Chapter

8
Strategic Control and
Continuous Improvement
 Chapter Topics

• Establishing Strategic Controls

• Premise Control
• Strategic Surveillance
• Special Alert Control
• Implementation Control
• The Quality Imperative: Continuous
Improvement to Build Customer Value
What is Strategic Control?

Tracks a strategy as it is
implemented, detects
problems or changes in its
underlying premises, and
makes necessary
adjustments
 Questions Involved in Assessing a
Strategy’s Success

1. Are we moving in the proper direction? Are our

assumptions about major trends and changes correct?
Should we adjust or abort the strategy?

1. How are we performing? Are objectives and schedules

being met? Are costs, revenues, and cash flows matching
projections? Do we need to make operational changes?
 Ex. 11-1: Four Types of Strategic Control

Strategic Surveillance

Premise Control

Special Alert Control

Implementation Control

Strategy Formulation Strategy Implementation

Time 1 Time 2 Time 3

 Ex. 11-1: Characteristics of the Four
Types of Strategic Control

Basic Premise Implementatio Strategic Special Alert

Characteristi Control n Control Surveillanc Control
csof
Objects Planning Key strategic e
Potential Occurrence of
control premises and thrusts and threats and recognizable
projections milestones opportunities but unlikely
related to the events
strategy
Low
Degree of High High
focusing High
Data
Acquisition:
Formalization Low
Medium High
Centralization Low High
Low Medium
High
 Ex. 11-1 (contd.)

Basic Premise Implementation Strategic Special Alert

Characteristics Control Control Surveillance Control
Use with:
Environmental Yes Seldom Yes Yes
factors
Industry factors Yes Seldom Yes Yes
Strategy-specific No Yes Seldom Yes
factors
Company- No Yes Seldom Seldom
specific factors
 Definitions of Types of Strategic
Controls

• Premise Control – Designed to check systematically and

continuously whether premises on which the strategy is based
are still valid
• Strategic Surveillance – Designed to monitor a broad range of
events inside and outside the firm that are likely to affect the
course of its strategy
• Special Alert Control – Thorough, and often rapid,
reconsideration of the firm’s strategy because of a sudden,
unexpected event
• Implementation Control – Designed to assess whether the
overall strategy should be changed in light of the results
associated with the incremental actions that implement the
overall strategy
Types of Implementation Control

Monitoring Milestone
strategic reviews
thrusts
 Establishing Effective Operational
Control Systems

Set standards of performance

Measure actual Steps involved Initiate

in postaction corrective action
performance control systems

Identify deviations from

standards set
 Concepts Related to TQM

• Viewed as a new organizational culture and way of

thinking
• Foundations of TQM
– Intense focus on customer satisfaction
– Accurate measurement of every critical variable in
a business’s operation
– Continuous improvement of products, services,
and processes
– Work relationships based on trust and teamwork
 Key Elements of Implementing TQM

• Define quality and • Adopt an error-free

customer value attitude
• Develop a customer • Get the facts first
orientation
• Encourage all levels of
• Focus on company’s
business processes employees to participate
• Develop customer and • Create an atmosphere of
supplier partnerships total involvement
• Take a preventive • Strive for continuous
approach improvement
 The Value Chain Approach to
Developing a Customer Orientation

Inpu
t
External
suppliers Function External
Outputs (ultimate)
(like production)
Seeking: customer
Quality
Efficiency Outputs Other
Internal Input Responsiveness internal
suppliers customers
(functions) (activities)
 What is Six-Sigma?

A highly rigorous and analytical

approach to quality and continuous
improvement with an objective to
improve profits through deficit
reduction, yield improvement,
improved customer satisfaction and
best-in-class performance
 Differences Between TQM and Six-
Sigma
• Acute understanding of customers and the product or
service provided
• Emphasis on the science of statistics and
measurement
• Meticulous and structured training development
• Strict and project-focused methodologies
• Reinforcement of the doctrine advocated by Juran
such as top management support and continuous
education
 ISO 9001

• The ISO 9001 standard focuses on achieving customer

satisfaction through
• Continuous measurement
• Documentation
• Assessment
• Adjustment
• It specifies requirements where an organization
• Needs to demonstrate its ability to consistently provide product
and services that meet customer requirements
• Aims to enhance customer satisfaction through the effective
application of the system, including processes for continual
improvement of the system and the assurance of conformation to
customer requirements
 The Balanced Scorecard
Methodology

• Intends to provide a clear prescription as to what companies

should measure in order to “balance” the financial perspective
in implementation and control of strategic plans
• It adapts the TQM ideas of customer-defined quality, continuous
improvement, employee empowerment, and measurement-
based management/feedback into an expanded methodology
that includes traditional financial data and results
• Uses four perspectives: the learning and growth perspective,
the business process perspective, the customer perspective,
and the financial perspective
 Ex. 11-7: Integrating Shareholder Value and
Organizational Activities Across Organizational
Levels
Order Size
Customer Mix
Sales/Account
Sales
Customer Churn
Targets
Rate
Margin COGS/ Deficit Rates
Sales Cost Per Delivery
Maintenance Cost
New Product Dev.
Dev. Cost/ Time
Shareholder Sales
ROCE Indirect/Direct
value Labor
Inv.
creation Customer
Turnover
Complaints
Cap. Downtime
Capital Utilization Accounts Payable
Economic
Profit Turnover Time
Cash Accounts
Turnover Receivable Time

CEO Corporate/Divisional Functional Depts. And Teams