Published: May 20, 2013
by Ashok Divakaran, Gary L. Neilson, and Jaya Pandrangi
A MUST read!!!!!
Every company’s situation is unique, and therefore the right design for one company will probably not work for others, even within the same industry. But the symptoms of adhoc organizational design are regrettably common. They include business units and functions that protect their own domain’s priorities to the detriment of the overall business, hoarded or wasted resources, strategic goals without follow-through, and a culture that dismisses or ignores accountability. These problems are not just a matter of personal ill will, incompetence, external pressure, or cultural resistance. They exist because organizational design determines behavior. When a company’s organizational forms are inconsistent with the broader objectives of the business, that misalignment affects the day-to-day actions of individual employees. It leads perfectly competent people to chronically under-perform Conversely, companies with a strong link between their strategy and their organizational structure can, like an engine firing on thousands of cylinders instead of a few, generate energy and creativity at all levels….
…How do you translate a business strategy into an organizational design? How can you connect the dots between company-wide objectives and the concrete details of reporting relationships, information flows, decision rights, and social networks? The answer is not obvious. Figuring it out requires a new way of thinking about organization: what might be called organizing for essential advantage. “Essential advantage,” in this context, refers to the creation of meaningful, lasting value for customers. Although mission statements and lists of business objectives are plentiful, it’s rare to find a statement that explains precisely how a company creates value. As described in several recent books—notably, The Essential Advantage: How to Win with a Capabilities-Driven Strategy, by Paul Leinwand and Cesare Mainardi (Harvard Business Review Press, 2011)—these statements can be distilled down to two elements: a “way to play” and a system of differentiating capabilities. The way to play is how a company engages with the market, its fundamental value proposition. For example, some companies choose to distinguish themselves as innovators, continually introducing new products and service, whereas others are value providers, offering their products or services at an attractive price point. Capabilities are cross-functional combinations of technology, processes, skills, and mind-sets that work together synergistically. Differentiating capabilities are the few (typically, three to six) capabilities that enable a company to stand out from competitors and consistently provide value for its chosen customers that no one else can match