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The Invisible Asset That Will Drive Your Growth
Companies are embracing agile ways of working, an approach borrowed from the world of software development.
Photo Credit : Shutterstock
Today’s nimblest, most customer-centric companies don’t just have wonderfully creative digital services and experiences. They have an invisible asset behind those offerings that most customers don’t see or appreciate - an organization built for speed and adaptability.
Many large companies today still retain some version of the matrix organizations popular during the late 20th century. Its outlines are familiar: a pyramidal hierarchy with lines of accountability according to function, geography, and business lines. It was a way to keep control as companies globalized and ballooned in size and complexity. As information flowed up the layers of management, leaders back in headquarters could have some sense of what was going on and run the business accordingly. They could ensure that the organization had some semblance of standardization to it, making for more efficient operations.
As useful as they once were, matrix organizations today are woefully inadequate precisely because silos and bureaucracies make them too cumbersome and fragmented. That’s why leading-edge organizations aren’t simply rethinking their offerings, global scale, supply chain relationships, and much else. As my BCG colleagues and I found, they’re also experimenting with newer structures to become more innovative and adaptive and ‘high speed’. This is the sixth of seven important paradigm shifts presented in our book Beyond Great and described in this article series.
Our research revealed three key organizational forms that companies today are experimenting with, and increasingly, embracing.
The first of these forms is customer-focused teams. You might wonder what kind of organization powered Chinese start-up Byte Dance as it grew into a $37 billion juggernaut on the back of its popular global platforms Tik Tok and Toutiao. Rather than developing into the traditional pyramidal structure as it grew to over 50 thousand employees, the company operates a flat structure of small, cross-functional teams across geographies but focused around a specific customer ‘outcome’. Information didn’t flow up and down rigid lines of accountability but was more horizontal and transparent via a highly efficient information and communication platform.
It isn’t only digital companies and startups with small, customer-focused teams. ING Netherlands emerged as a digital leader in banking on back of transforming its functional operations into customer focused teams. Unilever reorganized globally around over 200 “country-category business teams” that are empowered to make decisions more quickly in response to changing customer preferences. Companies are becoming ‘customer-in’ from ‘HQ-out’.
Relatedly, companies are embracing agile ways of working, an approach borrowed from the world of software development. Rather than indulging in a lengthy process of planning, development, and refinement of products and services, agile teams seek to “fail fast,” learn from their mistakes, and iterate. Multiple cycles of iteration, often undertaken in collaboration with customers, allow companies to unroll new offerings and initiatives quickly, adapting and refining them as they go. When ING Netherlands embraced agile teams, it rapidly increased its release of new offerings—from a few annually to a few quarterly. One of our clients, a European aircraft manufacturer, improved its time to market by 50 percent after adopting a form of agile working.
A third organizational innovation adopted by leading-edge companies are horizontal platforms. Growing global companies want internal groups or teams to stay nimble and relatively autonomous even as the company also benefits from a degree of standardization, scale advantage, and collaboration across boundaries. The solution is to make data, processes, and technology available as platforms across the enterprise. The Brazilian cosmetics company Natura created networks encompassing human resources, procurement, and other functions to serve its autonomous business units. It also created networks of excellence”—teams of leaders across the company—to drive progress in areas like sustainability and digital.
Transcending traditional organizational structures isn’t easy. As our research revealed, doing so successfully means focusing on developing an accompanying culture that prioritizes customers, delegation of authority, risk-taking, decisive action, and collaboration. Most of all, you must set aside the notion that your organizational innovation is “done” once you’ve started this work. In truth, organizational reinvention must remain an ongoing process.
After all, your customers and markets are changing faster than ever and will continue to do so in the decades ahead. Your organization must continue to evolve in turn.
Comments from Rama Bijapurkar
Companies operating in India, whether foreign or domestic, are far away from “customer-in, HQ-out”, agilely focused on “superior customer outcomes” via empowered, small customer facing teams.
Indian companies worship ‘process’ more than ‘customer’ because of India’s hallmark large scale of operations and thin margins and the well-entrenched practice of outsourcing customer facing tasks (irreversible without margin hit). They often are process obsessed and customer hostile. They draw inspiration from celebrated IT companies who have shown that centralisation boosts margins, and company-wide platforms make process compliance easier to enforce. HQ is the CPU of the company and the rest are controlled arms and legs. Startups, especially new economy ones, tend to be mini versions of this. Digital and IT capability has reinforced this model of the organization.
Customers outcomes also are managed by processes and simplistic outcome metrics - NPS (popular but tunnel-vision), grievance numbers, social media tracking. Product design is centralized. Even in atomized organisations, the mini CEO is allowed implementation flexibility and does not have a business design mandate. Inputs from front line welcome but HQ-out is the final way.
Boards need to push for this new vision of the organization, and nudge it persistently!
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.