Friday, October 18, 2019

6 New Organizational Lessons From Amazon and Alibaba

Jeff-Bezos-organizationIn my current role as a business consultant, I still find that most companies, large and small, organize themselves wholly based on what goes on inside the company, rather than looking outside – at their networks, their partners, and the niche they wish to dominate. The result is a hierarchy and a static group of silos that doesn’t adapt to market changes and competitors.

In fact, it is so tough to reinvent a legacy organization, that new businesses, such as Amazon, Apple, and Alibaba, are rapidly replacing former powerhouses, including Blockbuster, Sears, and Nokia. According to experts, as many as 50 percent of the existing S&P 500 companies will be pushed aside in the next 10 years, and the lifespan of traditional organizations is getting shorter.

Thus I was impressed with the dynamic new organizational approach outlined in a new book, “Reinventing the Organization,” by Arthur Yeung and Dave Ulrich. These authors are widely recognized, both in the U.S. and China, as thought leaders in this area, so their framework for reinventing your business organization, with some of my own insights, is definitely worth a look:

  1. Environment: Fund a group to track market changes. Not many businesses today spend any real resources, or organizational focus, on understanding and anticipating the changing forces facing every industry and business. We all need a well-defined and systematic approach for keeping up with today’s fast changing market environment.

    For example, not many of the big retail store chains, including Sears and Macys, had any tracking of how quickly online shopping was changing the environment, until Amazon and Alibaba became bigger than most brick and mortar retailers in their best years combined.

  2. Strategy: Define an execution pathway for growth. All businesses I know will tell you they have a strategy for growth, but I often have a hard time finding any group or silo really incented and measured on growth targets. The challenge is a growth rate greater than the market and new competitors, and a process to implement growth at that rate.

    While Amazon was growing at an average rate of twenty-five percent per year in each of the last five years, most of the big retailers found their business shrinking every year, and despite their best efforts, had no organizational ability or process to turn it around.

  3. Capability: Focus on customer innovation and agility. A market-oriented organization doesn’t focus on internal budget allocations and power struggles between functions, but remains customer obsessed, external data driven, and measured on their rate of innovation and agility. They focus on anticipating customer needs before the crisis.

    Individual unit leaders in this ecosystem are incented to meet regularly to share experiments, initiatives, insights, and lessons learned on the never-ending journey of capability enhancement. They share and celebrate successes, and analyze failures.

  4. Morphology: Organize around teams and partners. It’s time to take a new look at your organizational structure. Deep hierarchies and large functional silos don’t highlight agility and constant innovation. Evidence today points to the effectiveness of short-term teams, strategic partners, and a flat organization supported by a common resource platform.

    Amazon is organized into autonomous teams, each running a particular product or business and not a function like marketing, product or engineering. Amazon leaders are strong general managers, relying on external partners, rather than functional experts.

  5. Culture: Shape priorities and behaviors to your values. Your culture is what you want to be known for by your key customers, and it must be imbedded throughout the organization. It shapes and sustains employee well-being and productivity, business results, customer reputation, and investor confidence.

  6. Accountability: Inspire and tie focus to business results. In traditional large organizations, people lose sight of the big picture, and want to be accountable only for the internal results of their silo. Your challenge is to keep them connected and positively accountable to external results through all communications, standards, and incentives.

In all cases, organizations today have to learn to mine unstructured data for what could be, instead of structured data on what has been, and how to pivot the organization fluidly to transform the company as fast as the market changes. Reinventing your existing organization may be hard, but it’s not as painful as the long downhill journey to obscurity now being experienced by many.

Marty Zwilling

*** First published on on 10/04/2019 ***



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