The Future Marketing Organization

Digital Business Strategy & Innovation

Organizing for a Digital Age

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.

20th Century Organization Design Chart.
20th-Century Organization Design Mimicked the Railroad Industry Source: Harvard Business Review

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.

Information Age Business Org Chart.
The Matrix Was a Product of the Information Age

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

Current Leadership Tactics Organization Chart.
Leadership Networks, Now Popular in Business, Originated with the US Navy SEALs Source: Gartner

Leadership networks from GE to Google

Effective leadership networks depend on strong leaders at the top who articulate a strong vision and a bold strategic intent. Senior leaders at General Electric, early disciples of leadership networks, still say the company will be number one or number two in each of its businesses, or it will not be in that business. This strategic intent translates into decision-making criteria for its leadership networks. 

We find a similar situation at Google (another believer in leadership networks), where leaders articulate five values: simplicity is everything, attract beginners but engage experts, design for the world, dare to innovate, and delight the eye without distracting the mind. These values translate to decision-making criteria for Google’s leadership networks.

Proponents of holacracy push the envelope even further

Principles from leadership networks were used to form the foundation of a new organizational movement known as holacracy. Proponents of this movement argue that companies in rapidly changing industries must respond to new opportunities faster than competitors in order to sustain business advantage. Of course, they have to see these opportunities coming in the first place, something they say hierarchy discourages, because it prevents open thinking. 

That’s why at companies like Zappos, one of the most vocal advocates of holacracy, you won’t see enclosed offices, rather open spaces where everyone has the same size desk. Other pioneers of holacracy have gone so far as to eliminate titles such as EVP, SVP and even VP, saying they are relics from an irrelevant corporate aristocracy.

But holacracy is not a panacea

Proponents of holacracy admit cross-functional, multidiscipline teams drawn from the middle come with their own dysfunctions (the most common being endless conversations that don’t lead to decisions). Hence, leadership training to teach people the art and science of strategic decision-making often accompanies holacracy. For example, leaders are taught how to identify strategic options, then lay out the relative trade-offs of each option in an objective, nonemotional way. 

New concepts, such as leadership networks and holacracy, that empower mid-level teams are new for most business leaders. In fact, some of you may be hearing about these concepts for the first time. But if we are to keep up with the demands of a new type of digital economy, where change waits for no one, we must consider new organizational design concepts for two big reasons: to move faster, and to contain organizational complexity.

Competing with speed is no longer optional

Mastering speed has always been an enviable competitive capability. And in today’s digital economy, speed is the new normal. But many sectors are finding that competing with speed isn’t just used to gain a business advantage, it is required to sustain even basic competition. Hence, remodeling the organization for agility and speed has rapidly climbed to the top many CEO agendas. 

As the economy expands horizontally as a result of connectivity, we risk even more horizontal expansion of our organizations. The resulting complexity slows us down, leaving us prey to  more nimble competitors.

From hierarchy to holacracy

Holacracy Org Chart.
Holacracy Adopts Leadership Network Concepts to Push The Envelope Even Further

 

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).

More Insights

Locations

46 Cities.
5 Continents.
1 Vision.