In the first article in this mini-series I talked about how the most successful organizations of the moment are using new thinking to take the lead in their industries. In this second article I want to look at how other organizations can start to make the changes they need to keep up.
One of the key challenges facing businesses today is how to keep pace with, and preferably anticipate, the needs and expectations of customers. These expectations have changed as we have become better educated and informed about the buying decisions we make. We want the organizations that we do business with to show that they understand what we need and are able to deliver it. This demands flexibility and agility from the businesses that want to gain and keep satisfied customers. At the same time competition is growing: this era of globalization is seeing vibrant new economies emerging. Not only are the Asian economies taking away the drudge and administration from many businesses, they are also doing it better.
I don’t believe there is any single action plan for responding to these challenges. I do think though that there are some questions that companies should be asking themselves before they start to make changes:
What constraints are there on how the business is structured?
“We trained hard … but it seemed that every time we were beginning to form up into teams we would be reorganised. I was to learn later in life that we tend to meet any new situation by reorganising; and a wonderful method it can be for creating the illusion of progress while producing confusion, inefficiency, and demoralisation.”
This quote is often attributed to Petronius, a courtier of the Roman emperor Nero, but it is probably a 60 year old jibe at authority by a disillusioned WWII soldier. Nevertheless it very eloquently describes most people’s experience of company reorganisation. As I suggested in the first article the place that many organizations start when addressing a new challenge is their internal structure. The problem is that most organizations don’t know enough about what they are trying to achieve before they embark on changing how they operate. Let’s look at a couple of aspects of this:
- Structures should exist to help make things happen, so it should be pretty clear from the outset what these important things are. I have already argued that Successful Customer Outcomes should be the basis for any organization’s activities, so structures should help do the right things rather than just making sure that things get done right. There are companies that set strict guidelines for how many hierarchical levels should exist and how wide spans of control should be, often linked to the limits of effective performance management. If a company’s performance management systems have a big influence on team structures then it’s the performance management systems that need fixing.
- It’s no accident that the tools commonly used to draw structure charts default (if indeed there are any other options) to an arrangement of boxes joined by straight lines, with “bigger jobs” towards the top and team members arranged in a flat horizontal line beneath. If these applications defaulted to a series of concentric circles with the customer in the middle, might some organizations end up looking a little different? Where would the “big jobs” be? Would functions dominate the division of responsibilities or might customer-facing activities have more sway?
I like to think of the relationship between a business and its customer base as a solar system, where the customers act like the sun, influencing how the other parts work together. If our solar system functioned like most companies then planets would revolve around each other with the sun looking on in some bewilderment. So rather than trying to decide which of your organization’s planets (or functions) everything should revolve around, get it fixed in your mind that the energy-giving customer is at the centre of everything and allow the rest to follow from that.
Planets have it easy in one way - they have no option but to submit to the natural forces, such as gravity, that determine their orbits. Organizations, however, can choose to what extent they allow market forces to dictate how they operate. The best companies use these forces to propel them forwards, and they do this by getting their people aligned with what they are trying to achieve, hence the next question:
How is success measured and rewarded?
Measuring the success of a business has to be more than just looking at the bottom line. The Capital One case study in the first article demonstrates this point pretty clearly. Companies have to broaden their outlook and look beyond short term financial indicators. An important measure of a company’s success must be its ability to improve performance continuously. Truly successful companies understand and actively manage what influences their people to do the right things every day. And the important phrase here is “do the right things”. As I have already said, if performance targets are linked to corporate objectives that aren’t customer-focused then more and more dumb stuff gets done. But most objectives are inward-looking and often functionally specific, and so most of the staff reward mechanisms I have seen are based on the traditional production mindset of doing more things, working more quickly, fitting in well, playing the game. Put another way, their rewards are linked to “doing something to something to get something”. Where objectives are truly focused on Successful Customer Outcomes and people have the flexibility to do the right things, there is less need to impose so much structure on people. Organization structures then become support mechanisms rather than control mechanisms.
The last question I want to pose is one that is crucial in differentiating between leaders and followers:
How is change pre-empted in the organisation?
Companies that have focused themselves on the customer, organised around that, and aligned their people appropriately have achieved most of what they need to be successful in the new world. But the leaders I talked about in the first article are doing something else too – they aren’t just reacting quickly to change, they are anticipating it and sometimes driving it themselves. To do this they have created working environments that generate forward leaps in innovation. When most organizations are consumed by reacting to crises, this is a distinct advantage.
Don’t make the mistake of believing that this is the same as emulating the best practice of others, because this is no longer good enough. It has worked very well in the past, notably where the car industry was transformed by the widespread adoption of Japanese production techniques. The difference now is that customers are looking for added value, and simply following the rest isn’t going to work. So rather than looking for best practice, companies need to be more innovative, and I like the phrase “next practice” for this application of right brain thinking to the challenges of winning in a customer-centric world.
So what should be done with the learning from these questions? Well here’s a tip – don’t start from what you do now and look for incremental improvement. Companies with a short-term and predominantly cost reduction outlook pursue a periodic crash diet approach to keeping themselves on target. What’s needed now is a completely different approach – a healthy eating regime if you like, a permanent shift in habits and behaviours to get on the path to long term survival.
The gulf between the organizations that understand what SCOs are and structure themselves around them, and those that carry on with same-old, same-old, is widening as we speak - in fact it’s becoming a chasm. So if you’re not working out how to get across that chasm now, you are going to be one of those organizations that get left behind, irrelevant. It just isn’t good enough to get a bit better at what you are doing, the changes needed are fundamental. It’s a new era and that means new answers.
About the Author
Steve Towers, Co-founder and Chair of BP Group (www.bpgroup.org), is an expert on process and performance transformation. Steve founded the first community focused on business process management in 1992.
Steve has bases in Europe (UK), New York and Colorado.
