by Tom Dougherty
Changing Organizational Structure. Business Organization Needs to Change
Business is changing. Branding Structure has changed. Changing organizational structure is often needed. However the manner in which most organizations conduct business has not changed in many years. The vast majority of businesses today are built around an outdated hierarchical model that has no more relevance in today’s business environment than the wide scale use of typewriters. There is an evolution afoot, one which, has the promise to change organizational structure and make it easier to grow market share at the expense of the competition. Growing market share should be the primary focus of all organizational changes.
As our name implies, we often talk about stealing market share. While in general context, the notion of stealing may seem somewhat underhanded, make no mistake, if a company is increasing their market share they are stealing that market share from a competitor – be it a direct competitor or a competitor that offers a substitute product or service.
Today, it is nearly impossible to manufacture market share that was either not held by a competitor or had the potential to be held by a competitor. In order for a company to grow in most categories and in most locations, growth must come at the expense of a competitor. This means that the stakes are incredibly high. Pressure from stakeholders, from investors to customers, is placing many companies in the precarious position to grow, be swallowed up by a larger organization, or die. It is these pressures that require companies to think and act differently if they wish to succeed.
Outdated Organizational Structure
Most of today’s business organizations are divided into fairly ridged functional lines – operations, finance, marketing, HR, information systems, and so on. This branding structure is not well suited to focusing on market share growth. Each of these functional lines is usually represented in the executive committees of the company where strategic decisions that decide the direction of the company are made. For companies with a single brand product like most banks, DHL, or McDonalds, delivery of the brand is relatively easy across functional lines.
However, for companies with multiple brand products like GM, Sony, 3M, and Miller, delivery of the brand across functional lines becomes much more difficult. In order to maximize the brand’s value, the promise of the brand must be delivered at each functional level within the organization. In companies like McDonalds, for example, the delivery of the McDonald’s brand (for better or worse) is evident from the employees on the front lines in the local McDonalds on the corner to the executives in the corner office.
Each member of McDonald’s team knows what McDonald’s is supposed to represent. In companies with multiple brand products, particularly those that employ a “house of brands” strategic model, many functional lines represent the entire stable of brands for the entire organization. That is, HR, IT, finance, operations, and even marketing may work on each of the brands of the company. Rather than having a single brand promise to deliver, these departments have the difficult task of having to deliver 5, 6, or 10 brand promises. At the end of the day, none of the promises of any of the brands can be effectively delivered.
Organize Differently. Changing Organizational Structure is a Must
Business organization needs to reorganize themselves around the brand, not the departmental function. Much like vertically integrated companies, these new brandanizations, should be vertically integrated around the company’s resources of HR, IT, operations, and so on to maximize the delivery of the brand.
Brand managers are the ones who need to sit in executive boardrooms to help establish organizational strategy and should therefore be responsible for running the entire brand from R&D to distribution to CRM. Of course, this demands that brand be recognized as an essential strategy and not merely a tactical theory. Brands themselves play a much more important role than any of the current functional divisions within an organization.
Why is changing organizational structure important? Because a brand failure can cause the demise of an entire organization and once a brand has lost all of its equity and reputation, especially as a result of a failure on the part of the brand, it is extremely difficult and expensive to correct its course. On the other hand, most departmental failures (other than things like massive accounting scandals) are relatively easy to correct.
Clearly, converting modern hierarchical organizations and changing organizational structure into a new model requires personnel realignment as well as an organizational cultural realignment. This cannot be undertaken or accomplished overnight. It requires that organizations begin to think and act differently, acknowledging that their success or failure as an organization hinges on the success or failure of their brand(s).
Moreover, as competitive pressures continue to increase the need to move to brand-centric organizational structure only increases. Brand is not about logo, advertising, or even “the single minded proposition.” Brand is about creating a connection with the target that becomes a reflection of who the target believes they are. (When is the best time to rebrand?). If the brand is fully developed and bled from every single point of contact consumers and stakeholders have with it, then the organization has set itself up for incredible market share gains as well as solidifying its position in the minds of its current consumers.