1. Launch of the International Institute of Inspiration Economy

    September 1, 2015 by ahmed

    iiie

    BPIR.com is supporting the launch of the International Institute of Inspiration Economy. We encourage those interested in this new venture to attend the Learning & Inspiring Week – by IIIE, Slovenia – September 22nd till 26th, 2015.

    The 5 days is full of workshops, deep dialogue cafés, best practice visits and interesting visits and reflections on world attractions in and around Slovenia.

    Participants are expected from different countries of the world and especially those interested in inspiration, innovation, entrepreneurship, youth development, education, art, positive psychology and issues of socio-economy.

    The week will help you to re-focus on your role in a turbulent world and how to contribute during crisis.

    For further information on this new venture please read the brochure or contact Dr. Mohamed Buheji, buhejim@gmail.com.


  2. Get inspiration from 4 genius collaboration examples

    August 26, 2015 by ahmed

     

    Originally posted on LinkedIn by Roisin King

    I am always asked “what do you mean exactly” when talking about collaboration. We know what it means but put it into the context of growing your business and thinking outside your box!

    Example ! Example ! Example ! When you can’t afford to learn by doing, the next best option is to look at others’ experience to figure out whether something is beneficial and relevant enough for you to take on. This is exactly what I am planning to do in this blog – to paint a clearer picture of what collaboration is all about and to better yet demonstrate its practical application to the business world through specific examples

    From the little guys

    1. Lewis Road Creamery x Whittaker

    inspire01On October, 2014, a 5-employee boutique New Zealand dairy company decided to add a twist to their fresh milk product by introducing a chocolate drink in partnership with a local renowned confectioner, Whittaker. Little did they know at the time that they was creating one of the most sought after drink in the country – “the Kiwi equivalent of the Cronut”. Before this unanticipated success, Lewis Road Creamery’s most well-known product was its butter. From the initial 1,000 litres per week, within weeks, they were making 40 times that volume in order to meet market demand for that little ‘heaven in a bottle’- chocolate milk.

     

    2. Tile x Blunt

    inspire02I never thought I would get excited about laying my hands on a new umbrella, but I did (and I had good reasons for that). The Blunt umbrella is no ordinary one. It is an ‘indestructible’ product with a locating device allowing me to find it instantly with just a push of button. Brilliant isn’t it?

    In a market that already very saturated, who would have thought a company that sells umbrellas at $125+ could survive let alone be so successful? But Blunt – an Auckland based company, has done exactly just that.

    Most of us knows the struggle of being unable to find the umbrella when it’s raining hard outside and ends up buying a new one only to find the other one sitting in the back of the car. Putting themselves in customers’ shoes, the team at Blunt in partnering with Tile, introduces the world’s first traceable umbrella. Not only does the product possess the outstanding aerodynamic robust canopy structure powered by Blunt but it also inherits Tile’s brilliant world-class tracking technology. Never worried about losing your umbrella again!

    To the bigger ones

    3. Biotherm x Renault

    What do automobile and skincare have in common

    It’s very hard to connect the dots. The brilliant team at Renault and Biotherm ( L’Oreal’s Luxury Product Division ) has taken collaboration to a whole new level where they bring together Renault’s expertise on car design and Biotherm’s knowledge on cellular mechanisms and aromatherapy to introduce a Spa Car – Zoe. This 100% electric car is aimed to provide drivers the absolute travel comfort and even positive enhancement to passengers’ health, particularly their skin. Indeed, Zoe’s smart air-conditioning systems can automatically adjust temperature, provide aromatherapy that fit drivers’ needs and eliminate skin dehydrating effects as well as filtering out toxic particles inside the car.

    And the story of bringing Kiwi brands to the East.

    4. New Zealand Post’s TMall

    inspire03China is where everyone wants to be. While New Zealand brand image is very positively perceived over there, our physical remoteness often presents a significant barrier for Kiwi firms contemplating to enter this market. NZPost’s TMall project was born to address this. With the ambition to bring New Zealand’s brands closer to the Chinese customers and further strengthened the premium quality image of our product, NZPost along with Weta Workshop, Natural health product business Xtend Life and Hauora Honey, are currently selling their products directly to the Chinese consumers through their new storefront on Alibaba Groups’ TMall Global internet shopping website.

    For a long time, the couriers and local delivery services has suffered a stagnant period of minimal growth and declining sales. Hence, by doing this, NZPost is able to drive sales for parcels and e-commerce. At the same time, their partners are able to “dip the toes in the water for very minimal risk”.


  3. Do You Want to Hire Innovators?

    July 7, 2015 by ahmed

     

    Originally posted on LinkedIn by Jim Gilchrist

    This post addresses the topic hiring innovative and talented people. The BPIR website contains many case studies and expert opinion articles covering similar subjects. BPIR membership will provide you with unlimited access to these valuable resources. All topics are conveniently summarized into concise snippets that are linked to the original and printable article.

    As we experience economic evolution, and the emergence of the “new economy”, we need to understand that our business attitudes and approaches must evolve accordingly. Many of us already accept that achieving profitability and organizational growth will be a challenge in this increasingly competitive global economy. But the all-important question remains; “what are you going to do about it”? Those organizations that ignore the new realities of the evolution, and who return to past “old economy” thinking, will fall behind. Those who adapt to the changes, reluctantly or otherwise, will keep pace. But those organizations that embrace and facilitate change will take the lead in the new economy.

    The opportunities that will arise in the new economy will mostly be captured by innovative organizations that are staffed by innovative people. Performance-oriented and typically dissatisfied with the status quo, innovators will be excited about the challenges of the new economy and passionate about finding real solutions to real problems. Determined to make a difference in both their organizations and their industries, these select people will have the most “impact” when employed in the right roles in the right organizations. But when employed in organizations that operate contrary to their innovative nature, by continually utilizing antiquated business and management approaches that no longer work, they will readily seek a more suitable employment match.

    Organizational innovation starts at the top. It is essential that upper management has an innovative long-term vision, and that they build an innovative culture via leadership that is manifested through innovative policies and procedures. This goes so much farther than simply technological innovation. To build a truly innovative organization, it is essential that upper management embraces innovative business best practices, and that they integrate these concepts throughout all operational activities at all levels. To be successful, it becomes crucial to that we hire organizational leaders who have a track record of making quantum improvements, and in helping their organizations to break free from the status quo. To successfully build innovative organizations, we need to realize that innovative people are attracted to innovative managers, and they are repelled by the mediocre.

    Innovation is Personality Based

    To capture innovation, many organizations target passionate people who love their work. But passion by itself does not always breed the necessary discontent for things that are no longer working as they should. Individuals who are professionally innovative are often not only passionate, but they also possess a relentless drive to innovate around practices and approaches that no longer accomplish what the organization needs done. Consistently, innovators they have a track record of surpassing everyone else when it comes to successfully overcoming resistance to change and the barriers to innovative execution.

    “Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; un-rewarded genius is almost a proverb. Education will not; the world is full of educated failures. Persistence and determination are omnipotent”.

    Calvin Coolidge, US President

    We know that superior performance is always dependent on an appropriate match between a person’s work personality characteristics and the specific requirements of the respective position, the departmental team, the immediate manager and the organizational culture as a whole. But we can make some generalizations that are typical of innovative people. For the most part they are:

    • Exceptional problem solvers relative to the demands their position in the organizational hierarchy
    • Self-motivated and typically over-achievers
    • Able to maintain focus and concentration on the right things at the right time
    • Not easily distracted, and able to maintain their focus over time
    • Intellectually competitive and driven to surpass the competition
    • Open to new ideas and they welcome logical change
    • Highly expressive of their opinions and ideas
    • Able to absorb and utilize vast amount of information and to multi-task
    • Able to overcome resistance to change by creating interpersonal relationships with others
    • Willing to take risks, and accept mistakes
    • Capable of making logical decisions quickly
    • Able to learn from their mistakes and grow
    • Energetic and fast learners
    • Self confident, and
    • Highly ethical and devoted

    Innovative People Will Respond to Innovative Hiring Practices

    You cannot say one thing then do another. If you position your organization as being innovative, you will not be successful in attracting and hiring innovative people by using outdated, non-innovative recruitment and selection practices. In the new, internationally competitive, economy there will be significant demand for high-impact, innovative managers and staff. It is foolhardy, even in a high unemployment economy, to assume that innovative people will be readily available. Most innovators will be retained by their employers because they understand their current and future value. And SHOULD an innovator be temporarily unemployed, it would be unwise to assume that they are going to find, and select, your organization instead of all of their other options. This is “old economy” thinking, which did not really work then, and certainly will fail in the new economy. Innovative people are not attracted to web postings, job fairs, newspaper ads or corporate website posted opportunities. They are different than the “run of the mill”, they are in demand, and they know it. If you want to compete for high-demand innovative people, you would be wise to proactively find them and recruit them, rather than hope that they find you.

    Since the key to future business success will be in developing processes that drive continuous innovation throughout every aspect of the organization, it’s important to realize the significant impact of the recruiting function to organizational competitiveness. In line with the new demands of the new economy, the appropriate re-alignment of such functions as candidate sourcing, recruitment and assessment is essential to hiring more innovative individuals. In other words, we need to develop a recruitment process that is consistent with the organization’s innovation objectives. Here are some suggestions:

    • Define innovation relative to the organization, department, team and position to be filled
    • Make the hiring of innovators a primary goal
    • Develop a hiring plan based on your definition
    • Prioritize filling innovative positions and remove any possible barriers to hiring them
    • Know and promote the elements of your organization that would attract innovators
    • Encourage external hiring when you cannot identify internal innovators
    • Recognize and assess for key innovative personality traits
    • Be different than your competition by defining innovation without using the word “innovation”
    • Redefine how to identify and engage innovation in an interview
    • Utilize appropriate and valid assessments to identify innovation as per your definition
    • Adjust the candidate experience to verify that your organization is innovative (ie: no “cattle calls”)
    • Realize that your current hiring system probably restricts the hiring of innovators, so review;
    • how position requirements are defined,
    • methods of candidate attraction,
    • interviewing approaches,
    • internal assessment capability, and
    • adjust them specific to your hiring objectives rather than use a “one approach fits all” approach
    • Follow through with an innovative orientation and retention programs
    • Track success based on the initial innovation related goals

    Too often, organizational leaders mistakenly under-value the importance of organization-wide innovation, or they misinterpret how truly innovative their respective organizations actually are. And even when there is recognition of the need to develop more innovative business practices, and to hire more innovative personnel, many often postpone taking action to due to other priorities. But as the economic system quickly changes, our adaptive response needs to be just as fast. We need to understand the cumulative effects of the global recession, the shift in domestic sector strength, the shift in regional market strength, the growing economic clout of Asia and the subsequent competition to attract talent to that region, the increasing drain of experience through the retirement of the baby-boomer demographic, the lack of experience and preparation of new graduates, the lack of available prepared internal “successors”, the increasing pressure for higher productivity to be achieved with fewer resources, the upcoming personnel retention challenges that will occur as the recession lifts…. and so on, and so on…. Not to mention the global competition for talented innovative managers and staff.

    Anyone who thinks that it will be “business as usual” in the new economy is due for a serious “wake up call”.

    Jim Gilchrist B.E.S.
    CEO, CAES Career Advancement Employment Services


  4. How to Design Your Organization: Part 3 – How to Design

    June 21, 2015 by ahmed

    Originally posted on Organizational Physics by Lex Sisney

    The first step in designing the new structure is to identify the core functions that must be performed in support of the business strategy, what each function will have authority and be accountable for, and how each function will be measured (Key Performance Indicators or KPIs). Then, avoiding the 5 classic mistakes of structure above, place those functions in the right locations within the organizational structure. Once this is completed, the structure acts as a blueprint for an organizational chart that calls out individual roles and (hats). A role is the primary task that an individual performs. A (hat) is a secondary role that an individual performs. Every individual in the organization should have one primary role and — depending on the size, complexity, and resources of the business — may wear multiple (hats). For example, a startup founder plays the CEO role and also wears the hats of (Business Development) and (Finance). As the company grows and acquires more resources, she will give up hats to new hires in order to better focus on her core role.

    Getting an individual to gracefully let go of a role or a hat that has outgrown them can be challenging. They may think and feel, “I’m not giving up my job! I’ve worked here for five years and now I have to report to this Johnny-Come-Lately?” That’s a refrain that every growth-oriented company must deal with at some point. One thing that can help this transition is to focus not on the job titles but on the PSIU requirements of each function. Then help the individual to identify the characteristics of the job that they’re really good at and that they really enjoy and seek alignment with a job that has those requirements. For example, the title VP of Sales is impressive. But if you break it down into its core PSIU requirements, you’ll see that it’s really about cold calling, managing a team, and hitting a quota (PSiU). With such a change in perspective, the current Director of Sales who is being asked to make a change may realize, “Hmm… I actually HATE cold calling and managing a team of reps. I’d much rather manage accounts that we’ve already closed and treat them great. I’m happy to give this up.” Again, navigating these complex emotional issues is hard and can cost the company a lot of energy. This is one of the many reasons that using a sound organizational restructuring process is essential.

    A structural diagram may look similar to an org chart but there are some important differences. An org chart shows the reporting functions between people. What we’re concerned with here, first and foremost, are the functions that need to be performed by the business and where authority will reside in the structure. The goal is to first design the structure to support the strategy (without including individual names) and then to align the right people within that structure. Consequently, an org chart should follow the structure, not the other way around. This will help everyone avoid the trap of past precedents that I discussed earlier. This means – literally – taking any individual name off the paper until the structure is designed correctly. Once this is accomplished, individual names are added into roles and (hats) within the structure.

    After restructuring, the CEO works with each new functional head to roll out budgets, targets, and rewards for their departments. The most important aspect of bringing a structure to life, however, isn’t the structure itself, but rather the process of decision making and implementation that goes along with it. The goal is not to create islands or fiefdoms but an integrated organization where all of the parts work well together. If structure is the bones or shape of an organization, then the process of decision making and implementation is the heart of it. I’m going to discuss this process in greater detail in the next article in this series. It can take a few weeks to a few months to get the structure humming and people comfortable in their new roles. You’ll know you’ve done it right when the structure fades to the background again and becomes almost invisible. It’s ironic that you do the hard work of restructuring so you can forget about structure. Post integration, people should be once again clear on their roles, hats, and accountabilities. The organization starts to really hum in its performance and execution speed picks up noticeably. Roaring down the tracks towards a common objective is one of the best feelings in business. A good structure makes it possible.

    Structure Done Wrong: An Example to Avoid

    Below is a picture of a typical business structure done wrong. The company is a software as a service (Saas) provider that has developed a new virtual trade show platform. They have about ten staff and $2M in annual revenues. I received this proposed structure just as the company was raising capital and hiring staff to scale its business and attack multiple industry verticals at once. In addition to securing growth capital, the company’s greatest challenge is shifting from a startup where the two co-founders do most everything to a scalable company where the co-founders can focus on what they do best.

    structuredonewrong

    So what’s wrong with this structure? Several things. First, this proposed structure was created based on the past precedents within the company, not the core functions that need to be performed in order to execute the new strategy. This will make for fuzzy accountability, an inability to scale easily, new hires struggling to make a difference and navigate the organization, and the existing team having a hard time growing out of their former hats into dedicated roles. It’s difficult to tell what are the key staff the company should hire and in what sequence. It’s more likely that current staff will inherit functions that they’ve always done, or that no one else has been trained to do. If this structure is adopted, the company will plod along, entropy and internal friction will rise, and the company will fail to scale.

    The second issue with the proposed structure is that efficiency functions (Tech Ops and Community Operations) are given authority over effectiveness functions (R&D and Account Management). What will happen in this case? The company’s operations will become very efficient but will lose effectiveness. Imagine being in charge of R&D, which requires exploration and risk taking, but having to report every day to Tech Ops, which requires great control and risk mitigation. R&D will never flourish in this environment. Or imagine being in charge of the company’s key accounts as the Account Manager. To be effective, you must give these key accounts extra care and attention. But within this structure there’s an increasing demand to standardize towards greater efficiency because that’s what Community Operations requires. Efficiency always trumps effectiveness over time and therefore, the company will lose its effectiveness within this structure.

    Third, short-run functions are given authority over long-run needs. For example, Sales & Marketing are both focused on effectiveness but should rarely, if ever, be the same function. Sales has a short-run focus, marketing a long-run focus. If Marketing reports to Sales, then Marketing will begin to look like a sales support function, instead of a long-run positioning, strategy, and differentiation function. As market needs shift, the company’s marketing effectiveness will lose step and focus. It won’t be able to meet the long-run needs for the company.

    Fourth, it’s impossible to distinguish where the authority to meet customer needs resides and how the company is controlling for systemic risk. As you look again at the proposed structure, how does the company scale? Where is new staff added and why? What’s the right sequence to add them? Who is ultimately responsible for profit and loss? Certainly it’s the CEO but if the CEO is running the day-to-day P&L across multiple verticals, then he is not going to be able to focus on the big picture and overall execution. At the same time, who is responsible for mitigating systemic risk? Within this current structure, it’s very likely that the CEO never extracts himself from those activities he’s always done and shouldn’t still be doing if the business is to scale. If he does attempt to extract himself, he’ll delegate without the requisite controls in place and the company will make a major mistake that threatens its life.

    Structure Done Right

    Below is a picture of how I realigned the company’s structure to match its desired strategy. Here are some of the key things to recognize about this new structure and why it’s superior to the old one. Each box represents a key function that must be performed by the business in its chosen strategy. Again, this is not an org chart. One function may have multiple people such as three customer service reps within it and certain staff may be wearing multiple different hats. So when creating the structure, ignore the people involved and just identify the core business functions that must be performed. Again, first we want to create the right structure to support the chosen strategy. Then we can add roles and hats.

    structuredoneright1

    How to Read this Structure

    At the bottom of the structure you’ll see an arrow with “decentralized autonomy” on the left and “centralized control” on the right. That is, your goal is to push decision-making and autonomy out as far as possible to the left of the structure for those functions closest to the customer. At the same time you need to control for systemic risk on the right of the structure for those functions closest to the enterprise. There is a natural conflict that exists between decentralized autonomy and centralized control. This structure recognizes that conflict, plans for it, and creates a design that will harness and make it constructive. Here’s how.

    Within each function, you’ll see a label that describes what it does, such as CEO, Sales, or Engineering. These descriptions are not work titles for people but basic definitions of what each function does. Next to each description is its primary set of PSIU forces. PSIU is like a management shorthand that describes the forces of each function. For example, the CEO function needs to produce results, innovate for changing demands, and keep the team unified: PsIU.

    Identifying the PSIU code for each function is helpful for two reasons. One, it allows a shared understanding of what’s really required to perform a function. Two, when it’s time to place people into hats and roles within those functions, it enables you to find a match between an individual’s management style and the requirements for the role that needs to be performed. For example, the Account Management function needs to follow a process and display a great aptitude towards interaction with people (pSiU). Intuitively you already know that you’d want to fill that role with a person who naturally expresses a pSiU style. As I mentioned earlier, it would be a mistake to take a pSiU Account Manager and place them into a Sales role that requires PSiu, give them a commission plan, and expect them to be successful. It’s against their very nature to be high-driving and high-charging and no commission plan is going to change that. It’s always superior to match an individual’s style to a role rather than the other way around. Now that you understand the basics of this structure, let’s dive into the major functions so you can see why I designed it the way I did.

    The General Manager (GM) Function

    The first and most important thing to recognize is that, with this new structure, it’s now clear how to scale the business. The green boxes “GM Vertical #1 and #2” on the far left of the structure are called business units. The business units represent where revenues will flow to the organization. They’re colored green because that’s where the money flows. The GM role is created either as a dedicated role or in the interim as a (hat) worn by the CEO until a dedicated role can be hired. Each business unit recognizes revenue from the clients within their respective vertical. How the verticals are segmented will be determined by business and market needs and the strategy. For example, one GM may have authority for North America and the other Asia/Pacific. Or one might have authority for the entertainment industry and the other the finance industry. Whatever verticals are chosen, the structure identifies authority and responsibility for them. Notice that the code for the GM/PsIU is identical to the CEO/PsIU. This is because the GMs are effectively CEOs of their own business units or can be thought of as future CEOs in training for the entire organization.

    Underneath each green business unit is a Sales role, responsible for selling new accounts and an Account Management role, responsible for satisfying the needs of key clients. Essentially, by pushing the revenue driving functions to the far left of the structure, we are able to decentralize autonomy by giving each GM the authority and responsibility to drive revenue, acquire new customers, meet the needs of those customers. Each GM will have targets for revenue, number of customers, and client satisfaction. They also have a budget and bonus structure.

    The Product Manager (PM) Function

    To the immediate right of the green business units is a black box called “PM” or Product Manager. The function of the Product Manager is to manage the competing demands of the different verticals (the green boxes to its left) as well as the competing demands of the other business functions (the grey boxes to its right) while ensuring high product quality and market fit and driving a profit. The grey boxes to the right of the Product Manager — CEO, Finance, Operations, Engineering, Marketing Strategy, and Admin — represent the rest of the core organizational functions. Effectively, these functions provide services to the green business units so that those units have products to sell to their markets. The revenue that the business generates pays for those internal services. Profits are derived by subtracting the cost of those services from the revenues generated by the business units. A Launch Manager who helps to coordinate new product releases between the business units supports the Product Manager.

    The code for the Product Manager is pSiU. That is, we need the Product Manager to be able to stabilize and unify all of the competing demands from the organization. What kind of competing demands? The list is almost endless. First, there will be competing demands from the verticals. One vertical will want widget X because it meets the needs of their customers; the other will want widget Z for the same reasons (and remember that this particular company’s strategy is to run multiple verticals off a single horizontal platform). Operations will want a stable product that doesn’t crash and integrates well within the existing infrastructure. Engineering will want a cutting-edge product that displays the latest functions. Marketing Strategy will want a product that matches the company’s long-range plans. Administration will want a product that doesn’t cause the company to get sued. The CEO will want a product that tells a great story to the marketplace. Finance will want a product that generates significant ROI or one that doesn’t require a lot of investment, depending on its lifecycle stage. So the list of inherent conflicts runs deep.

    The reason we don’t want a psIu in the Product Manager is that at this stage of the company’s lifecycle, the innovative force is very strong within the founding team, which will continue to provide that vision and innovation in another role, new Vertical Development and R&D under Marketing Strategy (more on this later). Nor do we want a Psiu in the Product Manager function because a big producer will focus on driving forward quickly and relentlessly (essential in the earlier stages of the product lifecycle) but will miss many of the details and planning involved with a professional product release (essential at this stage of the product lifecycle).

    It’s worth discussing why we want the product P&L to accrue to the Product Manager function and not the CEO or GMs. By using this structure, the CEO delegates autonomy to the GMs to drive revenue for their respective verticals and for the Product Manager to drive profits across all verticals. Why not give P&L responsibility to the CEO? Of course the ultimate P&L will roll up to the CEO but it’s first recognized and allocated to the Product Manager. This allows the CEO to delegate responsibility for product execution in the short run while also balancing the long-range needs of the product and strategy.

    We don’t give the Product Manager function to the GMs at this stage for a different reason. If we did, the product would have an extreme short-run focus and wouldn’t account for long-run needs. The business couldn’t adapt for change and it would miss new market opportunities. However, the GMs will need to have significant input into the product features and functions. That’s why the Product Manager is placed next to the GMs and given quite a lot of autonomy – if the product isn’t producing results in the short run for the GMs, it’s not going to be around in the long run. At the same time, the product must also balance and prioritize long-range needs and strategy and that’s why it doesn’t report to the GMs directly.

    If the business continues to grow, then one of the GMs will become the head of an entire division. Think of a division as a grouping of multiple similar verticals. In this case, the Product Manager function may in fact be placed under the newly formed division head because it is now its own unique business with enough stability and growth to warrant that level of autonomy. Remember that structures aren’t stagnant and they must change at each new stage of the lifecycle or each change in strategy. For this current stage of the lifecycle, creating a dynamic tension between the GMs, the Product Manager, and the rest of the organization is highly desired because it will help to ensure a sound product/market/execution fit. I’ll explain more of how this tension plays out and how to harness it for good decision making in the next article.

    The Operations Function

    To the immediate right of the Product Manager is Operations. This is the common services architecture that all GMs use to run their business. It is designed for scalable efficiency and includes such functions as Customer Service and Technology Infrastructure. Notice how all of these functions are geared towards short-run efficiency, while the business still wants to encourage short-term effectiveness (getting new clients quickly, adapting to changing requests from the GMs, etc.) within these roles and so it gives more autonomy to this unit than to those to the right of it. The code for Operations is PSiU because we need it to produce results for clients every day (P); it must be highly stable and secure (S); and it must maintain a client-centric perspective (U). It’s important to recognize that every function in the business has a client that it serves. In the case of Operations, the clients are both internal (the other business functions) as well as external (the customers).

    The Engineering Function

    Going from left to right, the next core function is Engineering. Here the core functions of the business include producing effective and efficient architectures and designs that Operations will use to run their operations. This includes SW Design, SW Development, and QA. Notice, however, that the ultimate deployment of new software is controlled by the Product Manager (Launch Manager) and that provides an additional QA check on software from a business (not just a technology) perspective. Similar to Operations, Engineering is also short-run oriented and needs to be both effective and efficient. It is given less relative autonomy in what it produces and how it produces it due to the fact that Engineering must meet the needs of all other business functions, short- and long-run. The code for Engineering is PSIu because we need it to produce results now (P) and to have quality code, architecture, and designs (S), and to be able to help create new innovations (I) in the product.

    The Marketing Strategy Function

    The next core function is Marketing Strategy. Marketing Strategy is the process of aligning core capabilities with growing opportunities. It creates long-run effectiveness. It’s code is psIu because it’s all about long-term innovation and nurturing and defending the vision. Sub-functions include new Vertical Development (early stage business development for future new verticals that will ultimately be spun out into a GM group), R&D (research and development), Marketing Execution (driving marketing tactics to support the strategy), PR, and People Development. A few of these sub-functions warrant a deeper explanation.

    The reason new Vertical or Business Development is placed here is that the act of seeding a new potential vertical requires a tremendous amount of drive, patience, creativity, and innovation. If this function were placed under a GM, then it would be under too much pressure to hit short-run financial targets and the company would sacrifice what could be great long-term potential. Once the development has started and the vertical has early revenue and looks promising, it can be given to a new or existing GM to scale.

    The purpose of placing R&D under Marketing Strategy is to allow for the long-run planning and innovative feature development that can be applied across all business units. The short-run product management function is performed by the Product Manager. The Product Manager’s job is to manage the product for the short run while the visionary entrepreneur can still perform R&D for the long run. By keeping the Product Manager function outside of the GM role, New Product Development can more easily influence the product roadmap. Similarly, by keeping the Product Manager function outside of Marketing Strategy, the company doesn’t lose sight of what’s really required in the product today as needed by the GMs. Similarly, if the R&D function was placed under Engineering, it would succumb to the short range time pressure of Engineering and simply become a new feature development program — not true innovative R&D.

    The reason Marketing Execution is not placed under the GM is that it would quickly become a sales support function. Clearly, the GM will want to own their own marketing execution and he or she may even fight to get it. It’s the CEO’s role, however, to ensure that Marketing Execution supports the long-range strategy and thus, Marketing Execution should remain under Marketing Strategy.

    The basis for placing People Development under Marketing Strategy rather than under HR is that People Development is a long-range effectiveness function. If it’s placed under HR, then it will quickly devolve into a short-range tactical training function. For a similar reason, recruitment is kept here because a good recruiter will thrive under the long-range personal development function and will better reflect the organization’s real culture.

    The Finance & Admin Functions

    To the far right of the organization are the Administrative functions. Here reside all of the short-run efficiency or Stabilizing functions that, if performed incorrectly, will quickly cause the organization to fail. These functions include collecting cash Controller (AR/AP), Legal, and the HR function of hiring and firing. Notice, however, that the Finance function is not grouped with Admin. There are two types of Finance. One, cash collections and payments, is an Admin function. The other, how to deploy the cash and perform strategic financial operations, is a long-run effectiveness function. If Finance is placed over Admin, or under Admin, the company will either suffer from lack of effectiveness or a lack of efficiency, respectively. It also creates a tremendous liability risk to allow one function to control cash collections and cash deployments. It’s better to separate these functions for better performance and better control.

    The CEO Function

    The top function is the CEO. Here resides the ultimate authority and the responsibility to keep the organization efficient and effective in the short and long run. The code for the CEO is PsIU because this role requires driving results, innovating for market changes, and keeping the team unified. By using this structure, the CEO delegates autonomy to the GMs to produce results for their respective verticals. The GMs are empowered to produce results and also to face the consequences of not achieving them by “owning” the revenue streams. The CEO has delegated short-run Product Management to produce a profit according to the plan and simultaneously balances short- and long-run product development needs. At the same time, the CEO protects the organization from systemic harm by centralizing and controlling those things that pose a significant liability. So while the GMs can sell, they can’t authorize contracts, hire or fire, or collect cash or make payments without the authorization of the far right of the structure. Nor can they set the strategy, destroy the brand, or cause a disruption in operations without the authority of the CEO and other business units.

    The goal of structure is to create clarity of authority and responsibility for the core organizational functions that must be performed and to create a design that harness the natural conflict that exists between efficiency and effectiveness, short-run and long-run, decentralization and control. A good CEO will encourage the natural conflict to arise within the structure and then deal with it in a constructive way. More on how to do this in the next section.

    Remember that within any structure, individuals will play a role and, especially in a start-up environment, wear multiple hats. How you fill roles and hats is to first identify and align the core functions to support the organization’s strategy. Then, assign individuals to those functions as either a role or a hat. In this particular structure, the role of CEO was played by one founder who also wore the temporary hats of GM Vertical #1 and #2 until a new GM could be hired. The other founder played the role of Product Manager, as well as Engineer until that role could be hired. Clearly delineating these functions allowed them both to recognize which roles they needed to hire for first so that they could give up the extra hats and focus on their dedicated roles to grow the business. Going forward, both founders will share a hat in Marketing Strategy with one focused on new Business Development and the other on R&D. These Marketing Strategy hats play to the strength of each founder and allow them to maintain the more creative, agile aspects of entrepreneurship while the business structure is in place to execute on the day-to-day strategy.

    Summary of Organizational Structure & Design

    To recap, design controls behavior. When an organization’s structure is misaligned, its resistance to change will be great and its execution will be slow. Organizational structures get misaligned over time for many reasons. The most basic of these is inertia, through which companies get stuck in old ways of doing things. When restructuring your organization, there are some classic mistakes to avoid. First, always redesign the structure whenever you change the strategy or shift to a new lifecycle stage (do this even if there are no personnel changes). Second, avoid placing efficiency-based functions such as operations or quality control over effectiveness-based functions such as R&D, strategy, and training. Third, avoid giving short-range functions like Sales, Operations, and Engineering power over long-range functions like Marketing, R&D, and People Development. Fourth, distinguish between the need to decentralize autonomy and centralize control and structure the organization accordingly. Finally, avoid placing the wrong style of manager within the new structural role simply because that’s the past precedent. Changing structures can be really hard because there’s so much past precedent. If the organization is going to thrive, however, the new structure must support the new strategy. In the next article, I’m going to discuss the most important process of any business: the decision making and implementation that brings the structure alive.


  5. The Baldrige Approach to Innovation

    May 10, 2015 by ahmed

    Originally posted on Blogrige by Harry Hertz

    The Baldrige Excellence Framework, as a systems perspective, has taken a holistic approach to the important topic of innovation. This perspective comprises a Core Value and Concept, Managing for Innovation, and numerous considerations within the Baldrige Criteria. Together, the Baldrige approach to innovation emphasizes both cultural/people aspects and process aspects of achieving successful innovation and provides the linkages to ensure process and people are aligned.

    Baldrige defines innovation as making meaningful (breakthrough) change to improve products, processes, or organizational effectiveness and create new value for stakeholders. Managing for Innovation, as the words imply, requires a combination of people and process. Your organization should be led and managed so that identifying opportunities for innovation become part of the learning culture. Systematic processes for identifying those opportunities should reach across your entire organization.

    The Baldrige Criteria start the focus on innovation by asking how senior leaders create an environment for innovation (culture) and a focus on action to achieve innovation. In Strategy Development, the Criteria ask how your strategy development process stimulates and incorporates innovation through identification of strategic opportunities and selection of those that are intelligent risks worth pursuing. Next the Criteria ask about the use of organizational performance review findings as a mechanism for identifying opportunities for innovation and how you manage organizational knowledge to stimulate innovation. How does your workforce performance management system reinforce intelligent risk taking to achieve innovation? What is your operational process for managing innovation? What are the results of your innovation process? The outcome of the Baldrige approach to innovation is obvious. Innovation takes a systems perspective that involves leaders, all employees, and processes in coordination.

    So, you might ask what led to this blog post? It was triggered by a recent HBR post entitled, “Is Innovation More About People or Process?” Andrea Ovans concludes that it is both after giving some good examples from IDEO, Procter & Gamble, Intel, and others. She also cites a number of resources for people starting innovation efforts. Take a look at “Build an Innovation Engine in 90 Days” to see how to rapidly bring people and process together. (And for a very different approach to innovation, not recommended by me as the approach of choice, check out Political Activism and Innovation.)