When the business environment becomes more and more complex, organizational change will become a thing that will happen at any time. This is a big project that affects the whole body. How to avoid confusion in the process? -Bain's methodology can help the formulation of strategy.
Alfred Chandler, a business historian, put forward "structure following strategy" in 1962. He observed that the organizational structure of those successful companies changed with the change of business strategy. Chandler described how four large American enterprises, which have dominated the industry since the1968+1920s, changed from a huge and rigid organizational form to a more loosely connected business department structure in an attempt to solve the challenges of growth and diversification.
Chandler's strategy still applies today, but in practice, according to James Root and Stephen Shih, global partners of Bain Company, organizations usually make two mistakes: one of them is that the organizational evolution speed is not fast enough to adapt to the strategic shift. The second mistake is that the brand-new organizational design does not match the way the business creates value.
How can organizations avoid these mistakes and ensure the effective matching between strategy and organization? The method given by Bain Company is that it needs to go beyond the organizational structure to define the overall operation mode, define the blueprint, and see how resources organize operations, so as to realize the strategy.
All elements in a business model-structure, credibility, governance, necessary behaviors, and the way employees, processes and technologies are integrated to achieve key competencies-must be clearly designed. With this high-level blueprint definition, more detailed organizational design can be followed up.
The key first step in designing a correct business model is to transform the strategy into a set of design principles-simple but specific instructions to define what an organization must do to implement the strategy. A carefully drafted design principle, usually with 7~ 15 explanations, helps the leading team design the operation mode around objective standards. This method can be applied to the whole company, a business unit or an independent functional department.
Define key points
The design principles explain in detail the strategic requirements that the business model must support, and also point out the advantages that need to be retained in the organization and the aspects that hinder the future strategic implementation and must be changed.
Design principles can cover many fields, but it is usually necessary to emphasize the combination of some fields that are most relevant to the business.
■ Pay attention to the value of special resources in the business. For example, Olam International is a Singapore commodity trading company, which has a clear principle of optimizing the supply chain to the farm gate. Therefore, company managers put the establishment of relations with local farmers in the first place, because these farmers are the starting point of the value chain.
■ Convene key decisions. The correct operation mode should be to make important decisions faster and more effectively. Good principles usually specify special decision-making forms, and new models should be supported. For example, a consumer goods company pointed out that "the implementation of global brands, including pricing and promotion decisions, should be highly decentralized."
■ Correctly define business boundaries and scope. Ensure that the model reflects business opportunities in terms of consumers, costs and capacity sharing. A consumer goods company realizes that the market has evolved and its products should be globalized in the future, so it defines the principle that product development and brand should be managed globally, while maintaining local sales, marketing and consumer insight.
■ Explain the necessary capabilities to achieve strategic objectives. For example, "support repetitive product design process, balance consumer demand and technical convenience" or "allow us to increase or decrease business more conveniently." Especially from the latter principle, we can infer an operation mode, that is, each business unit adopts the method of minimum integration. Another example is that a beverage company takes acquiring 25-year-old male customers as its strategic focus. The principle of its design is to strengthen the insight of this part of customers and strengthen the execution of the point of sale, which are two capabilities that need to be emphasized in the operation mode.
■ Explain the strengths that the organization needs to maintain and solve the weaknesses. A company that has acquired a series of businesses is aimed at the same end customers, so the principle is "we should enter the market in a way that is convenient for dealers to do business with us."
A medium-sized high-growth company defines demand as "specialized process, improving cooperation in different product areas and reducing bureaucracy."
Corporate culture plays an important role in it. A company operating online business has gone through a series of mergers and acquisitions, and its principle is "to maintain entrepreneurship, which is the factor that promoted our past success." This explanation guides the new business model, including the fact that business department leaders retain many responsibilities of the general manager.
■ Clarify the core role of improving scale and professional ability. A chemical company said that "any institution that uses * * * to enjoy services, if the demand exceeds 80%, must bear the responsibility of service."
Apply design principles to work.
When a senior management team evaluates different operation mode options, the practicality of design principles can be reflected. A service company/kloc-acquired business in 0/2 and established a global powerful group, but its operating model did not fully enlarge the company's scale or global capabilities, such as general procurement or brand. At the same time, the senior management team is divided into two parts, one part requires a state-based operation model, and the other part promotes a more centralized model.
Therefore, the team put forward seven principles, aiming at improving local strength and flexibility, while enhancing advantages with global scale. According to these principles, senior leaders can objectively evaluate the four modes of operation. This model also clarifies the mechanism to promote cooperation between countries.
Before entering the discussion on the solution of the operating model, let the senior management team pay attention to the principle, which will eventually accelerate the development of the model. Before using these principles, senior leaders themselves need to spend enough time discussing and refining these principles so that they can control them. It is difficult to achieve this effect only through authorization.
Pass the "dog food" test
Lu Jianxi mentioned that the effective principle has three characteristics.
First, the facts are true, so as to remain objective in a complex and changeable environment. When the company decides to change its business model, follow-up discussion can reduce emotional resistance. The principle of fact-based strategy formation can be impartial, highlight the gap and help difficult choices.
Secondly, it is clear enough to help senior managers weigh the pros and cons. A few years ago, a large industrial company decided to redesign its business model, and the senior team spent a lot of time conceiving the design principles. But the CEO is worried that these principles are too general. "Can these principles be applied to dog food companies?" This is his problem, because vague principles are not conducive to the evaluation of different business models.
Although his question is a joke, it is a very realistic challenge: general statements, such as "increasing the scale" or "creating a simplified and efficient organization", feel good, but have limited persuasion. Any successful operation mode starts with a special and clear principle, which helps to distinguish the choice of different operation modes. For a sports equipment manufacturer, the general "strengthening cooperation through different categories" has little useful guidance. It is better to "make clothes and shoes easier to send to stores according to different seasons."
Third, simplicity. The best principle should be written on one page. If so, you'd better find out the most important principle.
If the above three principles are not well grasped, problems will arise in the process.