Commercial Reorganization: Why It Fails, How to Succeed? ??

Dear Friends,

I hope your summer has been refreshing. As we transition back into work, I’d like to address a critical issue: How can we rethink organizational costs in today’s economic climate without compromising medium-term growth?

Recent reports, including from Les Echos, highlight major firms like Continental, Bosch, ZF, and BASF undertaking significant reorganizations due to rising energy costs, fierce competition from China, and the shift to electric technologies. This reflects a global trend where strategic reorganization is crucial yet often mishandled.

Consider Koch Industries, which not only survived but thrived post-COVID by balancing cost optimization with commercial efficiency, reaching a record $125 billion in revenue. In contrast, other companies have slashed costs too harshly, jeopardizing their long-term health.

This leads us to a critical question: How can we smartly combine cost optimization with commercial effectiveness? Many firms get this wrong by solely focusing on cost-cutting, missing out on the true potential of a well-strategized reorganization.

So how do we combine these dual objectives? ????

The following companies successfully implemented a less conventional approach of re-designing their commercial teams during tough times:

Driving Organizational Design with Commercial Effectiveness Strategies :

Achieving this delicate balance requires a strategic approach:

1.???? Reformulating Growth Targets: Reassess your organic growth strategies. For example, a construction materials company might prioritize high-margin, large-scale international projects while reducing focus on less profitable regional sales. This shift allows more effective resource allocation towards areas with the highest growth potential.

2.???? Defining Targeted Commercial Efficiency: Clearly define the efficiency goals for your commercial teams, which include marketing, product management, sales, technical support, and pricing. Establish measurable outcomes like improved lead conversion, enhanced customer retention, and increased market penetration.

3.???? Designing the Organization: Assess the value each function contributes and design your organization to enhance strategic goals. For example, a streamlined project management team could focus on fewer, high-impact projects, while an agile sales team capitalizes on key market opportunities.

4.???? Aligning FTEs and Commercial Efficiency Ratios: Ensure that Full-Time Equivalents (FTEs) are aligned with the efficiency ratios for each function. This avoids overstaffing or underutilization, maximizing both cost efficiency and market impact.

What Might Go Wrong

However, this balance can be fragile. Common pitfalls include:

·?Focusing Solely on Cost Cutting:

While essential, cutting costs without considering the impact on growth can weaken your competitive edge.

·?Maintaining Silos:

Retaining functional silos can stifle collaboration and innovation. A well-designed organization should encourage cross-functional teamwork to ensure that all departments work towards common goals.

·?Reducing Only One Function:

Focusing on one area, such as sales, without considering the entire commercial ecosystem can disrupt synergy, leading to inefficiencies.

·?Neglecting Change Management:

Implementing organizational changes without proper change management can lead to confusion, resistance, and a decline in morale, which ultimately affects performance.

·?Ignoring Data:

Making decisions without data-driven insights can result in misguided strategies. Every change should be backed by solid data to align with your strategic goals.

As we move forward into the fall, I encourage manufacturers to reflect on how they can integrate these strategies to re-earn willingness-to-pay from their industrial customers. Would you like a deeper dive into these concepts?

Feel free to reach out, and I’d be happy to share a complimentary white paper on commercial organizational design to help you navigate this complex terrain. ????

Best Regards,

Olivier.

#Manufacturing #BusinessStrategy #CostOptimization #CommercialEfficiency #IndustrialGrowth #KochIndustries #GrowthStrategy #ChangeManagement #BusinessTransformation #Leadership #BusinessGrowth