When Do Structures Follow a Company Strategy, and When It’s the Opposite Way Around?
When it comes to company strategy and structures, many undermine the fact that strategy execution is more important than strategy articulation, which is an integral part of LOGIC consulting’s conviction and methodology. In a whitepaper titled “Executing Strategy in Times of Uncertainty”, jointly issued by Palladium and Monash University, Strategy execution was viewed as the most critical ingredient to future success by more than 90% of respondents.
The relation between both strategy and structure is similar to the relation between the brains and the muscles in human anatomy. The brain regulates the majority of our body functions, giving them clear directions and making clear decisions they all need to follow. On the other side, the muscles produce force and motion. They are primarily responsible for maintaining and changing the movement of organs. The brain/strategy does the thinking and the muscles/structure ensures proper execution. Both cannot succeed without the other!
When Does Structure Follow Company Strategy?
In a single company, the company strategy must be carefully developed, after a deep internal assessment of the company’s capabilities, as well as an external assessment of the market including competition, consumers, and opportunities. The articulation of the strategy is followed by the development of strategic initiatives, ensuring their measurability, to facilitate strategy execution. This strategy exercise should be followed by an organization structure revision, ensuring that the organization structure is reflective of the strategy.
For example, if a company’s strategy is focusing on penetrating new markets, then the organization structure needs to have an Export or Business Development department to ensure the execution of the strategy. The structure follows strategy is a well-known statement for management professionals in this case.
When Does Strategy Follow Structure?
In a Holding company context, it is extremely important to start first by organizing the house from the inside. This entails revising the common capabilities between the different businesses of the group, clustering them according to activity and go-to-market similarities, and designing the best management and leadership model (Role of the Center – RoC). Furthermore, it should be indicated whether each company will have its full senior management team and the Holding does the consolidation only, or if it should have a strong leadership team on the Holding level, with business partners at the satellite level, or any other alternative options. This exercise is known as Corporate Structuring or Restructuring and in the Holding context, it is advised to be undertaken before the Holding strategy as it will have a huge impact on many investment/strategy decisions.
Corporate Structure Versus Organization Structure.
There are 2 different yet very important structures; one which reflects the different companies owned by a Holding and their equity and managerial ties to the Holding and is called the Corporate Structure. The other reflects the different departments of a single company, known for Organization Structure
Common Company Strategy Mistakes
- Confuse Strategy with Vision/Mission/Objective.
- Confuse Strategy with plans or data analysis.
- Failure to be creative in identifying a unique strategic position.
- Failure to make choices.
- Believe that “strategic” means important; it means long-term.
- Believing that only top (important!) people can help develop strategic (important!) ideas.
- Believe that “Strategic Planning” is for planning strategy!
- Believing that questioning something means that it is wrong.
- Failing to sell it to people (employees) to win emotional commitment to it
- Believe that in today’s fast-changing world, we need to change our strategy to be competitive.
- Believing that planning is dead.
- Thinking that your strategy is “secret”.
- Believe that our competitive advantage will last forever!
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