Business Strategy Formulation - People Advantage

Business Strategy Formulation - People Advantage

BCG – People Advantage

People Advantage by Martin Reeves, Yves Morieux, Mike Deimler March 2010. A company’s ability to adapt to incessant change is embodied in the way people make decisions and behave in the workplace. There is no adaptive strategy without an adaptive organization.  Read more

Cross-Functional Councils

The CEO of Cisco Systems determined that he needed to employ a new management model. They could no longer afford the typical weaknesses that a steep hierarchal organization structure imposes. Better and timelier decisions needed to be made throughout the organization. So, CEO John Chambers put into place a structure of cross-functional councils. Furthermore, employees had the ability to form boards. John asked the councils to figure out how and generate 25 percent of revenue from new markets in 2010. This they did.

Adaptive Organizations have the Following Characteristics:

    • Modular: Modular organizational units that meet top standards and plug in where and when needed. This enables the firm to introduce and quickly implement product and process variations, adjust resources where and when needed, and ensure that the firm’s high standards are being met.
    • Knowledge Flow: Organizations that are adaptive work towards having a culture that supports knowledge sharing and constructive debate needed for decentralized decision making to be successful. A free flow of knowledge is important for organizations to intelligently and quickly make changes.
    • Guiding Principles: Detailed SOPs are unmanageable for organizations needing to change and improve constantly. Instead, a few guiding principles outline how individuals and teams should interact with each other and make decisions.
    • Leadership: Leaders no longer dictate from above. Instead, they provide the context needed to make decisions.
    • Expermintation: Adaptive organizations encourage testing, refinement, and smart risk taking through experimentation rather than to simple avoid failure.

Four Models To Address Adaptability Needs

BCS introduced four different organizational models to address varying adaptability needs based on the degree of turbulence in the market space and the change required. The authors state that when turbulence is high organizations depend more on experimentation and collective-decision making. When turbulence is low, a more analytic, expert based decision-making approach is used. Business Strategy Formulation – People Advantage

The four models include:

    • Sprinter organizations operate in markets of low turbulence that require little change. They generate solutions in localized, discrete units; make explicit decisions based on analysis; and exhibit more specialization and centralization than the other adaptive styles. Still, they are adaptive: they rapidly and dynamically re-optimize their routines to the changing environment.
    • Experimenter organizations use continual empirical testing to make decisions in a turbulent environment, but because the degree of change required is low, they can allow discrete parts of the organization to generate solutions. Therefore, the parts of the company that face uncertainty must empower the frontline to make choices and act, while other parts can behave like sprinters.
    • Migrator organizations face environments that require significant change, so they generate solutions through broad-based collective participation. However, because turbulence is low, decisions can be based on analysis and deliberation. A migrator’s modulating unit is often a cross-functional group that collates inputs from multiple sources and makes deliberate, analytical decisions.
    • Voyager organizations navigate environments of high turbulence in which a high degree of change is also required. Since no central authority can “know” the correct path, these companies rely on collective decision-making. They also make decisions empirically, since it is not feasible to analyze their way to a solution. And since problem solving at voyager organizations is collective, the periphery is empowered to detect and act on weak signals within an overall context set by management.

Links to highlights from other Boston Consulting Group articles:

Business Strategy Formulation - People Advantage

Highlights by David Willden