Is Strategy Still Relevant to Organization Design?

The axiom has always been to start with a clear strategy if you want to design a sound organization. But, is detailed strategy work even relevant in a world where the external environment is continually changing, requiring companies to regularly shift direction and priorities???? ?

On the contrary, we believe strategy is more important than ever. Both strategy and organization have to be dynamic. The companies that were able to quickly shift direction in 2020 have been least impacted by, or even profited from, the pandemic. But, being adaptive isn’t just about quickly deciding to change course. It is about having a flexible organization model that allows leaders to redirect resources, shift management attention, and accelerate change. This requires strategic boundaries to have been communicated in a way that empowers leaders on the ground to rapidly make tradeoff choices and act on them.? ?

We recently worked with a high-tech instruments company focused on growth. When we asked about strategy during our diagnostic, interviewees were enthusiastic about the $3B revenue goal and the 16% operating margin target. However, we quickly discovered that leaders were overwhelmed and exhausted by a set of uncoordinated activities all with equal priority. The chaos of the external environment had only exacerbated issues that already existed. For example, the lack of project prioritization and ineffective allocation of engineering and product development resources resulted in late and over-budget products, which were now in high demand.? ?

In order to create a flexible and nimble organization, leaders needed to be clear and aligned on a set of fundamental strategic questions. The team needs to go beyond the talking points that the head of strategy or the CEO might use for a broader audience. An executive team discussion on the?implications?of these choices is critical.? ?

• Which customers will provide us the greatest long-term opportunity??
• Given our ideal customer mix, where should we be a product-centric innovator, a me-too fast follower, and customer-centric??
• What are our principles and biases for sourcing – internal vs. partners??
• Where and how should we play in OEM (Original Equipment Manufacturer) and aftermarket channels??
• How should business development, M&A, and partnerships be aligned to the growth strategy and innovation portfolio?? ?

The answers to these questions empowered their teams to move quickly, confident that they were focusing on the highest value activities. As an example, after a discussion of Question 2, the team created new criteria for the innovation portfolio. The focus for R&D work shifted from primarily inside-out product innovation to commercially driven, market-led projects. Products that were difficult to install or couldn’t be used immediately by current customers were removed from the pipeline.? ?

To be truly adaptive, it is more important than ever for leaders to spend time aligning on and communicating?tradeoff choices related to customers, products, markets, channels, and new capabilities. Even though the external context may shift, and strategy cycle times may shorten, the discipline and practice of strategy making sets the frame for organization agility.?

Author: Jaclyn Kates