Organizational Patterns: Effects on Your Customer Relationships

The dominant paradigm in business today is targeted value creation for the customer. The organizational system links external customers (the buyers) with internal customers (the talent) in a flow of interactions that create or destroy value for buyers, employees and owners. In the past decade, the customer has become more important than the product. A similar shift has made talent more important than assets.

The shift from product to customer explains why value migrates away from the product to something else, and why changes related to customers are key triggers to those patterns. Because of the shift from assets to talent, organizational patterns will be among the most important patterns in the next half-decade.

There will be a profusion of new organizational patterns in the next several years, as creative companies invent new ways to solve the organizational part of the value creation equation. However, many of these solutions will have one factor in common: the redefinition of the relationship between the talent and the customer. Just as today's economy requires that we "reverse" the value chain and begin our strategic thought process with the buyer, so tommorrow's economy will require that we fold over the value chain and create the maximum possible direct linkage between the customer and the talent in our organizations. This direct contact will expose skill gaps early and will define the most efficient pathways for new growth opportunities.

Skill Shift • Pyramid to Network • Cornerstoning

Conventional to Digital Business Design

Skill Shift

When companies lose touch with changing customer priorities and market conditions, they get out of sync with the kinds of skills that are most important to customers and that produce the greatest profitability. Oganizational effectiveness and profit opportunities decline. Those few players who exploit the skill shift pattern well before their competitors do by engineering radical changes in their skill mix to match the market, increase their market options. The skill shift can work along several dimensions:

• Functional shift — The key to unlocking new profits is a shift of emphasis and resources from one major function within a company to another.
• Technical skill — New profits can result from changing the composition of sill sets within functions.
• Managerial skills and values — Winning capabilities have become a mix of great performance (ability to lead teams to high achievement) and great values (skills in communication, coaching and people development).

What do you do when you face a Skill Shift? Look at how the customer is changing. Identify tomorrow's skills and redeploy resources to build them today.

Pyramid to Network

Internal focus kills companies. Moving from a pyramid to networked structure maximizes the organization's external focus. In business, exposure to external factors is critical to survival and success. Customer priorities, channel shifts, infrastructure changes, competitive pressures, and valuable strategic signals transmitted by customers and investors are the keys to identifying emerging patterns in your industry.

The shift from a pyramid to a network structure exposes more employees to developments in the market and gives them a clearer sense of their direct role in the company's fortunes. This can result in dramatically more efficient and effective internal processes.

What do you do if you operate under a Pyramid structure? Maximize your external exposure. Use whatever organizational change it takes.

Cornerstoning

Build from strength, to strength, to strength. A cornerstoning pattern has three elements:

1. A terrific A+ initial strategic position in one area, typically with significant strategic control, since you can't cornerstone from a weak base.
2. An economically logical next opportunity for the organization that provides the greatest profit growth for the least incremental effort.
3. An adjacent opportunity space that is significaltly larger than the prior one.

Cornerstoning is becoming a more broadly available opportunity because of convergence. As competitive boundaries disintegrate, more adjacent opportunity spaces are available for consideration.

When looking for the next space, experimentation is driven by one difficult question: What's the single best next opportunity? Getting that answer right is so valuable that it's worth the two to three years of experimentation, missteps and wrong turns required to get there.

The first step, however, is the most critical one in the sequence: creating an untouchably powerful strategic position in the initial domain. Without that base, it is impossible to exploit the rest of the pattern.

What do you do to initiate Cornerstoning? Be A+ at something. Search for the best next space. Experiment to find it. Go there first — don't skip over it. Then find the best next space.

Conventional to Digital Business Design

Rapid technological advance has triggered a pattern of separation of atoms (physical product requirements) from bits (the information aspects of products) which, by moving all non-atom aspects of a business to electronic management, enable companies to achieve orders of magnitude performance improvements; multiplying productivity levels, reducing response times and decreasing asset levels.

But the true power of digital business design extends into further realms and can be magnified dramatically when it works in combination with a network organizational structure. Digital business design enables a complete redefinition of the supplier-customer relationship since it can enable the customer to self-select and self-create offerings as needed. In defining a digital business design, the key is not about the technology, but about the business issues.

What do you do to move from a Conventional to Digital Business Design? Challenge your organization's "paper" and "personal meeting" mindset. Identify your most important business issues and the "bits" related to them. Manage all those bits electronically.

Page content is based upon Profit Patterns, written by Slywotzky, Morrison, Moser, Mundt and Quella, published by Times Business, Random House, copyright © 1999 Mercer Management Consulting, Inc.