Management controls can be used to overcome the challenge of aligning conflicting corporate strategies with functional tasks, such as new product development.
Corporate strategy rarely offers a clear and unified directive for the company’s functions and business units. Instead, companies often have competing sets of corporate strategies. In a study based on the product development activities of a large food company, researchers from Oregon State University and the University of Auckland demonstrate that strategic alignment challenges can be resolved through management controls.
The challenge at the pseudonymous FoodCo was the company’s two conflicting strategies: the pursuit of sales growth and the pursuit of profit growth. Investing in growing sales figures can hurt the bottom line. Focusing on increasing profits can often require the elimination of non-profitable products or business units, which reduces overall sales.
Despite this natural tension, the new product development (NPD) function was left with the challenge of launching new products and services that significantly increased the revenues of the company while at the same time significantly increasing the bottom line.
FoodCo’s new product development process was based on the stage-gate approach: A new product or service idea progressed through four stages—scoping, concept, feasibility, and development—each culminating in a go-no go “gate.” If the verdict was “go,” the idea passed through the gate and moved to the next stage. To reconcile the corporate strategies of high sales growth and high-profit growth, the company creatively applied to this four stage-gate NPD process four management control mechanisms as follows:
The strategic alignment framework in this case study can help NPD managers, members of cross-functional project teams, management accountants and senior managers understand how they can align product development with corporate strategies through the use of different management controls. In this case, the allocation of corporate strategic responsibilities in the different stages-gates influenced each stage-gate’s project activities, which were facilitated through the use of cross-functional project teams and project performance measures. The result: FoodCo managed the tension between the conflicting strategies, and also built alignment between product development projects and corporate strategies.
Ideas for Leaders is a free-to-access site. If you enjoy our content and find it valuable, please consider subscribing to our Developing Leaders Quarterly publication, this presents academic, business and consultant perspectives on leadership issues in a beautifully produced, small volume delivered to your desk four times a year.
For the less than the price of a coffee a week you can read over 650 summaries of research that cost universities over $1 billion to produce.
Use our Ideas to:
Speak to us on how else you can leverage this content to benefit your organization. firstname.lastname@example.org