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Gaining Strategic Advantage through Organizational Design
One of the biggest challenges facing modern corporations is ensuring that business strategy and
organizational design are tightly aligned. Conventional wisdom suggests that it is critically
important to decide the enterprise strategy first and then re-align the organization to deliver on it.
Reality is quite different.
Structure defines organizational boundaries for where and how value is managed and delivered.
It not only dictates accountabilities and responsibilities, but, by definition, structure provides the
units by which a companys financial and human resources are allocated. Therefore, structure is
one of the key levers that chief executives can use to successfully manage the value of their
businesses and best gain or leverage their competitive advantage.
Value exemplars often use organizational design to gain strategic advantages and help deliver
consistent, superior returns to shareholders. For these companies, structure does not follow
strategy structure is strategy.
The following case studies demonstrate how structure and strategy are inextricably intertwined.
The lesson to be learned in these examples is that there should be no such a thing as an industry
standard organizational design because adhering to any standard structure may mean missing a
hidden source of competitive advantage. A distinctive design can give your business a unique
edge in the marketplace.
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In Pakistan organizations that dont periodically renew themselves suffer from such symptoms
as:
Inefficient workflow with breakdowns and non value-added steps
Redundancies in effort (we dont have time to do things right, but do have time to do them
over)
Fragmented work with little regard for good of the whole (Production ships bad parts to
meet their quotas)
Lack of knowledge and focus on the customer
Silo mentality and turf battles
Lack of ownership (Its not my job)
Cover up and blame rather than identifying and solving problems
Delays in decision-making
People dont have information or authority to solve problems when and where they occur
Management, rather than the front line, is responsible for solving problems when things go
wrong
It takes a long time to get something done
Systems are ill-defined or reinforce wrong behaviors
Mistrust between workers and management
Flexible Structures Produce Flexible Strategies
Companies that organize around functions tend to develop functional and fixed strategies.
Likewise, companies that organize around geographies tend to develop fixed geographic
strategies. Beyond the lack of flexibility, both are easy to copy by competitors and will likely
prevent the execution of distinctive strategies and performance in the long run.
One of the worlds most profitable retailers addressed their global/local challenge by creating
both global category and local market business units.
Structure Is Strategy
Every business should be organized to exploit whats unique about its markets, products, and
people. If your structure is similar to your competitors, your ability to develop distinctive
strategies is almost inevitably blunted. Distinctive strategies require distinctive structure.
You will know that your structure is distinctive when it consistently allows you to outclass your
competitors at uncovering strategic insights, when it effortlessly manages both the global and
local dimensions of your business, when your organization quickly adjusts its focus to the right
strategic issue at the right time, and, most importantly, when the CEO can say that his or her
management team is working at the peak of its game. Then youll know your distinct structure is
your winning strategy.