Business Model Harvard – There is no one-size-fits-all recipe for successful business. But business leaders today seem to agree that strategic alignment is paramount.
For us, strategic alignment means that all elements of a business—including market strategy and the way the company itself is organized—are arranged in a way that best supports the achievement of its long-term goals. While a company’s purpose usually doesn’t change, strategy and organizational structure do, which can make the pursuit of “alignment” between strategy and organization feel like chasing elusive will-o’-the-wisps.
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As if that wasn’t hard enough, another challenge for business leaders is understanding strategic alignment
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However it is possible. For example, as the company grew, Facebook found that its early “move fast and break things” culture had to be funneled into dedicated technical teams and product groups to make its product development process faster, more stable, and have a chance to meet its needs. Requirements for new public shareholders after an IPO. The current mantra is “move fast with stable infrastructure,” which illustrates the organizational design challenges of operating at scale in a volatile world.
You can perform a simple test to start a candid conversation about the strategic and organizational effectiveness of where you work. Think about your company in its entirety, or select strategically important elements of it, such as growth areas on which future success will depend or its main source of income, and consider the following two questions:
Businesses will make it happen. Purpose is enduring – it’s the North Star that a company should be pointing towards. Strategy involves choosing which products and services to offer, which markets to serve, and how a company should best differentiate itself from competitors to gain a competitive advantage. Think about your own business and ask yourself, using a scale of 1 – 100,
(If you’re unclear about your company’s strategic focus or its purpose, chances are it is.)
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2. To what extent does your organization support the realization of the business strategy? We use “organization” here to include all the necessary capabilities, resources (including people) and management systems needed to implement the strategy. For example, if your company seeks to beat out the competition with superior customer service, is this reflected in the day-to-day behavior of your employees and their interactions with customers? If innovation is a key strategic priority, does your organizational structure support creative collaboration, risk-taking, and knowledge-sharing? To maintain strategic alignment, a company’s people, culture, structure, and processes must be flexible to change as the strategy itself shifts. Symptoms of inconsistency are often evident, especially to those who work for the company, but also to customers who do not experience the service expected from the company’s brand and advertisements. Using the same 1 – 100 scale ask yourself:
If your organization is unable to achieve its strategy, then the strategy is effectively worthless and your company’s goals will more or less be unattainable.
Your answers to both questions can be plotted in the matrix above. Each state presents different leadership challenges. (In all four dimensions, however, we assume that the end itself is feasible and likely to succeed.)
Best Chance of Winning: Companies that score high on these two dimensions have the best chance of winning in their competitive field. But consistency goes beyond great financial performance. It also results in a more positive work climate, above-average employee engagement, a strong commitment to values, and less (er) energy-intensive turf wars and infighting. No matter what type of business it is, it creates buzz because people value being part of a winning company.
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ARM may be one of the best performing companies you’ve never heard of. Its microprocessors are used in more than 95 percent of the world’s smart devices, including iOS and Android smartphones and tablets. Superior technological innovation is at the heart of its strategic and organizational design. ARM organizes innovation with purpose by maximizing opportunities for knowledge sharing and collaboration across its ecosystem of thousands of external partners. Its core staff of just 3,500, mostly based in Cambridge, UK, share a common purpose and set of values that supersede functions, careers and roles. There are few barriers to spontaneous collaboration between technical teams.
Well-intentioned, but powerless: Companies that score high on the Purpose and Strategy Alignment scale, but low on Strategy and Organizational scale, are more or less unable to implement their strategy as intended. Performance losses can manifest as poor customer attraction and retention, higher-than-anticipated costs, organizational dysfunction, or simply poor financial performance.
Like many leading international banks in recent years, Barclays has come under fire for its culture, governance and risk-taking practices, which contributed to the 2008 financial crisis. A string of scandals, including foreign exchange manipulation, has led to record fines, regulatory scrutiny and highly negative publicity. A report commissioned by Barclays in 2013 revealed a corporate culture that was not fit for purpose, with a tendency to “prefer transactions over relationships, short-term over sustainability, and financial over other business purposes.” It further Reveals a complex and siled organisation, with operating assumptions, values and practices that compete with those of the group as a whole. The result is a fertile environment for reckless and risky employee behavior that runs counter to the overall vision and values of the business.
Do Nothing Boldly: Companies with high alignment between strategy and organization but weak alignment between strategy and goals are classified as Do Nothing Boldly. In our experience, there are many capable businesses with great people who lack a coherent, overarching purpose to help guide strategic shifts. The result is a company that becomes less and less capable over time as customers churn and talented employees leave. Kodak is a well-known example of a very capable blue-chip business that went downhill because it didn’t know how best to achieve its goals in the digital world. Despite their development of digital photography, too many people in the company were focused on the core organizational capabilities of film. Rather than seeing digital cameras as a new way to execute on their organizational goal of capturing a “Kodak moment,” they stuck to their existing film-centric strategy. This puts them out of sync with consumers’ changing preferences for digital media and instant sharing.
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It’s a short-lived world: Companies that score low on both dimensions are in crisis, even if it’s not immediately obvious. Their strategies didn’t — couldn’t — achieve their larger goals because they failed to effectively address customer preferences, market conditions, and competitor capabilities. Equally important, their organizations fail to achieve strategic priorities.
Autumn comes quickly. Royal Bank of Scotland (RBS) is a flagship bank highly regarded for its strong financial performance. It grew rapidly in the late 1990s and early 2000s, transitioning from a Scottish regional bank to a British national bank following the acquisition of NatWest in 2000, and finally quickly becoming a Global universal bank. At its peak, RBS had 170,000 employees, operations in more than 50 countries and annual profits of £10.3bn. However, in 2008, RBS failed miserably and was nationalized by the UK government to prevent its collapse.
Since then, many have speculated about its failure under the leadership of its upbeat predecessor, Fred Goodwin. Goodwin was notoriously combative, with a “Fred Says” autocratic management style. RBS is also known for its “strategy without strategy”, which is largely opportunistic, relying on aggressive action, agility and audacity to outperform its peers. Ultra-rapid inorganic growth – notably the acquisition of ABN Amro – meant that RBS grew very large, very fast, with a variety of different operating structures and subcultures. RBS’s command-and-control leadership structure was unable to effectively manage complex and diverse activities across international operations. Many poor business decisions have resulted in an unsustainable accumulation of toxic debt. Nearly a decade after nationalization, RBS is still living on the support of the UK taxpayer and has yet to return to sustainable profits, losing money again in 2015, wiping out more or less all the public money invested since its inception . downfall.
How does your company score? What does it tell you about how you think about your strategy or the effectiveness of your organization? Further consideration:
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Diversity Latest Magazine Ascend Topics Podcasts Video Store The Big Idea Data & Visuals Case Selections Learning An operating model is an organizational blueprint that dictates a company are going to make decisions and execute the work needs to deliver its strategy, business model and customer mis A pattern is an organizational blueprint that specifies how a company will make decisions and perform the work needed to deliver its strategy, business model, and customer mission.
In Part 1 of this blog series, we start by sharing
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