Reports

Working Paper

Aligning the Organization with the Market

George S. Day, 2005, 05-110

Organizations are steadily evolving toward closer alignment with their markets. Firms are being pushed by their strategies and pulled by increasingly assertive customers who demand more accountability and responsiveness to their distinctive needs.

In this study, author Day finds three stages of evolution beyond product or functional silos. Stage 1 improves alignment with informal lateral coordination. Stage 2 uses integrating functions such as key account managers and segment advocates. Stage 3 involves fuller structural alignment with customer-based front-end units or matrices with segment champions. Most organizations will not, cannot, or should not go all the way to Stage 3.

Each stage of this evolution is disruptive in the short run and adds coordination costs in the long run. Is it worth doing? The findings from a study of 347 companies were mixed. There was much greater accountability for customer relationships and better information sharing, but overall performance wasn’t improved.

Day also made in-depth studies of 15 reorganizations and finds four imperatives that a company must address when embarking on a structural realignment around markets:

  1. Have a guiding strategic rationale for the realignment such as providing solutions to customers or gaining deep knowledge of their needs. Structure must fit and follow strategy.

  2. Keep everyone focused on the customer experience. Ensure there are clear accountabilities for the quality of relationships with the best customers, the integration of products, and the tracking of lost customers.

  3. Adjust the pace of alignment to anticipated obstacles by proper training, keeping customers informed, and respecting cultural differences.

  4. Keep realigning in response to market changes and advances in technology. Most important of all, companies should not embark on a multi-year journey to better align their organizations with their markets unless there is sustained leadership commitment.

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