Large marketing organizations still operate around models designed for a 20th century industrial world where product lifecycles lasted 10, even 20 years. Such models are at odds with a digital economy where product lifecycles have shrunk dramatically.
Now, external change outpaces most organization’s capacity for internal change, leaving them prey to more agile competitors. New management techniques, borrowing principles from the agile development movement, help organizations execute more quickly, often at speeds greater than market trends, giving them real business advantage.
Competing With Speed
During the 1980s, Rosalia Mera, co-founder of the Spanish apparel retailer Zara, was instrumental in pioneering a concept known as fast fashion. Unlike its competitors, who regularly require six months to get new designs to the retail floor, Zara often does it in two weeks—a feat it has achieved through innovative supply chain practices driven by senior management’s empowerment of teams in local markets to make rapid decisions. Using its think global, act local approach, Zara now operates in 88 countries with four times the profitability of its primary rivals.
After Mera became the world’s wealthiest self-made businesswoman, she was often asked about the secret to her success. Her response typically began with a story about the day she decided to rip up her detailed three-year plan, explaining that in her sector, predicting future challenges wasn’t practical, or even possible. Searching for an alternative technique, she was inspired by Jack Welch, who believed that business performance was better served by building an organization with the agility to respond to change faster than competitors.
In this piece from Razorfish, we explore:
The blueprint that oganized 20th-century business
Why current models aren’t equipped for agility and speed
How new models offer a solution
Recommendations for business leaders
The Blueprint That Organized 20th-Century Business
Before we dive into the details of modern organization science, let’s take a quick look at how we got here.
By the early 1900s, Union and Pacific Railways had merged to form an organization of 80,000 people managing 55,000 miles of track. Its leaders, wanting to expand the organization even more, needed to scale its many functions. To do so, they invented a centralized model supported by a layer of decentralization: eight vice presidents managing each of the company’s eight railways.
As the company expanded its leaders added yet another layer, this one consisting of group vice presidents, each of whom oversaw two to three business units. This highly vertical structure became the blueprint that organized 20th-century business: strong leaders at the top pushing decisions down the organization in a command-and-control style.
External change outpaces most organizations’ capacity to adapt, leaving them prey to more agile competitors. New organization strategies provide a way forward.
Next came the information age
After World War II, the efficacy of the model shown in Figure 1 showed signs of decline. The economy began a rapid horizontal expansion as scores of new industries were added with each decade. The century concluded, of course, with the Information Age, which brought armies of knowledge workers and technical experts who, while not executives or even managers, had the knowledge and the expertise to make big strategic decisions.
In the Information Age, organizations began to resemble hospitals, universities—even symphony orchestras, where individual contributors became valued participants in big strategic decisions. Hence, organizations became wider, flatter and less hierarchical, but more siloed.
Why Current Models Aren’t Equipped for Agility and Speed
Now, the economy is experiencing yet another horizontal expansion as it becomes connected—as we put technology directly into the hands of empowered customers, giving them independent, personalized access to information and tools to evaluate and buy products on their own.
But in our zeal to fulfill customers’ appetite for self-service, we’ve slowed them down, asking them to traverse our internal departments, or silos, to get what they need (getting passed from internal organization to internal organization is a classic example of this phenomenon).
But if the fragmented customer experience was the first symptom to challenge the health of the modern organization, it also challenged us to look at the employee experience. As it turns out, our employees don’t like traversing silos any more than our customers do.
How New Models Offer a Solution
Leading marketing organizations are characterized by collaboration, solving customer problems with cross-functional, multidiscipline teams. But while the leader of such a team is responsible for a team goal, his or her team members often still pay allegiance to their home silo. For team managers, this creates the now-famous “responsibility without authority.”
Recognizing the problem, we’ve created new roles, such as that of marketing program manager. Now, team members have hard-line reporting to such a manager (with a dotted line to their functional manager) as long as they are on assignment to that PM.
This technique of adding leadership capacity by tapping into cross-functional teams drawn from the middle (versus the top rungs of the organization) has proven effective at improving performance without adding head count (albeit as a technique, it has been limited to sectors such as professional services and technology).
Competing in a connected economy
Now, all sectors are imitating technology and professional services as the economy becomes more connected. A perfect example is Nike, a provider of athletic apparel, and now a provider of athletic advice, given that it has appended its physical products with digital services.
Seizing opportunities from a connected economy makes organizations even more reliant on the cross-functional, multidiscipline team, characterized by agility, rapid decision making and a penchant for taking risks. Cross-discipline teams are also required to deliver today’s multifaceted customer experience solutions, which are powered by the creative use of art, science and technology.
Leadership networks and agility
The need to manage faster and with greater agility in harnessing technology for business advantage has given rise to an organizational concept known as leadership cells, which collectively form leadership networks. This thinking stems from the argument that cross-discipline teams, closest to the problem or opportunity (with the most relevant experience) are best equipped to address it. Such cells, composed of one or two people or as many as seven or eight, form around specific tasks, ideas or opportunities.
Marketers adopt learnings form the US navy seals
The concept of leadership cells originated from the US military, the most dramatic example being the US Navy SEALs: highly trained, cross-functional, cross-discipline teams, empowered to make rapid decisions, even changing strategies on the fly, once they’ve assessed a situation. When such teams form, two leadership types tend to emerge: the task leader, who is good at getting things done, and the social leader, who is good at using diplomacy and social connections to help crush the issues that get in the way of getting things done
Business Leader on Mobile.
Recommendations for Business Leaders
Don’t assume organization performance is structural
Most organization performance issues point back to business process, culture and conflicting incentives. NASA and FEMA have identical structures, yet were quite different in the processes and empowerment philosophies that were used to solve the Apollo 13 and Hurricane Katrina crises.
Use new organizational thinking to sustain simplicity
Remember, overly complex organizations diminish both speed and effectiveness. Overly complex organizations also tend to overstaff. One way to contain complexity is to make use of cross-functional teams (in many cases, you can avoid a new hire by using this technique).
Eliminate conflicts that dilute the performance of cross-functional teams
The magic of the multidiscipline team is the future, but we must support these teams by removing conflicting goals that arise from silos. Marketing and sales organizations provide the perfect example (when sales goals are based on any revenue, and marketing goals are based on profitable revenue).