VOLUME 2 | ISSUE 7 | MARCH 2022 |
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DAWGEN GLOBAL INSIGHTS
INTRODUCTION TO OUR MONTHLY NEWSLETTER DAWGEN GLOBAL INSIGHTS Welcome to Dawgen Global and our March 2022 edition of our Monthly Newsletter-Dawgen Global Insights. This Newsletter has been produced to provide you with an overview of our firm and the wide range of services offered by Dawgen Global entities; whether audit, accounting, tax or advisory services. Over the past 20 years, I can proudly say that Dawgen has significant experience and expertise that we draw upon, day after day, helping our clients to progress. Our Monthly Newsletter will demonstrate the strength of our firm and the unique and innovative approach we engender. This is communicated through client case studies on how our team have collaborated to help our clients succeed. This issue of Dawgen Global Insights explores several management tools and strategies including Functional Strategy. The role of corporate functions, traditionally, has been to conduct the various service-oriented specialized tasks necessary to run the organizations. Corporate functions are of strategic significance in achieving organizational objectives, yet their role at most organizations is kind of contractual at best. These units assist in routine operations, facilitate other business units, and manage conflicts and relevant pressing matters. This article outlines the 4 key opportunities that organizations can tap into by transforming their corporate functions . We also deliberate on the 3 categories of Corporate Capabilities that each corporate function requires to achieve the enterprise value propositions: Basic Capabilities, Competitive Capabilities, and Distinctive Capabilities. In this edition we also examine Managing Disruption. This article discusses best practices for leaders managing their organization through a disruptive event. Recessions force leaders of almost all organizations, across the world, to contemplate about the impact of a profoundly Disruptive crisis. Facing this crisis, some leaders flourished, causing their organizations to become stronger. Some clearly staggered through. Still others were mere spectators to their organizations’ downfall. I hope that you will find the information we provide in this Newsletter helpful.
Dr. Dawkins Brown Executive Chairman Dawgen Global
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TABLE OF CONTENT 04 Managing Disruption
20 Functional Strategy
Managing Disruption
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This article discusses
best practices for leaders managing their organization through a disruptive event ARTICLE OVERVIEW
R
ecessions force leaders of almost all organizations, contemplate
across about
the
the
world,
impact
of
to a
profoundly Disruptive crisis. Facing this crisis, some leaders flourished, causing their organizations to become stronger.
Some
clearly staggered through. Still others were mere spectators to their organizations’ downfall. This article talks about 3 approaches that leaders of the organizations—that withstood and thrived during recession—practiced:
1
Anticipate & Prepare
2
Plan & Respond
3
Implement & Sustain
Organizations that endure serious Disruptions are
Leaders are eternally lured towards
expected to emerge more robust, and more capable
complacency and not
of foreseeing and preparing for the next such event.
shaking things up.
The organizational head has the most important role to play in this regard.
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First, we should understand Innovation and Disruption go hand-in-hand INNOVATION & DISRUPTION Ever since Clayton Christensen coined the term “Disruptive Innovation” in the 1990s, the terms Innovation and Disruption have become linked and often confused with each other.
To understand the differences, let’s begin by defining Disruption.
Disruption occurs from 2
• Organizations are constantly trying to innovate and, likewise, all industries will eventually be
paths:
disrupted, as new products, companies, and
Disruption can occur from a low point in a market
industries emerge.
where the typical customer is overserved by the
• No industry is safe from Disruption. In a 2017 PwC
incumbent organizations.
survey of 1,379 CEOs around the world, 60% said
Disruption can also occur by focusing on low-end
their market has already changed or completely
customers who are underserved or not served at all by the current market. Innovation is the ability to define and develop new products and services and deliver them to the market. It is the fundamental source of Value Creation in companies.
reshaped in the past 5 years and over 75% anticipate they would by 2022. • Note the catalyst for Disruption is not always Innovation. It could be driven by other market changes, such as regulation. • It is also important to recognize all Disruptors are Innovators, but not all Innovators are Disruptors.
Source: The Fear of Disruption Can Be More Damaging than Actual Disruption, Leinwand, Strategy &, 2017
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Organizational heads who are successful in bringing their organizations out of Disruption adopt 3 ways to lead MANAGING DISRUPTION OVERVIEW Regardless of the reason for Disruption, leaders of their organizations are ultimately responsible for Managing Disruption. To be effective, leaders of their organizations during times of Disruption requires the management team to lead following a structured 3-phase approach:
Anticipate & Prepare
Plan & Respond
Implement & Sustain Top leaders must spot the dynamics of Disruption, foresee its possible consequence, develop a plan to respond to it, control that response, and maintain the needed changes.
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There is opportunity in every crisis for those who are prepared. Source: Captains in Disruption, 2013, Booz & Company
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The initial phase in the response to Disruption is to have the capability to anticipate and then prepare accordingly ANTICIPATE & PREPARE OVERVIEW This involves assessing the likelihood of—and the possible fallout of—an adverse event. Preparing for it is the other part of this process that warrants keeping the extent of preparation proportionate to the type of, and probability of, the risk. • For any organization, anywhere, the 1st step in
and possible loss value of different types of risks
dealing with Disruption is to build the ability to
have been used previously; these models enable
foresee it and spot its signs before it strikes.
preparations as per probability of occurrence and
• Predicting every Disruption is not possible but anticipating the varieties of Disruptions that may
propensity for loss. • Such
models
have
limitations
though—like
be especially damaging and preparing for them
having relative strength and also not being able
correspondingly is a possibility.
to predict highly unlikely events—which make the
• Risks against which organizations think they are hedged because of their competency and capabilities should be specially looked at. • Clear distinction should be made between Risk Management and Disruption anticipation as the 1st relates to risks involved in day-to-day operations while the 2nd is on a larger scale.
organizations relying on them complacent to such occurrences. • Only the top boss of the organization can circumvent these limitations by learning to ask better questions on multiple tiers of the organization and looking forward instead of relying merely on past data.
• Analytic models that determine probability for
Only those who are continually apprehensive last.
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A useful tool for anticipating and preparing for
Disruption is the 4 Stages of Disruption Maturity Model ANTICIPATE & PREPARE STAGES OF DISRUPTION Innovation for a technology product that eventually leads to Disruption follows a 4-stage evolution. The 4 stages of Disruption are:
Appealing Convergence
Disruption of Incumbent offering—
Incumbents recognize the threat of this Innovation
something the Incumbent quickly dismisses as
and begin incorporating the new, disruptive features
irrelevant.
into its existing offering. In other words, there is now
The
Disruptor
introduces
the
new
a convergence between the emerging and existing
Rapid and Linear Evolution
offerings.
The Incumbent rapidly Innovates upon its initial
Complete Reimagination
offering, as it gains some market traction.
The fully disruptive Innovation is created.
• Understanding this 4-stage model will help us understand what design choices to prioritize and when. • At any given time, different products and organizations are likely to be at different stages relative to local “end point” of Innovation.
Disruptive products follow this 4-stage pattern— however, this pattern doesn’t guarantee Disruption. Source: The Four Stages of Disruption, Sinofsky, Recode, 2014
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At each stage of Disruption, there are defining dynamics—
actions by the Disruptor and reactions from the Incumbent
ANTICIPATE & PREPARE – STAGES OF DISRUPTION (ACTIONS & REACTIONS) Each stage is defined by certain actions and reactions by the Disruptor and Incumbents, respectively.
Disruption of Incumbent Action by Disruptor At this stage, the Disruptor introduces a new offering with a distinct point of view, knowing it does not solve all the needs of the entire existing market. However, the offering provides a better solution and will advance the state of the art in technology and/ or business. Reaction from Incumbent The Incumbent dismisses the new product or service as something that is not relevant to existing customers or market. In other words, the Incumbent is in a state of denial that the Innovation poses an existential threat.
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Rapid linear evolution Action by Disruptor The Disruptor proceeds to rapidly innovate by adding features and capabilities. It
completes
the
Customer
Value
Proposition after initial traction with early customers. Reaction from Incumbent The Incumbent begins to compare its fullfeatured offering to the new offering and show deficiencies. In other words, the Incumbent begins to recognize and validate the legitimacy of the Innovation as a potential threat.
Appealing Convergence Action by Disruptor The Disruptor sees opportunity to acquire broader customer base by appealing to slow movers. Also, sees limitations of own new product and learns from what was done in the past, reflected in a new way. Reaction from Incumbent The Incumbent considers cramming some element of disruptive features to existing product line to sufficiently demonstrate attention to future trends, while minimizing interruption of existing customers. At the stage, the Incumbent is now directly competing the Disruptor.
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Complete Reimagination Action by Disruptor The Disruptor approaches a decision point, as new market entrants can benefit from all that its product has demonstrated, without embracing the legacy customers (as done in the previous stage). The question now becomes: Do we embrace the legacy market more, or keep pushing forward? Reaction from Incumbent At this point, the Incumbent is too late to respond. The company begins to define the new product as part of a new market, and existing product part of a larger, existing market.
EXAMPLES There are countless examples of Disruptions that totally upended very lucrative and well positioned Incumbents. Some examples include:
VS
VS
VS
VS
To learn more about the Stages of Disruption, refer to this framework: https://flevy.com/browse/flevypro/4-stages-of-disruption-5265 Source: The Four Stages of Disruption, Sinofsky, Recode, 2014
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2nd step in responding to a Disruption is to make a tenable plan and pursue it realistically PLAN & RESPOND – OVERVIEW OVERVIEW Ensuring that there is an unmistakably defined objective and a persuasive motive for it, developing a workable and reliable plan for attaining that objective, and persistently and realistically pursuing it.
• Threats can come to light in 2 ways; either the top bosses anticipate a vulnerability that may result in potential Disruption or when the disrupting event actually occurs. • Forming a response to the Disruption is the responsibility of the head of the organization; leading from the front is critical for effectively managing a disrupting event.
Short-term thinking
• Head of the organization should consult all stakeholders,
and immediate
without prejudice, with humility, and listen to all opinions
gains have to take a
with an open mind.
back seat especially in Disruptive events.
• After careful consideration the leader should announce a response delineating clearly what actions are needed, by whom, and in what timeframe. • The leader should not allow any dwelling on the past or playing the blame game. The focus should instead be on the future.
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Leaders will be able to respond to Disruption effectively by following 4 principles PLAN & RESPOND – GUIDING PRINCIPLES Effective bosses comprehend the fact that Disruptions will occur, and that no organization can shield itself entirely from its consequences. The following 4 guiding principles will aid the top bosses enormously when they plan a response to Disruption:
1
Head of the organization is the most important
2
Overcoming resistance to change and shaking
3
Organizational heads have to make sound
person in shaping and executing a response.
inertia is a must for an effective response.
choices when forming their team of top executives.
4
Selecting a small group is often necessary when making a choice of top decision-makers.
Disruptions
Countering Disruption in a
provide hidden
coherent manner, leveraging
opportunities to the
these
guiding
principles,
may well become the CEO’s
organizational heads
defining moment and may
who are ready.
determine how the boss is regarded and remembered.
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Source: Captains in Disruption, 2013, Booz & Company
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Head of the organization has to take the reins in shaping the response and has to shake the inertia PLAN & RESPOND – GUIDING PRINCIPLES (DETAILS, 1 OF 2) Head of the organization is the most important person in shaping and executing a response.
Head of the organization is the most important person in shaping and executing a response.
Head of the organization must assume prompt
It is imperative that the head of the organization
responsibility for the situation and be willing to be
explain the circumstances to the employees and
answerable for the ultimate success or failure of the
elucidates on the plan in a distinct and straightforward
organization’s response.
way.
Momentum of change has to be established by the
Messaging has to be clear-cut, forceful, and consistent
organizational head regardless of the circumstances
from the top in order to show that usual ways are no
of Disruption i.e., internal, external, anticipated or
longer tolerated and that change is inevitable.
completely unpredictable.
Altered nature of circumstances ought to be conveyed
Occasionally it becomes indispensable for the head
to all stakeholders, both inside and outside the
of the organization to coerce action, decisions, and
organization, in ways that stimulate the new culture.
openness.
Organizational head should foster a future-oriented
Matters may become gradual to an extent after the
culture and announce a sort of amnesty for past
initial quick response as decision-makers manage
actions.
the continuing effects of the Disruption, but most of the momentum is likely to be carried by the organization.
Old ways of doing things have to be abandoned by all in the organization for it to move forward.
Collaboration across the organization is undoubtedly the chief accelerator of change. DAWGEN GLOBAL INSIGHTS I MARCH 2022
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Choice of a sound top executive team by the head of the organization is a critical step in responding effectively to Disruption PLAN & RESPOND – GUIDING PRINCIPLES (DETAILS, 2 OF 2) Organizational heads have to make sound choices when forming their team of top executives.
Selecting a small group is often necessary when making a choice of top decision-makers.
Employees should be given a chance to adapt to the
the quicker they are necessary to execute.
new culture, those who do not adapt should be let go.
Ironically, the more extreme the changes intended,
Implementing changes swiftly can be accomplished more easily by a small team of decision-makers
Head of the organization has to go about this process by choosing those executives who are completely on-board in the new process.
compared to a sizable band of executives. Head of the organization has to not only know the strengths of the top executives thoroughly but should
Adjustments in top management must be made
also have clarity on what needs to be accomplished,
prudently; even a couple of noticeable changes can
when, and how.
considerably heighten employees’ awareness that the circumstances are grave.
Matching capability with task correctly, will ensure proper and nimble execution of the planned changes.
Process of clearing up should be devised in such a way as to give due respect to every employee whether they are staying or leaving.
Leadership pushes culture, and culture propels organizational accomplishment.
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Quickly implementing the changes needed and consistently pursuing them to the end is essential for the organizational head IMPLEMENT & SUSTAIN – OVERVIEW OVERVIEW Swiftly implementing the changes through careful matching of top executive’s capability to task is one part of the process, the more tedious and critical part is sustaining those changes so that they take root and become the way of doing things. Organizations confronted with business crises, initiate suitable responses but all too often are incapable or reluctant to carry them to completion. In such scenarios the issues that stymied the response continue to remain unexamined, and the organization becomes even more ill-prepared for the next crisis. To implement change and sustain an organization during Disruption warrants viewing minutely both the Organizational Design and the Organizational Culture. It is the organizational head’s responsibility to ensure the structure and the culture are ready for the needed changes and set to sustain the new
Organizational head has to genuinely believe in what is needed and be relentless in its pursuit.
strategies and each other.
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Responding to Disruption in most cases necessitates change in Organizational Design IMPLEMENT & SUSTAIN ORGANIZATIONAL DESIGN Response in majority of Disruption cases demands a move to a more agile, concentrated, and strategically aligned Organizational Structure.
Organizational
Structure
should
be
such that inspires employees to change, instead of ensnaring them in obsolete processes or approval hierarchies. New structure has to allow employees to collaborate completely through internal boundaries, even if that contradicts established channels of communication or control. The type of organizational change usually required to counter Disruption ought to
Organizational heads ought to be bold enough to entirely change Business Models.
be a continuing endeavor. It is about persistently inspiring and crafting an organization that is never contented and thinks for the next objective to strive for.
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Effective response to Disruption is almost impossible without a change in the Organizational Culture IMPLEMENT & SUSTAIN CULTURAL CHANGE Changing a large organization’s culture in response to a Disruption can be even tougher than Organizational Redesign, but it is as significant as the former. Quite a few organizations devise new strategies and
Leaders have to start interacting at multiple levels of
Operating Models but do not pay attention to or do
the organization to get effective feedback regarding
not know what to do with Organizational Culture.
matters.
The only actual manner of changing an organization’s
This interaction enables permeation of the change
culture is to change its behavior.
spirit among the lower tiers of the organization
Cultural change has to be defined at the top and
making those employees catalyst for change.
has to start at the top and is more effective when
Being an insider gives a tremendous advantage to
practiced first rather than announced first.
the head of the organization compared to coming from outside and trying to make a change.
Head of the organization has to make clear what kinds of behavior are required.
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Functional
Strategy
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Constant pressure on businesses to compete in this Age of Disruption has forced them to rethink the role of their corporate functions ARTICLE OVERVIEW
T
he role of corporate functions, traditionally, has been to conduct the various serviceoriented specialized tasks necessary to
run the organizations. Corporate functions are of strategic significance in achieving organizational objectives, yet their role at most organizations is kind of contractual at best. These units assist in routine operations, facilitate other business units, and manage conflicts and relevant pressing matters. This article outlines the 4 key opportunities that organizations can tap into by transforming their corporate functions:
1
Change in Market Environments
3
Increased Pressure on Process Improvement
2
Increased Focus on Discretionary Activities
4
Development of Distinctive Capabilities
This article also deliberates on the 3 categories of Corporate Capabilities that each corporate function requires to achieve the enterprise value propositions: Basic Capabilities, Competitive Capabilities, and Distinctive Capabilities.
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The role of corporate functions has customarily been transactional CORPORATE FUNCTIONS OVERVIEW The role of corporate functions, traditionally, has been to conduct the various service-oriented specialized tasks necessary to run the business.
For instance: Human resources (HR) function is typically responsible for staffing people, managing their benefits, and administering performance appraisals
and
career
advancement
procedures. Information technology (IT) unit deploys and manages the organization’s technology infrastructure, systems, and applications. Finance unit performs activities concerning accounts, credit, payroll transactions, taxes, and financial reporting. Learning and Development unit administers training programs to build and maintain organizational
capabilities
integral
for
Typically, when functional
developing competitive advantage.
leaders are asked to make
Legal department evaluates contracts and
improvements, it implies doing
ensures regulatory compliance.
the same things more efficiently and at greater cost savings.
Corporate functions are of strategic significance in achieving organizational objectives yet their role at most enterprises is kind of contractual at best. These units assist in routine operations, facilitate other business units, and manage conflicts and relevant pressing matters.
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The role of Corporate Functions is evolving with the fluctuating business environment CORPORATE FUNCTIONS OPPORTUNITIES Lately, the expectations from corporate functions have evolved to the degree where the leadership anticipates the support functions to be of more value for the company. These corporate functions are now required to align more strategically and directly with the Corporate Strategy. Functions supporting brands, like R&D, supply chain, procurement, sales, and marketing have also undergone changes, but not as much as support
Change in Market Environments
functions. The Transformation of corporate functions is inevitable due to various reasons.
To undergo
Increased Focus on Discretionary Activities
Transformation, businesses should act quickly to tap value that these 4 key opportunities offer:
Increased Pressure on Process Improvement Alignment of functions with strategy is a must for businesses to survive in this highly competitive age.
Development of Distinctive Capabilities
Source: Think Functionally, Act Strategically; Booz&Co; 2013
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With changing markets, expectations from corporate functions is intensifying CORPORATE FUNCTIONS OPPORTUNITIES (DETAILS, 1 OF 2) Change in Market Environments The expectations from corporate and support functions
is
increasing
because
markets
are
becoming more and more volatile, uncertain, and rife with innovative rivals.
Now leaders
With this, the constantly shifting customer demands
have more time
are forcing organizations to put more pressure on
to focus on
strategic as well as support functions. They have to
discretionary
develop expertise to deliver on more complex tasks
activities that
than in the past. For instance, IT needs to be able to now design
produce more value.
applications capable of unearthing vast data lakes to reveal valuable insights in real-time. Likewise, HR should be capable of onboarding diverse key talent globally and offer flexible career paths to retain people.
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Increased Focus on Discretionary Activities Traditional corporate functions were more occupied with routine operational
activities—resolving
financial
errors,
emailing,
overseeing employee compensation, and managing IT assets. However, now, thanks to Process Optimization and Outsourcing, corporate functions have been streamlined and become efficient to the point that they have slashed the requirement for resources to deal with routine activities significantly—about 35% of staff time compared to 70% in the past. This has freed immense resources, leaders’ time and effort to be spent on discretionary strategic initiatives that have the potential to bring more value for the organization.
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These changing times have pushed the businesses to streamline their processes CORPORATE FUNCTIONS OPPORTUNITIES (DETAILS, 2 OF 2) Increased Pressure on Process Improvement
Development of Distinctive Capabilities
Changing market dynamics and intensifying
The changing market dynamics have made the
rivalry has strained the organizations to ensure seamless implementation of strategic initiatives, boost effectiveness, and bring on operational excellence.
companies realize the significance of creating unique capabilities—differential edge acquired due to the ability to do things remarkably and inimitably. For instance, distinctive capabilities in developing
This competitive landscape has forced the functional leadership to reduce expenditures, find new avenues of operational improvement, and enhance value.
online
user-friendly
interfaces,
pristine
supply
chains, and technological prowess have contributed immensely to Amazon’s success. Likewise, Hyundai’s success in the US market is attributed to distinctive capabilities in developing impeccable automobile design, marketing and continuous quality improvement.
Functional units are now more than ever required to support new capabilities in addition to doing their routine activities with excellence.
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Corporate functions have taken a more pivotal role in devising and implementing the Corporate Capabilities lineup today FUNCTIONAL STRATEGY OVERVIEW With disruption and volatile market dynamics, the responsibility of Corporate Functions is mounting across industries and organizations.
Organizations are now more focused on empowering
Rather than just assessing fulfilment of requests
their global corporate employees.
from the team members, rewards and recognition of functional leaders is now being tied more with
Marketing, R&D, and procurement functions are
their efficiency, judgment, ability to create key
being incorporated across all business units of the
differentiators for the organization, and finding
business.
efficient ways of doing business.
The Corporate Functions have now become more
Corporate functions should define their role in
and more important for the organization’s Corporate
view of the overall capability schema and how they
Strategy.
can drive that capability outline—rather than just
The increasing significance of Corporate Functions
realizing their functional excellence agenda.
demands from the functional leaders to operate more strategically.
Functional leaders need to now concentrate on Conflict Resolution among different units—e.g. disagreement over dissonant IT systems or unnecessary talent programs.
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In today’s changing market dynamics,
delivering enhanced value by the corporate functions should be treated as a strategic initiative FUNCTIONAL STRATEGY CAPABILITIES The “enhanced value delivery” initiative requires preparing a statement of the Value Proposition at the outset.
This has to be done not only at the enterprise level but also at the unit level, in addition to finding answers to the following key questions: Do we strive to become an innovation-centric organization, introducing cutting-edge product and service offerings? Are we aiming to compete on the basis of low costs? Is it delivering amazing Customer Experience that we aim to create our “way to play?” Is there anything else that we want to adopt to deliver value? In successful organizations, the Value Proposition is closely aligned to the enterprise’s key strategic
To accomplish this, leaders need to define their organization’s selected approach to creating value for its customers and the way to attract and retain customers.
capabilities—the knowledge, skills, and things an organization does exceptionally well.
Functional
leaders are the ones who outline, develop, manage, and retain these capabilities. Therefore, it is critical for them to have a clear perception of the enterprise’s value proposition, capabilities required to achieve them, and the responsibilities of each function in this regard.
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This warrants segregating the capabilities each function bring to the table into 3 broad categories:
BASIC CAPABILITIES
DISTINCTIVE CAPABILITIES
COMPETITIVE CAPABILITIES Functional leaders should know in which category their capabilities fall—and balance the allocation of their resources accordingly. Source: Think Functionally, Act Strategically; Booz&Co; 2013
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Basic Capabilities are essential for the survival of an organization FUNCTIONAL STRATEGY CAPABILITIES (DETAILS, 1 OF 2)
Competitive Capabilities enable bringing in efficiency and Cost Optimization.
BASIC CAPABILITIES
COMPETITIVE CAPABILITIES
These capabilities involve payroll management,
Competitive Capabilities, as the name suggests, are
administration of employee benefits, and basic
integral for an organization to compete with rivals.
Information Technology services. Examples of such competences include distribution, These roles are performed by specific units.
procurement, logistics, back-office operations, and integrated IT architecture.
Basic capabilities are, although, critical but do not set a company apart from its rivals.
Competitive Capabilities are crucial for reducing costs and improving efficiency.
However, these
These capabilities need to be managed efficiently,
competencies can’t make an enterprise a world-class
automated, or outsourced to low-cost service
organization.
providers to free up valuable resources to focus on creating Distinctive Capabilities.
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Distinctive Capabilities are essential to gain a Competitive, Differential Advantage FUNCTIONAL STRATEGY CAPABILITIES (DETAILS, 2 OF 2) DISTINCTIVE CAPABILITIES This category of capabilities are the ones that are
made possible by the involvement of product
integral to create a Competitive Advantage integral
development, manufacturing, finance, and market
for outpacing rivals.
research functions.
Their product, the Swiffer
WetJet mop, was created and perfected by a product To develop these capabilities, a number of functions
launch team that paid multiple visits to consumers
have to collaborate in ways that are difficult to
struggling with conventional mops.
imitate by the competitors. Procter & Gamble’s success in Innovation, for
Differentiating Competencies
instance, isn’t attributed merely to the capabilities
should be invested in
of its R&D unit. This level of Innovation has been
and focused on to realize Competitive Advantage.
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A Functional Operating Model outlines the way strategic objectives are going to be implemented FUNCTIONAL OPERATING MODEL DESIGN OVERVIEW Effective implementation of strategic initiatives is essential for the success of an organization, in this disruptive age. A Functional Operating Model development involves reimagining:
To build Distinctive Capabilities, organizations should have:
• The approval authorities, processes, and systems.
• Global centers of excellence
• How performance is evaluated at the unit level.
• A supportive Organizational Structure
• Organizational structure, roles and responsibilities.
• Decentralized operations
• Centralized
• Allowed shared services or outsource supportive
authorities.
control
versus
delegation
of
capabilities. • Collaboration between business leaders and functional managers to make strategic decisions and build innovative distinct capabilities.
Collaboration across different functions assists in gathering valuable customer insights, critical knowledge transfer, and designing new products.
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Each corporate function should contribute towards developing Distinctive Capabilities and value for the company ultimately
FUNCTIONAL OPERATING MODEL DESIGN FUNCTIONAL PERFORMANCE KPIS With changing environments and markets the main concern of corporate functions should be to aid in creating and maintaining Distinctive Capabilities. But before doing that, Leadership should be able to clearly outline and gauge the value each corporate function is bringing.
In order to gauge the productivity and value contributed by each corporate function, senior Leadership needs to utilize 4 Key Performance Indicators (KPIs):
1 Quantifiable Impact 2 Clear Drivers of Value 3 Cost Effectiveness 4 Internal Market Validation
These functional KPIs are important to measure successful execution of projects to deliver value. Source: Think Functionally, Act Strategically; Booz&Co; 2013
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Leadership needs to calculate the results of organizational initiatives that corporate functions undertake in specific timelines FUNCTIONAL OPERATING MODEL DESIGN
FUNCTIONAL PERFORMANCE KPIS (DETAILS)
Quantifiable Impact
Clear Drivers of Value
Each corporate function has to evaluate the impact
Ascertain the key contributors of a corporate
of their initiatives against the assigned business
function’s value to the enterprise.
objectives, in accordance with the organization’s strategic priorities.
For example, improved demand management ability depends on developing superior analytical methods
For example, centralized consumer insights can be
to enable better access to info and scalability. Metrics
gauged by the reduction in time required to create
should track the ability to assess the degree of tools
new products within a specified time.
availability versus their usage.
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Utilization of these KPIs assist the functional leaders in assigning adequate resources to higher-value activities.
Cost Effectiveness
Internal Market Validation
Each corporate function’s contribution to the
Gather and integrate input from internal and external
organization should be assessed based on improved
stakeholders,
financial performance and enhanced profit versus
effectiveness and value.
the expenses incurred on achieving profitability.
to
improve
corporate
functions’
For example, using service-level agreements, chargebacks, or in-house versus outsourcing decision. Deploy tools to align function’s operations and investments with the functional priorities and operating model, to maximize value creation.
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Capabilities-driven strategy needs corporate functions to get involved unequivocally FUNCTIONAL OPERATING MODEL DESIGN
LEADERSHIP CONSIDERATIONS Functional leaders need to distinguish Distinctive Capabilities and design tools and procedures to develop and use them to implement their Functional Strategy.
Functional Leadership needs to consider the following key considerations to design an effective Operating Model: A functional leader’s interpersonal skills and strategic insights are the hallmark of the function’s as well as organization’s success. Distinctive
Capabilities
aren’t
developed
by
a
single function itself; this necessitates meaningful collaboration between various units. There should be open communication with the
Higher degree of alignment between the HQ and local business leaders and focus on the most critical capabilities enhances functional leadership.
functional leaders if their performance and priorities conflict with the organizational priorities. Leaders should collaborate to build Distinctive Capabilities and to discontinue investing in unviable initiatives. Functional leaders should transform their mindset from a service-oriented approach to a strategic approach. Effectiveness and harmony between functional leaders demand greater delegation of authorities and curbing practices that suppress innovation.
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