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If Your Company’s Form Following Its Function?

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If Your Company’s Form Following Its Function?

I was shocked when I heard of the bankruptcy of Hostess Brands Inc. The $2.5 billion maker of Twinkies and Wonder Bread had about 33 plants, 565 distribution centers and 570 bakery outlet stores across the United States. I have no doubt tons of e-ink will be spilt on dissecting the saga and pinning the blame on the unions, management, workers, and government.

However, from my perspective, the business model of the company was passé long time ago. In this article, we contrast the Hostess Brands business model with that of the top-rung players in the food industry – the so-called ABCD: Archer Daniels, Bunge, Cargill and Dreyfuss.

Even you skim parts of the book “The 5-Star Business Network”, I urge you to read carefully, think and use the material in this article because it could make the difference between your company becoming the Hostess of your industry, or one of the ABCDs.

Business Model Has Changed And Most People Are Yet To Understand The Profound Change

It is a well-known aphorism in the circles of architecture that the form follows function. In other words, the structure of a particular unit evolves to facilitate the functioning of that unit. If the form does not match the function, the structure or the function eventually changes.

While researching the book, we examined the organization structure of more than 50 companies, almost all of them looked like variations of the generic structure given in the figure here (see the complete structure in the book)

Traditional Organisation Structure

Titles and structure in organisational structure vary enormously. However, most companies agree this is the best way to look at how they are organised to serve their customers’ needs.

At the same time, most of these companies evolved at least two decades ago so their functioning has become almost entirely customer-centric, with their customers’ priorities driving most of the business workings. In our work with corporations, we have often found the supply network structure frequently results in limiting the effectiveness of the organisation.

The traditional structure of the organisation shown above frequently stifles customer responsiveness and innovation. In the modern outsourced globalised world, a traditional structure with strict hierarchies and internal walls between departments is a hindrance, rather than an aid for achieving success in business.

In today’s hypercompetitive world of consumer electronics, Apple is a standout among peers as great as Sony, Samsung, Panasonic, Motorola, Nokia and Dell. With convergence, all of these companies are vying for their share of the consumer’s wallet with increasingly similar products doing similar things. What did Apple do that its market value now surpasses Microsoft’s? How did it manage to get over the entrenched competitive advantage of companies such as Sony, Motorola or Nokia?

Your Organization Chart Is The Wrong Model For Your Business

Our work in global supply network strategies and supply network design has convinced us that a modern distributed organisation needs to look at redesigning its explicit structure to keep up with the realities of the business world, which has changed tremendously in the last 20 years.

A typical supply chain now runs seamlessly across multiple continents, through boundaries of several organisations, to finally serve a customer with a unique product. To do so, organisations have created de facto structures, which are far different from the traditional structures that they have put in their organisation charts.

The purists might argue that this discussion does not really matter if organisations are already acting in accordance with a de facto structure – an argument which holds some merit. However, people who make up an organisation respond to the explicitly shown structure (see the complete structure in the book) with much more enthusiasm and clarity that to a defacto or mutually understood structure.

I believe that organisations should formalise their defacto structures and use them to gain further competitive advantage. For this purpose we have created the model Customer Centric Organisation Structure.

Extract from the book “The 5-Star Business Network”, written by Vivek Sood

Read more on  The 5-Star Business Network

Source for the Cartoon: Outsourcing 3.0

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ABOUT THE PRINCIPAL AUTHOR

Today, Vivek and his partners are among 20-30 people on the planet earth who have this deep understanding of supply chain systems, practices and tools. CEOs, COOs, executives and Boards call them in most challenging situations once they know the full potential of supply chain based transformations. Following are key milestones in Vivek's journey:

  • Started in 1983 as a merchant navy cadet at 18 years age, worked his way to qualify as a Captain – qualified to take command of any merchant ship, worldwide.
  • Earned a top tier MBA from UNSW at the top of his class.
  • Joined highly regarded strategy consulting firm Booz Allen & Hamilton, consulting to the CEOs, Boards and senior management of global corporations within Australia.
  • To learn and specialise in supply chain – against all odds, sought out the co-inventor of supply chain in Germany and convinced him to be a partner in his firm, GLOBAL SUPPLY CHAIN GROUP, launched in January 2000.
  • More than 500 successful blue chip projects with high impact business transformations in large corporations using the full power of SUPPLY CHAIN MANAGEMENT.
  • 4 Seminal and path breaking business books IN SUPPLY CHAIN MANAGEMENT – these are available in bookstores and universities and libraries worldwide.

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THE 5-STAR BUSINESS NETWORK

If you are deeply passionate about the world of business and supply chain networks as I am, and enjoy digging answers to critical questions that will help build and steer your business with wisdom, then join me. This book is a journey of exploration through the world of business networks that run along the veins of today’s commercial world.

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OUTPERFORM OUTSOURCE OUTPROFIT

The trend of outsourcing continues to grow unabated with the whole gamut of services, from simple to mission-critical tasks. There is not a single company on earth that does not outsource anything. It is not just about cost arbitrage, it is also a finer expression of division of labour at the organisational level. Like all leverage, outsourcing is a double-edged sword too. On one hand, it allows you to do more, faster. On the other hand, if it goes bad, it can easily kill your business. If you do not believe that is possible – you can google the Fox Meyer saga from the 90s and see for yourself.

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UNCHAIN YOUR CORPORATION

Businesses Are Chained By Unseen Chains. If You Are Looking For Ways To “Unchain Your Corporation” A Successful Business Transformation Is Required.

Successful Business Transformations Are Difficult, Yet Rewarding.

Business Transformation Is Fast Becoming A Question Of Survival In The Modern Globalised Era.

Modern Supply Chains Integrate Businesses And Economies Faster By Systematic Information Sharing From Internal And External Sources.

Companies Can Multiply Profits By Progressively Ramping Up Cohesion And Collaboration Of All Moving Parts In B2B Network To Achieve Tighter Integration.

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GREEN SUPPLY CHAIN – AN ACTION MANIFESTO

It is generally accepted that environmental consciousness is now changing to environmental proactiveness as organizations are discovering that it makes good commercial sense.

Boards are asking the management to review their policies related to environmental norms, not only to bolster their corporate social responsibility aims, but also because consumers are asking for greener supply chains

It is also widely agreed that consumers will increasingly prefer to buy more and even pay more for products or services provided in an environmentally sound manner.

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