strategy vs structure how do they differ

Strategic planning and structural organization are two of the most integral components of any successful organization. When used together, they can form an effective and efficient system that drives business growth, increases productivity, and encourages innovation. However, while they are closely related, strategy and structure are two distinct concepts that require a different approach when it comes to implementation. Understanding their differences and how they work together is essential for successful organizational management. This blog post will explore the differences between strategy and structure and examine how they can be used to create an effective and efficient business environment. We’ll also discuss how structure can support strategy, how to create and maintain an effective structure, and how to develop strategies that are tailored to the organization’s particular goals and objectives. By the end of this blog post, you should have a better understanding of strategy vs structure and how to ensure their successful implementation within your organization.

Strategy is how your organization goes about its work is its strategy (vs. your strategic plan document). This includes the plans that set out how your organization will use its major resources to meet specific goals. Structure is the way the pieces of your organization fit together to meet a common goal.

The Structure Strategy – Comparison

Why is strategy important?

A company’s growth and goal-achieving can be planned for with the aid of a business strategy. Business owners can benefit from developing a strategy in the following ways:

Flat

In a flat structure, employees have more decision-making power. They report directly to upper-management and may have more responsibility. This structure is common for new businesses or start-ups. It can reduce costs and improve colleague relationships.

What is structure?

An organizations structure reflects the overall company formation. The organizational structure describes many components within the business, including:

There are many different types of organizational structures. Each one has its own benefits and possibilities. The structure you choose could affect your strategy. Alternately, the methods you select might influence the format you employ. Some companies change or refine their structure over time. Here are a few common structure types:

How Strategy Fits Into Business

Strategy is the actionable aspect of running a business. It includes pricing strategies, branding and marketing strategies, and competitor analysis. In order to understand how the company will fit into the market and, more importantly, how the company will compete, a strategy must be developed.

Setting specific goals and having a broad perspective on the company’s objectives are necessary for strategy design. The structure can be molded to work with the strategy after the strategy has been formed. You can also develop a strategy in an established business with solid structural components based on the current structure and procedures.

The mission statement and goals are the central components of the strategy. The organization must first consider its purpose and identity in depth. Using this crucial information, the strategy can be developed to stand out from the competition and increase sales.

The strategy establishes fundamental ideas as well as a unified corporate vision. Every employee is impacted by this, and it affects how they view and approach carrying out their duties and identifying as a team member.

Structure is the foundation of the company and varies greatly depending on the industry and business model. The hierarchy starts with the executive, managerial, and departmental job roles.

Accounting, human resources, sales, operations, and product development are typical universal departments. Departments like floor production, shipping, supply chain logistics, and so forth will be added for a particular business model, such as manufacturing.

What Is the Right Strategic Approach for You?

The structural environment in which an organization operates, its resources and capabilities, and its strategic mindset are the three elements that determine the best course of action. The structuralist approach is likely to yield good results when the structural conditions of an industry or environment are desirable and you have the resources and capabilities to carve out a viable competitive position (see the exhibit “Choosing the Right Strategic Approach”). The structuralist approach can be successful even in an unattractive industry if a company has the resources and capabilities to outperform the competition. In either case, the goal of strategy is to use the company’s core competencies to produce respectable risk-adjusted returns in a market that already exists.

However, a structuralist strategy is not a wise choice when conditions are unfavorable and they are going to work against you regardless of your resources and capabilities. This frequently occurs in markets with high levels of supply, fierce competition, and slim profit margins. In these circumstances, a company should take a reconstructionist stance and develop a plan to reshape industry boundaries.

The structuralist approach won’t result in high performance even in attractive industries if established players are entrenched and an organization lacks the resources and capabilities to compete with them. In this case, the business must develop a plan to carve out a new market for itself.

The best option will depend on the organization’s strategic mindset when structural factors, resources, and capabilities do not clearly indicate one approach over another. An organization will be more successful in adopting a reconstructionist strategy if it has an innovative mindset and is sensitive to the risks of passing up future opportunities. A structuralist strategy would benefit companies that have a tendency to defend their current strategic positions and are reluctant to venture outside of their comfort zones.

The development and alignment of three propositions—a value proposition that draws customers, a profit proposition that enables the company to profit from the value proposition, and a people proposition that inspires those working for or with the company to implement the strategy—are crucial to the success of any strategy, regardless of the approach taken. The alignment of the propositions is where the two methods differ from one another.

Let’s first flesh out our definition of strategy. What a company offers to customers and how it will profit from that offering are outlined in the value and profit propositions, which serve as the strategy’s foundation. The people proposition determines the quality of execution. The three strategy propositions are consistent with the traditional activity system of an organization, where the inputs are the costs to produce the outputs and the labor required to deliver them, and the outputs of an organization’s activities are value for the customer and revenue for the organization. Therefore, we define strategy as the creation and coordination of the three ideas to either take advantage of or change the business and economic environment in which an organization operates.

A company is unlikely to produce a high-performing and sustainable strategy without developing a comprehensive set of consistent propositions. The organization may experience brief but unsustainable success, for example, if the value and profit propositions are strong but the people proposition doesn’t inspire employees or other constituencies. This is the classic case of execution failure. Similar to this, a company that has a compelling people proposition but weak value or profit propositions will struggle to perform well. This is formulation failure.

Each suggestion might need to take into account more than one stakeholder group, for example, when successful strategy execution depends on the support of both internal and external groups within an organization, such as supply chain partners. Similar to this, a business in the business-to-business sector might need to create two value propositions: one for the customer and another for the customer’s customers.

Now let’s consider where the two approaches diverge. According to the structuralist approach, a company’s entire system of operations, and consequently its strategy proposals, must be in line with the distinctive decision to pursue either differentiation or low cost, each of which is an alternative strategic position in an industry. If, for example, a strategy’s value and profit propositions revolve around differentiation but its people proposition is focused on low cost, it is unlikely to be successful. High performance is attained using a reconstructionist strategy approach when all three strategy propositions aim to be both different and low cost. By overcoming the current value-cost trade-off, this alignment in favor of differentiation and low cost enables a company to enter new markets. It allows strategy to shape structure. For either approach, alignment also results in a more sustainable strategy. While it is possible to imitate one or two of the strategy propositions, it is challenging to replicate all three, particularly the people proposition (see the exhibit “Achieving Strategy Alignment”).

The top executives of an organization must ensure that each proposition is fully developed and that all three are consistent. Executives with a strong functional bias—marketing, manufacturing, human resources, or other functions—tend to miss the bigger picture of strategy because they are the only ones who are suited to this type of broad strategy work. For instance, the marketing team might focus too much on the value proposition and give the other two too little attention. The same goes for executives who have a manufacturing bias who might ignore customer needs or view people as a cost variable. It is unlikely that an organization’s leadership will create a complete set of properly aligned strategy propositions if it is not aware of these tendencies.

Although managers are aware of how structure influences strategy, they are less knowledgeable about how to align the three propositions so that strategy can influence structure. The city-state of Dubai will be used as an example in the following section of this article to demonstrate how blue ocean strategy alignment enables an organization to rebuild the environment. Dubai has changed how its government operates and has produced one of the world’s fastest-growing economies for the past 20 years.

Researching the local population will help a business determine the type of market that exists there. Making a product exclusive might appeal to people if they are a highly educated group with more money. Selling a product at a discount will be more successful if the majority of your customers fall into the lower income bracket. To cut costs, another organizational strategy might be to outsource some of the work. It might also entail placing the manufacturing facility in nations with inexpensive labor so that the business can charge a competitive price for its goods.

When a business first starts out, one of the first things it does is evaluate its operational environment to ascertain the circumstances under which it must operate. Examining the opposition, consumer trends, culture, and other elements is necessary for this. The business will research the strengths and weaknesses of its rivals, consumer purchasing patterns, and its financial capabilities. The business must determine whether selling its own product above or below the competition’s price of $10 US Dollars (USD) is the best course of action. One marketing tactic that might be attractive to a particular target market is selling its own goods at a discount. Selling the same product for more than the competition, on the other hand, is a tactic that might grant exclusivity and appeal to a particular demographic.

Organizational strategy aids in defining and constructing an organization’s organizational structure, so the two are related. Based on the findings of the organizational strategy analysis, a company’s organizational structure is developed. These findings will be used by the business to identify its focus areas and how to best position itself for success.

I concur that the plan must be modified in order to be successful. But wouldn’t this also be very expensive for the organization?

The organization’s structure will need to change if the strategy changes, and you’re right that this is very expensive. Because of this, the organization’s strategy and structure should be adaptable enough to changes without requiring a significant, expensive change. fBoyle yesterday.

FAQ

What is the relationship between strategy and structure?

Structure can change or shift as a result of strategy for an organization A business may need to alter its organizational structure as it develops specific objectives, marketing plans, and market research. For instance, a business that wants to open a new location may need to change the number of teams and departments it has.

What comes first structure or strategy?

“Structure follows Strategy. This means that decisions about an organization’s structure should be made with its strategic intent in mind in all areas, including the establishment of departments and divisions and the designation of reporting relationships.

Why does strategy need to match structure?

This matching allows us to define control points that are built into the processes, significantly reducing the operational and financial risks to the company. These tools assist people in connecting to the organization, its objectives, and the tasks that need to be accomplished.

Who is known for pointing out relationship between strategy and structure?

Five distinct instances have been found to back up Chanler’s (1962) claim that “Structure Follows Strategy.” These cases include a real-world incident, Chandler’s case study, the Kenya Commercial Bank case, the Safaricom case, and the Bharti Airtel case.

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