frustrated by the disconnection between the plans and strategies they
devise and the actual behavior of the managers throughout the company. This article approaches the
problem from the ground up, recognizing that every time a manager allocates resources, that decision
moves the company either into or out of alignment with its announced strategy. A well-known story--
Intel's exit from the memory business--illustrates this point. When discussing what businesses Intel
should be in, Andy Grove asked Gordon Moore what they would do if Intel were a company that they had
just acquired. When Moore answered, "Get out of memory," they decided to do just that. It turned out,
though, that Intel's revenues from memory were by this time only 4% of total sales. Intel's lower-level
managers had already exited the business. What Intel hadn't done was to shut down the flow of research
funding into memory (which was still eating up one-third of all research expenditures); nor had the
company announced its exit to the outside world. Because divisional and operating managers-as well as
customers and capital markets-have such a powerful impact on the realized strategy of the firm, senior
management might consider focusing less on the company's formal strategy and more on the processes by
which the company allocates resources. Top managers must know the track record of the people who are
making resource allocation proposals; recognize the strategic issues at stake; reach down to operational
managers to work across division lines; frame resource questions to reflect the corporate perspective,
especially when large sums of money are involved and conditions are highly uncertain; and create a new
context that allows top executives to circumvent the regular resource allocation process when necessary.

Literature Review:

A simple and comfortable view of the strategy process sees it as a set of well-informed imperatives
devised by senior management, communicated down the ranks, and implemented exactly as specified.
That view is belied by the frustration of senior managers when, as frequently happens, the actual behavior
of the managers throughout the company fails to match up with their plans and strategies. Citing the case
of Intels move out of the memory business, the authors point out that each resource allocation decision
by a manager moves the company either into or out of alignment with its announced strategy. Senior
executives cannot rely on a planning or capital-budgeting procedure or a system of incentives to ensure
the execution of strategy. The challenge for leaders is to give coherent direction to how resources are
allocated.
They categorize those aspects into organizational structure and decision-making processes. The crucial
facts about organizational structure are that knowledge is dispersed; power is dispersed; and roles
determine perspective. On the last of these, the authors cite Miless Lawwhere you sit determines
where you standwhich they believe is central to how strategy gets made in practice.

Equal in importance to organizational structure is the effect of decision-making processes on strategy.


Bower and Gilbert look briefly at how processes span multiple levels and activities proceed on parallel,
independent tracks. The simple, comforting notion of a top-down strategic process can only work with
central control of all steps in the process, but that level of control rarely exists in a large organization. In
addition, the process of crafting strategy is an iterative, real-time process in which commitments are
made, then either revised or stepped up as conditions change.

General managers, operational managers, customers, and capital markets all strongly influence the
realized strategy of the firm. This realization should lead senior management to focus less on the
companys formal strategy and more on the processes by which the company allocates resources. Bower
and Gilbert point out six ways for senior managers to orchestrate the strategy of their firm by better
understanding the resource allocation process: Top managers must know the track record of the people
who are making resource allocation proposals; recognize the strategic issues at stake and make it is
addressed; when a debate reflects fundamental differences about the strategy, intervene; reach down to
operational managers to work across division lines; frame resource questions to reflect the corporate
perspective, especially when large sums of money are involved and conditions are highly uncertain; and
create a new context that allows top executives to circumvent the regular resource allocation process
when necessary.

Top leaders formal strategies determine how business gets done in your firmRight? Wrong, say authors
Joseph bower and Clark Gilbert: it's other manager' decisions about where to commit resources that really
drive strategy. sometimes these choices support corporate plans. other times, they don't.

take toyota: it launched the echoa no-frills, inexpensive vehicle to fight a low-cost rivals. But
salespeople, seeking higher commissions, steered customers to higher-priced models.

How to avoid such scenarios? Understand whos driving resource-allocation decisions.

For example, is a division manager only sending you proposals for projects that will expand his turf? Is
an R&D manager giving a large customer too much say over product development decisions?
Then step in as needed: Prompt unit man-agers to ask, Whats best for the company? (not their
divisions). Form cross-divisional teams to discuss strategic options.

By managing your companys resource-allocation process, you align bottom-up actions with top-down
objectives. And you drive your company in the right direction.

Level of Manager:

General managers translate broad corporate objectives (such as earnings and growth goals) into specifics
that operating managers execute. They also define plans, programs, and activities they believe are
essential for their division's performance. Then they decide which proposals to send upward for corporate
review. The way they translate strategyand the proposals they choose to presentmay or may not align
behind the enterprise-level strategy.

Operational managers make choices that either support the company's high-level plans or contradict
themas the Toyota Echo example reveals. Senior executives overlook these managers' impact at their
peril.

Customers can powerfully affect strategy. Newspaper company Knight Ridder redirected its corporate
strategy to focus on the Internet. But existing advertising customers in the newspaper business shaped
how actual strategy was carried out. These advertisers weren't interested in online ads, so sales reps kept
selling them traditional print ads. Result? Knight Ridder had difficulty tapping into the new revenue
stream.

Capital markets can dramatically reshape corporate strategy. For instance, earnings pressure causes a
company to exit a new market too soon. Or a dip in stock price compels a firm to sacrifice long-term
strategy for short-term fixes that improve immediate performance.

References:

(2013, 03). Strategy. StudyMode.com. Retrieved 03, 2013, from


http://www.studymode.com/essays/Strategy-1546839.html
How Managers Everyday Decisions Createor DestroyYour Companys Strategy Retrieved
from http://midmarket.epiture.net/exploreCO.aspx?coid=CO2120715232771
Harvard business review february 2007 Retrieved from
http://www.brittenassociates.com/documents_articles/Managers%20Creating%20Destroying
%20Strategy.pdf