Beyond the Business Unit

Abstract

Corporate organization's future lies in the ability to work across business units. Opportunity-based organizational design may help you succeed. Economic logic is driving two clear organizational trends. The need to be entrepreneurial and responsive to markets favors agile and focused companies. However, an unprecedented $3.4 trillion in corporate mergers and acquisitions around the world during 1999 is powerful testimony to the benefits of scale and scope. [1] Corporations are increasingly unwilling to sacrifice size and breadth for market responsiveness or vice versa; companies are now organizing to realize the benefits of both. IBM, for example, seeks to foster the entrepreneurial spirit of their employees by encouraging people in their lower reaches to show initiative. And companies such as British Petroleum, having disaggregated themselves into focused units, don't hesitate to grow larger through acquisitions. Nevertheless, many companies are still struggling to create entrepreneurial focus and to leverage and integrate their far-flung resources at the same time. One of the most important benefits of scale and scope is the ability to give employees privileged access to a wide range of resources throughout an organization. A global entity like Citigroup, for instance, boasts a considerable array of resources--including people, knowledge, products, and even relationships with outside partners--residing in functional, product, industry, and geographic units. But integrating such resources to serve a corporate client about to do business in, say, Thailand would inevitably require far more lateral work across hierarchical lines than traditional management precepts and designs envision. Using opportunity-based design Some companies do, however, seem to be getting it right. Rather than viewing the corporation as a portfolio of business units, their managers regard it as a portfolio of resources and of opportunities to create value. This opportunity-based design perspective gives these companies the flexibility to bring the most useful resources to bear on the most promising opportunities. But the resulting organization is more complex and poses new managerial challenges (exhibit). We have studied some two dozen companies that have adopted an opportunity-based design. Many of their managers, often working deep within operating units, discover opportunities in key global accounts, tightly defined market segments, or tailored product solutions. To exploit such opportunities, these entrepreneurs, regardless of their positions in the corporation, are authorized to mobilize whatever resources they need, such as product experts to create an integrated solution or functional and industry specialists, from a variety of countries, to serve a key global account. Opportunity-based design helps established companies emulate the market responsiveness of start-ups without sacrificing the advantages of scale and scope. Consider ABB, an engineering company long known for its decentralized structure, in which dozens of quasi-autonomous businesses are loosely linked to a wafer-thin corporate center. Increasingly, both the sourcing and the scope of ABB's projects around the world have cut across these units. Oslo's new airport was one such project. In 1994 the government of Norway suddenly gave the go-ahead for this long-mooted scheme. ABB's country manager immediately appointed an airport project leader, who persuaded all of ABB's more than 20 businesses in the country to work under his aegis. Together, these businesses and their external networks offered the complete set of resources needed for the project. Because the project leader--the owner--was empowered to coordinate these resources, and because the heads of ABB business units and functions--the resource owners--were willing to dedicate them to an opportunity that others had identified, ABB won 70 airport contracts, with a total worth of more than $300 million. …