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Company Rebuilding: Shaking up Existing Power Structures

From Deadwood to Cell Structure in Seven Steps

What is going on in the executive suites of German companies? The executive officers tour the technology Meccas of this world, establish idea laboratories, take off their ties, give up their single offices, hang swing hammocks in their open-plan offices – and repeatedly fall into despairing gloom when even the tiniest attempts at innovation bog down in the vast expanse of their rigid organization. It is, after all, crystal-clear to them: business models that appeared virtually untouchable over decades and generated high profits are being turned upside-down by new, often small and young enterprises. 

Market entry barriers, especially the technological ones, are disappearing almost completely. Technology is freely available and just waiting to be used for the disruption of the next market. Nothing new here. Yet many German corporate captains still watch with their eyes wide open as new startup piranhas attack their own dinosaur companies every day. Why do the “big boys” nevertheless find it so impossible to respond to all of this sensibly and to renew their own operations?

And the even more important question: What must be done to put an end to the agility killers in the company such as hierarchies, processes, control systems, and swarms of managers and to replace them with an innovation culture?

The Answer: Company Rebuilding.

“Company what?” A new buzzword, a new chance? Not at all! The company rebuilding concept is based on the principle of cell division – steering organizational growth organically and anorganically via platforms, which direct the communicative interaction and added value, thereby laying the foundation for the creation of new, transformational products.

All units in this newly created ecosystem are oriented to a clearly formulated vision (purpose) that contributes to a specific customer value and has the potential to bring forth transformational products. At the same time, this purpose serves as a magnet to attract new partners and stakeholders in the added-value process.

The decisive element at this time is that unambiguous rules for organizational collaboration, a common value structure, and, in particular, rules for the creation of new cells are communicated during the creation of the new units or cells. In this sense, all the organically created units carry more or less the same DNA, which joins customers and employees as equals in its double helix and ensures that any and every type of structure and activity that does not add value is immediately eliminated.

The agenda: into the future in seven steps

Once there was a golden rule: Try to secure a large market share as soon as possible and throw up market entry barriers, especially sheer size (workforce, assets, etc.), along the way; the automotive, banking, or machine construction sectors are good examples. Size was achieved either organically (by building up assets and workforce) or anorganically (through acquisitions), although, according to a study from KPMG, for instance, 80% of the PMI processes ended in failure. From a certain point on, the organizational size goes hand in hand with the creation of required structural elements: formal and documented processes appear, departments for the maintenance of the processes are created, the number of managers suddenly exceeds that of the leaders, who either metamorphose into managers or leave the company – the deadwood piles up. That has fundamentally changed, however. Let us start by looking at how the ideal type of a successful organization is generated in the digital age.

Step 1: The Nucleus

The decisive point of the first step is that the corporate captains feel sufficiently strong pressure to act, to stay focused and persistent as they travel the road ahead of them, and to protect the newly created nucleus from the “corporate immune system.” The starting point is the recruiting of the nucleus team. This team – not a prefabricated business model or a project schedule – is decisive for later success. The nucleus is comprised of a founder team and experts who make it possible to realize the initial products and prototypes. The critical element is that this nucleus is a heterogeneous team and meets the criteria of a high-performing team as described by Henley – in other words, precisely contrary to the criteria of traditional management assessment.

Step 2: Define a Clear Vision

Once this team has come together around a vision/idea, the vision must be clearly defined and backed up by concrete customer benefits. This is, so to speak, the hour when a new ecosystem is born. Now is a good time to utilize an “Ecosystem Canvas” or similar tools. It is absolutely essential to work out the specific benefits so appealingly that they act as an attraction for even more added-value partners such as customers, high potentials, and top experts. 

Step 3: Put Together a Dream Team

A “Dream Team of the Best” is drawn from this pool of talent. Surviving in an economy in which “the winner takes it all” is impossible without such a team. The appropriate digital platforms are the control centers for the organization of these units. Startups are frequently the object of stolen glances full of envy because these companies seemingly take their ideas to the market without any complications or burdens holding them back, and their middle name appears to be agility. The fact that this is only the tip of the iceberg and that 99% of all startups fail is conveniently forgotten. Yet large corporations and established companies have at this point something available to them that the newcomers lack or must still acquire at a high price (= shares): resources! And we are not talking just about money here; even more valuable is the experience in realization of projects and the skills that are required to turn the initial idea into a product accepted by customers.

Step 4: Strength Is in the Rules

One important step in the formation of the nucleus and the buildup of the organization is the definition of clear rules for further growth – getting started with the creation of the organizational blueprint of the cells. This concerns in particular topics such as these:

  • Corporate culture and values
  • Organizational structures oriented to New Work principles
  • Clear communication channels and rules of collaboration within a cell and with stakeholders outside of the unit
  • Mechanisms for regularly checking employee or customer benefits. And if there are no such benefits: a clear process for discontinuation. Zero overhead is clearly the target here.

Do not let yourself be deceived by the many organizational concepts (such as holacracy) that rave about democratic structures without any rules whatsoever. Collaboration without clear rules often ends, particularly in such cases, in chaos.

Step 5: The Organizational Division

It is essential to define the point from which the organizational division (company rebuilding) should start. Based on our experience and recent academic findings, we can recommend the following rules (among others):

  • A quantitative formation rule that we have derived especially from the findings of the anthropologist Dunbar. It states that socially stable relationships and interactions are limited to a group of about 150 interaction partners. 
  • A customer-centric formation rule specific to the occasion; new units are created to focus on new customer needs and are correspondingly specific in their character – until a certain level threshold of complexity is reached that requires a quantitative separation.

The decisive point is that this organizational blueprint must be applied to every separation process and serve as the common denominator of all units that have grown organically.

Step 6: Specific Character of the Units

The specific character of each unit is then – analogously to biological cells – adapted to the environment around it. This ensures that local circumstances or specific customer needs, for example, are taken into consideration and prevents less than optimal offers from being issued by corporate headquarters taking the scattergun approach. The centralized policy at McDonald’s, for instance, has enabled KFC to take over the pole position in China because the latter’s restaurants orient their menus to local eating habits.

Step 7: Feedback

All units that have grown organically have something in common: they regularly submit feedback on relevant changes in the market so that the vision is modified whenever there is any doubt. “Embrace change,” says Jack Ma, as it is the only constant. The days of traditional vision and strategy development for the next 10 years belong to the past, and regular feedback is in demand.

Conclusion: Courage and persistence are the dictates of the hour.

Predicting the future is becoming increasingly difficult, and the formulas of the past have become worthless. Company rebuilding is itself a story with an unknown ending. A journey to an unknown destination. It demands a lot of courage to make changes – and enjoyment of the journey. 

But as pointed out above, corporate groups and large companies have an invaluable head start over the feared startups: the knowledge from experience along with financial and personnel resources. And that is worth considerably more than a swing hammock in an open-plan office.

 

Authors: Verena Vinke, Marc Wagner