The Strategy Execution Agenda

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© 2013 STRATEGOS CONSULTING Λ 1 Strategic success not only requires an appropriate strategy but also that the strategy is executed successfully. This article pre- sents nine key success factors for successful strategy execution. The Strategy Execution Agenda Dr. Arnoud van der Maas [email protected] linkedin.com/in/avandermaas February 2013 Strategic success not only requires an appropriate strategy but also that the strategy is executed successfully. Even the best-made strategies are worthless without successful execution. Despite its strategic importance many organiza- tions fail at strategy execution. Fewer than 15 percent of organizations are suc- cessful in strategy execution. Because of its high failure rate, achieving successful execution remains a continuing chal- lenge for managers. This article presents the Strategy Execution Agenda – a man- agement model that allows managers and executives to master one of the greatest management challenges – suc- cessfully implementing strategies. The Strategy Execution Agenda incorpo- rates 8 key factors for strategy execu- tion. Collectively, these tools help or- ganizations execute their strategy exe- cutions to achieve sustainable organiza- tional success. Strategy without Execution is Worthless The successful execution of strong and robust strategies gives any organization a significant competitive edge. Strategy execution is even more important in cur- rent turbulent organizational environ- ments. The ability to develop and imple- ment new strategies quickly and effec- tively may well mean the difference be- tween success and failure for organiza- tions (Drazin and Howard, 1984; Hauc and Kovac, 2000). However, well-formulated strategies only produce superior perfor- mance for organizations when they are successfully implemented (Bonoma, 1984). The best-made strategies are worthless if they cannot be successfully implemented (Schilit, 1987). Strategic success not only requires an appropriate strategy but also that the strategy is im- plemented successfully (Hussey, 1996), and timely.

description

Strategic success not only requires an appropriate strategy but also that the strategy is executed successfully. Despite its strategic importance many organizations fail at strategy execution. This article presents the Strategy Execution Agenda – a management model with 9 success factors that allows managers to master one of the greatest management challenges – successfully implementing strategies.

Transcript of The Strategy Execution Agenda

Page 1: The Strategy Execution Agenda

© 2013 STRATEGOS CONSULTING Λ 1

Strategic success not only requires an appropriate strategy but

also that the strategy is executed successfully. This article pre-

sents nine key success factors for successful strategy execution.

The Strategy Execution

Agenda

Dr. Arnoud van der Maas [email protected] linkedin.com/in/avandermaas February 2013

Strategic success not only requires an

appropriate strategy but also that the

strategy is executed successfully. Even

the best-made strategies are worthless

without successful execution. Despite its

strategic importance many organiza-

tions fail at strategy execution. Fewer

than 15 percent of organizations are suc-

cessful in strategy execution. Because of

its high failure rate, achieving successful

execution remains a continuing chal-

lenge for managers. This article presents

the Strategy Execution Agenda – a man-

agement model that allows managers

and executives to master one of the

greatest management challenges – suc-

cessfully implementing strategies. The

Strategy Execution Agenda incorpo-

rates 8 key factors for strategy execu-

tion. Collectively, these tools help or-

ganizations execute their strategy exe-

cutions to achieve sustainable organiza-

tional success.

Strategy without Execution is

Worthless The successful execution of strong and

robust strategies gives any organization

a significant competitive edge. Strategy

execution is even more important in cur-

rent turbulent organizational environ-

ments. The ability to develop and imple-

ment new strategies quickly and effec-

tively may well mean the difference be-

tween success and failure for organiza-

tions (Drazin and Howard, 1984; Hauc and

Kovac, 2000). However, well-formulated

strategies only produce superior perfor-

mance for organizations when they are

successfully implemented (Bonoma,

1984). The best-made strategies are

worthless if they cannot be successfully

implemented (Schilit, 1987). Strategic

success not only requires an appropriate

strategy but also that the strategy is im-

plemented successfully (Hussey, 1996),

and timely.

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Most Strategy Executions Fail Organizations often fail at strategy exe-

cution. Few intended strategies are suc-

cessfully realized (Mintzberg, 1990), de-

spite its strategic importance to any or-

ganization. Fewer than 15 percent of or-

ganizations around the world report that

they are successful at strategy execution

(Harvard Business Review, 2006). Vari-

ous studies have reported execution fail-

ure rates at 60 to 90 percent (Kaplan &

Norton, 2005). As a result, survey after

survey reveals that strategy execution is

a top priority for executives (Harvard

Business Review, 2006).

The majority of strategies fail in the

strategy execution phase (Noble, 1999).

After a comprehensive strategy or single

strategic decision has been formulated,

significant difficulties are often encoun-

tered during the following strategy exe-

cution process (Alexander, 1985). Many

organizations have a fundamental dis-

connect between the formulation of their

strategy and the execution of that strat-

egy into useful action (Kaplan, 1995). This

has been called the strategy implementa-

tion problem: ‘the all too frequent failure

to create change after seemingly viable

plans have been developed’ (Nutt, 1983).

Achieving successful execution remains a

continuing challenge for managers re-

sponsible for executing strategies (Cra-

vens, 1998).

The Strategy Execution Agenda To contribute to the understanding of

strategy execution at its reasons for suc-

cess or failure, we conducted a qualita-

tive survey of 55 executives with strategy

execution responsibilities within 44 pub-

lic and private organizations. From this

research nine key factors emerged that

positively influence strategy execution

success. Together, these nine practices

constitute the Strategy Execution

Agenda (see Figure). Managers and exec-

utives need to take these factors into ac-

count in order to overcome the ‘imple-

mentation problem’ and successfully ex-

ecute strategies within their organiza-

tions.

The Strategy Execution Agenda is a

comprehensive management model that

allows managers and executives to mas-

ter one of the greatest management chal-

lenges – successfully implementing strat-

egies. This powerful framework incorpo-

StrategyImplementation

Success

1Appoint

Competent Management 2

People-oriented

Management Style

3 Take Political Interests into

Account

4 Develop an Execution

Plan

5 Align

Structure to Strategy

6 Change the

Culture

7 Appoint an Execution

Leader

8Communicatethe Strategy

9 Monitor and

Learn

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rates nine success factors for strategy ex-

ecution. Collectively, these tools help or-

ganizations implement their strategies to

achieve sustainable organizational suc-

cess.

1. Appoint Competent

Management The presence of competent employees

and especially management is the most

important success factor for strategy ex-

ecution. Inadequate capabilities of man-

agers are a common cause of strategy ex-

ecution failure (e.g. Beer & Eisenstat,

2000; Pinto & Slevin, 1987; Alexander,

1985). Without competent organizational

members, implementing a strategy suc-

cessfully becomes very difficult if not im-

possible. Organizational members with

execution responsibilities need to have

sufficient skills and knowledge to imple-

ment the strategy. Eventually organiza-

tional members are the ones who have to

perform the execution activities to make

the strategy a success.

Especially, having competent manage-

ment is important. When top manage-

ment is incompetent, the whole organiza-

tion is affected and thus the strategy ex-

ecution effort as well. Furthermore, when

employees have little confidence in the

ability of management to execute the

strategy then their commitment to the

strategy will be low.

Having incompetent members within a

team has a negative influence on the per-

formance of other organizational mem-

bers. Well-performing organizational

members have their motivation reduced

when they have to work with or are de-

pendent on poor performing colleagues.

Especially the presence of incompetent

managers has a very negative influence

on the performance of subordinates. If a

person is competent and that person’s

manager is not, this is likely to have a neg-

ative influence on the level of motivation

and execution performance. Successful

organizational members tend to leave an

organization where they have to work for

incompetent managers and feel that their

performance is not appreciated or often

even worked against.

To increase the level of competence of

organizational members several prac-

tices can be used such as training and ed-

ucation, coaching and counseling, in-

creasing self-efficacy of organizational

members, giving feedback about perfor-

mance, giving compliments for good per-

formance, addressing poor performance,

hiring and firing of organizational mem-

bers and bringing in external expertise.

2. Use a People-oriented

Management Style Having a people-oriented management

style is a key practice for successful exe-

cution. As individuals go to work for both

instrumental and social reasons, manag-

ers need to pay attention to both task

performance and social relationships

(Henderson & Argyle, 1986). Better social

relations increase the cooperation, moti-

vation, and effectiveness of organiza-

tional members (ibid). Organizational

members have the need to be treated

with the dignity of a human being – one

with knowledge and free will (Guillen &

Gonzalez, 2001).

A people-oriented manager listens,

provides support and encouragement,

coaching and counseling, develops social

relations with subordinates, celebrates

social activities and empowers organiza-

tional members during a strategy execu-

tion effort. People-oriented management

consists of four main aspects.

A first aspect is coaching and counsel-

ing employees during the strategy execu-

tion effort. Employees eventually have to

internalize the new activities, which are

required to implement the strategy.

Therefore, management must guide and

coach the employees but they have to

perform the execution tasks themselves.

Moreover, organizational members are

often quite capable of performing certain

execution tasks but need help doing it. By

coaching employees, they can become

more confident of their abilities and can

become more involved and less passive.

In addition, managers can reduce re-

sistance to change by being facilitative

and supportive (Kotter and Schlesinger,

1979). This may involve giving employees

time off after a demanding period and

providing emotional support (ibid).

A second part of people-oriented man-

agement is to develop and maintain per-

sonal relationships with subordinates.

Better social relations have a positive in-

fluence on the cooperation, motivation

and effectiveness of organizational mem-

bers (Henderson & Argyle, 1986).

Celebrating social activities with or-

ganizational members is a third aspect of

people-oriented management. Organiz-

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ing social activities are a good way to de-

velop close and personal relationships

among organizational members, can cre-

ate a positive atmosphere within the or-

ganization, create more unity within the

organization, reduce the distance be-

tween management and subordinates,

and increase organizational commitment.

Empowering organizational members

is a final aspect of people-oriented man-

agement. Organizational members can

be empowered by making them inde-

pendent, delegating responsibilities, al-

lowing participation, giving them more

control over their work, giving them infor-

mation about the strategy and its execu-

tion, and organizing training and leader-

ship courses. Self-responsibility and self-

empowerment of organizational partici-

pants makes them more motivated, more

self-confident and more willing to take in-

itiative, which is beneficial to the strategy

execution effort. In addition, empower-

ment or delegation has potential benefits

such as improves speed and quality of

decisions, reduced managerial overload,

enrichment of subordinates’ job, in-

creased motivation of subordinates and

provides opportunities for the develop-

ment of leadership skills of subordinates

(Yukl & Fu, 1999). In addition, empower-

ment increases work performance (Cot-

ton et al., 1988; Leana, 1986) and innova-

tive behavior (Kanter, 1983). This in turn

increases the motivation of organiza-

tional members by making them feel

more powerful (Conger & Kanungo,

1988).

Moreover, empowerment increases

self-determination, which increases the

self-confidence of employees. Further-

more, by giving employees more control

over their work they feel more proud, im-

portant, and involved. A final reason for

the delegation of authority to employees

is that they are the ones who encounter

the problems during their work and are

thus the ones who are most suited to

solve these problems.

3. Take Political Interests into

Account Politics and struggles over power and

leadership are just a few obstacles that

may undermine an execution effort (De

Kluyver and Pearce, 2003). Strategy for-

mulation and execution inevitably raise

questions of power within an organiza-

tion (Pettigrew and Whipp, 1991). The ex-

istence of conflicts, and the use of indi-

vidual and group power needs to be

taken into consideration (Bergadaà,

1999). The very prospect of change con-

fronts established positions (ibid), which

may lead to resistance to change. Re-

sistance to change may lead to passivity

toward the strategy or even sabotage.

Managers can overcome resistance to

change by involving potential opponents

in decision-making, taking their interests

seriously and clearly communicating the

new strategy and its advantages to them.

4. Develop an Execution Plan After the strategy is developed, it needs

to be translated into a concrete and well

worked out strategy execution plan. Even

the best strategy is worthless when man-

agers cannot translate the strategy into

operational reality. The strategy execu-

tion plan specifies the processes, activi-

ties and operational objectives that are

required to achieve the goals of the strat-

egy. The strategic objectives need to be

translated into measurable operational

execution sub-objectives (Reid, 1989)

and linked to departmental and individual

goals (Kaplan, 1995). In addition, progress

measurement points or ‘milestones’ need

to be established (Owen, 1982). Measura-

ble objective provide an effective basis

for management control of the execution

(ibid).

Without concrete objectives and mile-

stones, it is impossible to measure the

progress of the strategy execution. This

makes managing and improving the

strategy execution impossible. Therefore,

the execution plan needs to contain a

clear set of concrete and measurable ob-

jectives or targets. Clear and specific

tasks need to be defined which are re-

quired to achieve these targets. Everyone

with strategy execution responsibilities

needs to know what to do in order to im-

plement the strategy and what concrete

objectives they have to attain. Unclear

objectives leave room for differential in-

terpretation and discretion and may thus

contribute to execution failure (Barrett,

2004).

Effective strategy execution requires

clear execution tasks, activities and re-

sponsibilities. Execution can only be suc-

cessful when there is a clear and shared

understanding of who does what, when,

at what cost (Allio, 2005). Not only

should the necessary actions to imple-

ment the strategy be identified and

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planned, responsibility for these actions

should be allocated as well (Owen, 1982).

By allocating clear responsibilities for the

execution of the execution activities, pro-

gress can be measured and controlled

(Reid, 1989).

Specific and ambitious but realistic

goals, which are accepted by organiza-

tional members lead to the best task per-

formance (Erez & Kanfer, 1983). People

need realistic challenges to perform well.

When organizational members have de-

cided that it is impossible to reach a goal

they will stop trying to reach that goal

(ibid).

5. Align the Organization

Structure During a strategy execution effort, a clear

organization structure needs to be

aligned to the strategy. It needs to be

clear whom the authority has to make de-

cisions. When possible, management

must ensure that the organization struc-

ture is clear, relatively decentralized and

relatively formalized. When the existing

organization structure does not meet

these requirements, it may represent a

hindrance to strategy execution and

needs to be changed.

The main advantage of a decentralized

organization structure is that it increases

the commitment of organizational mem-

bers to decision-making; decisions can be

made more quickly, and may improve the

quality of decisions as it makes more use

of specialized knowledge of organiza-

tional members at lower levels in the or-

ganization.

Centralized decision-making, one-way

top-down communication and lack of in-

put from lower levels of the organization

may inhibit strategy formulation and exe-

cution (Kiggundu, 1996). A centralized

organizational structure with rigid organ-

izational policies combined with a per-

ceived lack of control is related to mala-

daptive behavior in organizations (Mar-

tinko & Garnder, 1982). Individuals work-

ing in centralized organizations, tend to

feel that management does not trust their

skills and abilities resulting in a sense of

incompetence (Lawler, 1992). Centralized

control reduces self-determination

(Spreitzer, 1996), which in turn reduces

the intrinsic motivation of organizational

members (Conger and Kanungo, 1988;

Lawler, 1992). An explanation for this is

that individuals tend to have a desire for

personal control (Greenberger and

Strasser, 1986). In addition, an authoritar-

ian management style can remove con-

trol and discretion from employees,

which increases their sense of powerless-

ness (Conger and Kanungo, 1988). Con-

trary, decentralized control helps organi-

zational members feel that they are con-

tributing to the operations of the organi-

zation, which promotes their sense of

having impact (Martinko and Gardner,

1982). Furthermore, it may increase the

motivation of organizational members.

A moderately formalized organization

structure has the advantage that it cre-

ates clarity for organizational members.

Clear procedures, rules and responsibili-

ties may give organizational members

certainty during an execution effort.

When problems arise and responsibilities

are not clear, organizational members

may blame each other.

A highly level of formalization reduces

the propensity to change (e.g. Hage & Ai-

ken, 1970; Bonoma & Zaltman, 1981). The

greater the number of rules and regula-

tions, the greater the rigidity and inflexi-

bility an organization. A high level of for-

malization discourages new ways of do-

ing things and reinforces the status quo

(Hage and Aiken, 1970). However, when

formalization is low, organizational mem-

bers have few rules or procedures to fall

back on during the strategy execution.

Thus, organizations must not be too for-

malized and become rigid but also not

become too informal and become chaotic

and uncontrollable (Volberda, 1996).

6. Change the Culture A new strategy may require changes in

the way of thinking and habits of organi-

zational members. Old habits and ways of

thinking can prove to be an obstacle to

strategy execution. Fundamental organi-

zational change often involves major un-

certainty and can trigger intense emo-

tions, such as anxiety (Huy, 2002) and a

fear for job security. As a new strategy

can be accompanied by layoffs it, organ-

izational members may perceive it as a

threat to job security. Job insecurity is re-

lated to a variety of negative responses

such as lower job satisfaction, lower or-

ganizational commitment, lower job in-

volvement, increased psychological with-

drawal, greater resistance to change,

greater propensity to leave the organiza-

tion, lower trust in management (Borg &

Dov, 1992) and withdrawal cognitions

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and behaviors including reduced work ef-

fort, increased absenteeism, and theft

(Davy et al., 1997).

An existing organization culture can be

characterized by fear for making mis-

takes, responsibility, participation, and

change. When managers act in authori-

tarian and punitive ways, subordinates

may become reluctant to make mistakes

and engage in learning behaviors (Ed-

mondson, 1999). Employees may become

shaped by organizations with high levels

of centralization, formalization, and rigid

rules and may become passive and una-

ble to be creative or exercise initiative on

the rare occasions that it is encouraged

and rewarded (Martinko & Gardner, 1982).

However, to implement a strategy suc-

cessfully, proactive organizational mem-

bers are often needed who participate in

strategy formulation and execution. In or-

der to participate, organizational mem-

bers need to dare to take initiative, voice

their opinion, and not be afraid to make

mistakes. Therefore, an empowered and

fearless organization culture needs to be

created in which organizational members

are able to make mistakes without being

punished for it. When organizational

member believe that well-intentioned in-

terpersonal risks will not be punished, this

fosters learning behavior (Edmondson,

1999).

To change an existing organizational

culture several strategies and tactics can

be used. First, a clear vision of the new

organizational culture is needed. The vi-

sion needs to clearly describe the new

culture and how it differs from the old

culture what its advantages are. This

needs to be communicated very clearly

to the employees. Cultural change in-

volves a lot of communication. Another

tactic is to individually coach and council

employees. This includes having open

conversations with employees. Involve

employees and give them feedback

about their performance and the new cul-

ture. Providing training and education,

especially motivational courses, can also

be used to change the culture. Visible

changes, such as new uniforms and a new

corporate logo can be used to make the

culture change more visible and tangible

to organizational members. In addition,

hiring employees who have a better fit

with the new culture and demoting or let-

ting go of employees who not able to fit

in the new culture are another tactic that

can be used. Finally, leadership from top

management is crucial in culture change.

Top management need to serve as an ex-

ample of the norms and values it wishes

to convey to organization.

However, changing the culture of an

organization is a difficult and time-con-

suming process. It may take years to suc-

cessfully change an existing organiza-

tional culture. Changing habits, which

have been the same for a very long time

is not easy.

7. Appoint a Strategy

Execution Leader During the strategy execution effort

there needs to be one clear leader who is

responsible for the outcome of the strat-

egy execution. The strategy execution

leader serves as project managers and

problem owner of the strategy execution.

The execution leader needs to be board

member, especially for strategic execu-

tions. The execution leader is responsible

for articulating and communicating an at-

tractive strategic vision that guides the

strategy execution. A successful leader

inspires followers through the communi-

cation of a captivating vision designed to

motivate followers to ambitious goals

(Huy, 1999). Effective leaders have the

ability to inspire confidence and enthusi-

asm of the new direction (Tushman et al.,

1986).

Execution leaders need to be decisive

during the strategy execution effort. Tak-

ing decisions may be considered to be is

the primary task of management. When

taking these decisions a manager needs

to be steadfast, resolved and not allow

him or her to be influenced by others.

Managers who want to execute ambitious

and innovative plans need to be persis-

tent in sticking the course through thick

and thin (Gersick, 1994). During reorgani-

zations in which employees can lose their

job or when established power positions

are threatened, considerable resistance

to change can arise. In such instances of

considerable resistance to change, man-

agement has to be decisive and steadfast

in taking decisions. Managers need to be

able to take tough decisions when organ-

izational members are not performing

well.

Strategy execution leaders need to

take decisions, which are perceived by

organizational members to be fair. Re-

search has found that organizational

members are more committed to deci-

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sions, decision-makers and the organiza-

tion when the procedures, which were

used to arrive at the decision, are per-

ceived as fair (Brockner et al., 2000). As

Brockner et al state: ‘It’s not only what

you do, but how you do it’.

Finally, when leaders practice moral

virtues such as fairness, integrity, hon-

esty, loyalty, determination, courage and

responsibility increases the willingness of

followers to follow a leader (Guillén &

González, 2001).

8. Communicate the Strategy After the strategy is formulated, it needs

to be communicated to the rest of the or-

ganization, and especially to organiza-

tional participants who are directly influ-

enced by it. However, no less than 95 per-

cent of organizational members do not

understand the strategy of their own or-

ganization (Kaplan & Norton, 2000). The

objective is to make organizational mem-

bers understand what the strategy is all

about and what its goals are. Further-

more, employees need to know how the

strategy influences their daily work. Com-

municating the strategy in a very simple

way makes it easier to understand for or-

ganizational participants.

An important part of the communica-

tion of the strategy is the explaining and

convincing of the strategy to employees.

Not only needs the content of strategy to

be clearly communicated, it also needs to

be clearly explained in a way that em-

ployees understand and may become

convinced that the strategy is sound and

effective. This can be done by explaining

the advantages of the new strategy in a

clear and practical way. Organizational

members are more willing to accept un-

desirable decisions when they have re-

ceived clear and adequate explanations

for those decisions (Brockner et al., 1990).

Organizational members need to un-

derstand why the execution or the new

strategy is necessary. It is especially ben-

eficial if organizational members see in

their daily activities that something needs

to be changed. Furthermore, a perceived

crisis may also be beneficial in establish-

ing the need for change to organizational

members. When organizational partici-

pants understand the need for the strat-

egy execution, they are more likely to be

supportive of it.

Communication of the strategy can be

done through a wide range of communi-

cation means, such as magazines, email,

leaflets, information, and publicity meet-

ings. However, two-way communication

sessions with organizational members are

most effective. In these sessions, the

strategy is explained and employees get

the opportunity to voice their views on

the strategy and its execution. It is not

only important to communicate the strat-

egy to the people but it is also important

to listen to their reactions to the strategy.

Extensive listening to comments from

employees takes considerable time but

builds commitment to the strategy.

9. Monitor and Adapt the

Strategy During the strategy execution, it is im-

portant to monitor whether the goals of

the execution are being met and whether

adjustments need to be made. During the

strategy execution, the strategic goals

translated into operational goals with

performance indicators need to be moni-

tored to assess whether the objectives

are being achieved. As strategy execu-

tion plans are destined to change, execu-

tion teams need to regularly meet in well-

structured, punctuated sessions to share

information, reconfirm priorities (Allio,

2005) and make decisions. This way,

management can make adjustments

when needed and thus control the strat-

egy execution effort. To make these ad-

justments it is required to assign clear re-

sponsibilities for the achievement of

those targets. When objectives are not

being met, the person or persons respon-

sible need to be held accountable.

When objectives are not being it is possible that the assumptions underlying the strategy are flawed or obsolete. When this happens it needs to be decided whether incremental improvements will suffice or that a fundamentally new strat-egy is required. Many organizations have accountabil-

ity problems, which are the result of a lack

of planning, the absence of a functional

management information system, or the

existence of cultural values which do not

encourage holding persons, especially in

high positions, accountable (Kiggundu,

1996).

Finally, when a strategy execution is

finished it needs to be evaluated. This

way, an organization may learn from the

execution, which can benefit future strat-

egy executions. Furthermore, it is im-

portant to conclude and evaluate a pro-

ject so that employees see what they

worked for, creating a sense of closure.

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Dr. Arnoud van der Maas (a.vandermaas@

strategos.nl) is a consultant in strategy & fi-

nance to public and private organizations.

Arnoud received a PhD in Strategic Man-

agement from Rotterdam School of Man-

agement, Erasmus University. One of the

top business schools in Europe. This article

is based on this PhD thesis on strategy im-

plementation in an international context,

which can be found here.

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