Dawgen Global Insights : March 2022

VOLUME 2 | ISSUE 7 | MARCH 2022 |

PAG E S 41

DAWGEN GLOBAL INSIGHTS

INTRODUCTION TO OUR MONTHLY NEWSLETTER DAWGEN GLOBAL INSIGHTS Welcome to Dawgen Global and our March 2022 edition of our Monthly Newsletter-Dawgen Global Insights.

This Newsletter has been produced to provide you with an overview of our firm and the wide range of services offered by Dawgen Global entities; whether audit, accounting, tax or advisory services.

Over the past 20 years, I can proudly say that Dawgen has significant experience and expertise that we draw upon, day after day, helping our clients to progress. Our Monthly Newsletter will demonstrate the strength of our firm and the unique and innovative approach we engender.

This is communicated through client case studies on how our team have collaborated to help our clients succeed.

This issue of Dawgen Global Insights explores several management tools and strategies including Functional Strategy. The role of corporate functions, traditionally, has been to conduct the various service-oriented specialized tasks necessary to run the organizations.

Corporate functions are of strategic significance in achieving organizational objectives, yet their role at most organizations is kind of contractual at best. These units assist in routine operations, facilitate other business units, and manage conflicts and relevant pressing matters.

This article outlines the 4 key opportunities that organizations can tap into by transforming their corporate functions . We also deliberate on the 3 categories of Corporate Capabilities that each corporate function requires to achieve the enterprise value propositions: Basic Capabilities, Competitive Capabilities, and Distinctive Capabilities.

In this edition we also examine Managing Disruption. This article discusses best practices for leaders managing their organization through a disruptive event. Recessions force leaders of almost all organizations, across the world, to contemplate about the impact of a profoundly Disruptive crisis.

Facing this crisis, some leaders flourished, causing their organizations to become stronger.

Some clearly staggered through. Still others were mere spectators to their organizations’ downfall.

I hope that you will find the information we provide in this Newsletter helpful.

Dr. Dawkins Brown Executive Chairman Dawgen Global

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TABLE OF CONTENT 04 Managing Disruption

20 Functional Strategy

Managing Disruption

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This article discusses

best practices for leaders managing their organization through a disruptive event ARTICLE OVERVIEW

R

ecessions force leaders of almost all organizations, contemplate

across about

the

the

world,

impact

of

to a

profoundly Disruptive crisis.

Facing this crisis, some leaders flourished, causing their organizations to become stronger.

Some

clearly staggered through. Still others were mere spectators to their organizations’ downfall.

This article talks about 3 approaches that leaders of the organizations—that withstood and thrived during recession—practiced:

1

Anticipate & Prepare

2

Plan & Respond

3

Implement & Sustain

Organizations that endure serious Disruptions are

Leaders are eternally lured towards

expected to emerge more robust, and more capable

complacency and not

of foreseeing and preparing for the next such event.

shaking things up.

The organizational head has the most important role to play in this regard.

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First, we should understand Innovation and Disruption go hand-in-hand INNOVATION & DISRUPTION Ever since Clayton Christensen coined the term “Disruptive Innovation” in the 1990s, the terms Innovation and Disruption have become linked and often confused with each other.

To understand the differences, let’s begin by defining Disruption.

Disruption occurs from 2

• Organizations are constantly trying to innovate and, likewise, all industries will eventually be

paths:

disrupted, as new products, companies, and

Disruption can occur from a low point in a market

industries emerge.

where the typical customer is overserved by the

• No industry is safe from Disruption. In a 2017 PwC

incumbent organizations.

survey of 1,379 CEOs around the world, 60% said

Disruption can also occur by focusing on low-end

their market has already changed or completely

customers who are underserved or not served at all by the current market.

Innovation is the ability to define and develop new products and services and deliver them to the market. It is the fundamental source of Value Creation in companies.

reshaped in the past 5 years and over 75% anticipate they would by 2022.

• Note the catalyst for Disruption is not always Innovation. It could be driven by other market changes, such as regulation.

• It is also important to recognize all Disruptors are Innovators, but not all Innovators are Disruptors.

Source: The Fear of Disruption Can Be More Damaging than Actual Disruption, Leinwand, Strategy &, 2017

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Organizational heads who are successful in bringing their organizations out of Disruption adopt 3 ways to lead MANAGING DISRUPTION OVERVIEW Regardless of the reason for Disruption, leaders of their organizations are ultimately responsible for Managing Disruption.

To be effective, leaders of their organizations during times of Disruption requires the management team to lead following a structured 3-phase approach:

Anticipate & Prepare

Plan & Respond

Implement & Sustain Top leaders must spot the dynamics of Disruption, foresee its possible consequence, develop a plan to respond to it, control that response, and maintain the needed changes.

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There is opportunity in every crisis for those who are prepared.

Source: Captains in Disruption, 2013, Booz & Company

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The initial phase in the response to Disruption is to have the capability to anticipate and then prepare accordingly ANTICIPATE & PREPARE OVERVIEW This involves assessing the likelihood of—and the possible fallout of—an adverse event. Preparing for it is the other part of this process that warrants keeping the extent of preparation proportionate to the type of, and probability of, the risk.

• For any organization, anywhere, the 1st step in

and possible loss value of different types of risks

dealing with Disruption is to build the ability to

have been used previously; these models enable

foresee it and spot its signs before it strikes.

preparations as per probability of occurrence and

• Predicting every Disruption is not possible but anticipating the varieties of Disruptions that may

propensity for loss.

• Such

models

have

limitations

though—like

be especially damaging and preparing for them

having relative strength and also not being able

correspondingly is a possibility.

to predict highly unlikely events—which make the

• Risks against which organizations think they are hedged because of their competency and capabilities should be specially looked at.

• Clear distinction should be made between Risk Management and Disruption anticipation as the 1st relates to risks involved in day-to-day operations while the 2nd is on a larger scale.

organizations relying on them complacent to such occurrences.

• Only the top boss of the organization can circumvent these limitations by learning to ask better questions on multiple tiers of the organization and looking forward instead of relying merely on past data.

• Analytic models that determine probability for

Only those who are continually apprehensive last.

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A useful tool for anticipating and preparing for

Disruption is the 4 Stages of Disruption Maturity Model ANTICIPATE & PREPARE STAGES OF DISRUPTION Innovation for a technology product that eventually leads to Disruption follows a 4-stage evolution.

The 4 stages of Disruption are:

Appealing Convergence

Disruption of Incumbent offering—

Incumbents recognize the threat of this Innovation

something the Incumbent quickly dismisses as

and begin incorporating the new, disruptive features

irrelevant.

into its existing offering. In other words, there is now

The

Disruptor

introduces

the

new

a convergence between the emerging and existing

Rapid and Linear Evolution

offerings.

The Incumbent rapidly Innovates upon its initial

Complete Reimagination

offering, as it gains some market traction.

The fully disruptive Innovation is created.

• Understanding this 4-stage model will help us understand what design choices to prioritize and when.

• At any given time, different products and organizations are likely to be at different stages relative to local “end point” of Innovation.

Disruptive products follow this 4-stage pattern— however, this pattern doesn’t guarantee Disruption.

Source: The Four Stages of Disruption, Sinofsky, Recode, 2014

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At each stage of Disruption, there are defining dynamics—

actions by the Disruptor and reactions from the Incumbent

ANTICIPATE & PREPARE – STAGES OF DISRUPTION (ACTIONS & REACTIONS) Each stage is defined by certain actions and reactions by the Disruptor and Incumbents, respectively.

Disruption of Incumbent Action by Disruptor At this stage, the Disruptor introduces a new offering with a distinct point of view, knowing it does not solve all the needs of the entire existing market.

However, the offering provides a better solution and will advance the state of the art in technology and/ or business.

Reaction from Incumbent The Incumbent dismisses the new product or service as something that is not relevant to existing customers or market.

In other words, the Incumbent is in a state of denial that the Innovation poses an existential threat.

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Rapid linear evolution Action by Disruptor The Disruptor proceeds to rapidly innovate by adding features and capabilities.

It

completes

the

Customer

Value

Proposition after initial traction with early customers.

Reaction from Incumbent The Incumbent begins to compare its fullfeatured offering to the new offering and show deficiencies.

In other words, the Incumbent begins to recognize and validate the legitimacy of the Innovation as a potential threat.

Appealing Convergence Action by Disruptor The Disruptor sees opportunity to acquire broader customer base by appealing to slow movers.

Also, sees limitations of own new product and learns from what was done in the past, reflected in a new way.

Reaction from Incumbent The Incumbent considers cramming some element of disruptive features to existing product line to sufficiently demonstrate attention to future trends, while minimizing interruption of existing customers.

At the stage, the Incumbent is now directly competing the Disruptor.

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Complete Reimagination Action by Disruptor The Disruptor approaches a decision point, as new market entrants can benefit from all that its product has demonstrated, without embracing the legacy customers (as done in the previous stage).

The question now becomes: Do we embrace the legacy market more, or keep pushing forward?

Reaction from Incumbent At this point, the Incumbent is too late to respond.

The company begins to define the new product as part of a new market, and existing product part of a larger, existing market.

EXAMPLES There are countless examples of Disruptions that totally upended very lucrative and well positioned Incumbents.

Some examples include:

VS

VS

VS

VS

To learn more about the Stages of Disruption, refer to this framework: https://flevy.com/browse/flevypro/4-stages-of-disruption-5265 Source: The Four Stages of Disruption, Sinofsky, Recode, 2014

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2nd step in responding to a Disruption is to make a tenable plan and pursue it realistically PLAN & RESPOND – OVERVIEW OVERVIEW Ensuring that there is an unmistakably defined objective and a persuasive motive for it, developing a workable and reliable plan for attaining that objective, and persistently and realistically pursuing it.

• Threats can come to light in 2 ways; either the top bosses anticipate a vulnerability that may result in potential Disruption or when the disrupting event actually occurs.

• Forming a response to the Disruption is the responsibility of the head of the organization; leading from the front is critical for effectively managing a disrupting event.

Short-term thinking

• Head of the organization should consult all stakeholders,

and immediate

without prejudice, with humility, and listen to all opinions

gains have to take a

with an open mind.

back seat especially in Disruptive events.

• After careful consideration the leader should announce a response delineating clearly what actions are needed, by whom, and in what timeframe.

• The leader should not allow any dwelling on the past or playing the blame game. The focus should instead be on the future.

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Leaders will be able to respond to Disruption effectively by following 4 principles PLAN & RESPOND – GUIDING PRINCIPLES Effective bosses comprehend the fact that Disruptions will occur, and that no organization can shield itself entirely from its consequences.

The following 4 guiding principles will aid the top bosses enormously when they plan a response to Disruption:

1

Head of the organization is the most important

2

Overcoming resistance to change and shaking

3

Organizational heads have to make sound

person in shaping and executing a response.

inertia is a must for an effective response.

choices when forming their team of top executives.

4

Selecting a small group is often necessary when making a choice of top decision-makers.

Disruptions

Countering Disruption in a

provide hidden

coherent manner, leveraging

opportunities to the

these

guiding

principles,

may well become the CEO’s

organizational heads

defining moment and may

who are ready.

determine how the boss is regarded and remembered.

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Source: Captains in Disruption, 2013, Booz & Company

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Head of the organization has to take the reins in shaping the response and has to shake the inertia PLAN & RESPOND – GUIDING PRINCIPLES (DETAILS, 1 OF 2) Head of the organization is the most important person in shaping and executing a response.

Head of the organization is the most important person in shaping and executing a response.

Head of the organization must assume prompt

It is imperative that the head of the organization

responsibility for the situation and be willing to be

explain the circumstances to the employees and

answerable for the ultimate success or failure of the

elucidates on the plan in a distinct and straightforward

organization’s response.

way.

Momentum of change has to be established by the

Messaging has to be clear-cut, forceful, and consistent

organizational head regardless of the circumstances

from the top in order to show that usual ways are no

of Disruption i.e., internal, external, anticipated or

longer tolerated and that change is inevitable.

completely unpredictable.

Altered nature of circumstances ought to be conveyed

Occasionally it becomes indispensable for the head

to all stakeholders, both inside and outside the

of the organization to coerce action, decisions, and

organization, in ways that stimulate the new culture.

openness.

Organizational head should foster a future-oriented

Matters may become gradual to an extent after the

culture and announce a sort of amnesty for past

initial quick response as decision-makers manage

actions.

the continuing effects of the Disruption, but most of the momentum is likely to be carried by the organization.

Old ways of doing things have to be abandoned by all in the organization for it to move forward.

Collaboration across the organization is undoubtedly the chief accelerator of change.

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Choice of a sound top executive team by the head of the organization is a critical step in responding effectively to Disruption PLAN & RESPOND – GUIDING PRINCIPLES (DETAILS, 2 OF 2) Organizational heads have to make sound choices when forming their team of top executives.

Selecting a small group is often necessary when making a choice of top decision-makers.

Employees should be given a chance to adapt to the

the quicker they are necessary to execute.

new culture, those who do not adapt should be let go.

Ironically, the more extreme the changes intended,

Implementing changes swiftly can be accomplished more easily by a small team of decision-makers

Head of the organization has to go about this process by choosing those executives who are completely on-board in the new process.

compared to a sizable band of executives.

Head of the organization has to not only know the strengths of the top executives thoroughly but should

Adjustments in top management must be made

also have clarity on what needs to be accomplished,

prudently; even a couple of noticeable changes can

when, and how.

considerably heighten employees’ awareness that the circumstances are grave.

Matching capability with task correctly, will ensure proper and nimble execution of the planned changes.

Process of clearing up should be devised in such a way as to give due respect to every employee whether they are staying or leaving.

Leadership pushes culture, and culture propels organizational accomplishment.

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Quickly implementing the changes needed and consistently pursuing them to the end is essential for the organizational head IMPLEMENT & SUSTAIN – OVERVIEW OVERVIEW Swiftly implementing the changes through careful matching of top executive’s capability to task is one part of the process, the more tedious and critical part is sustaining those changes so that they take root and become the way of doing things.

Organizations confronted with business crises, initiate suitable responses but all too often are incapable or reluctant to carry them to completion.

In such scenarios the issues that stymied the response continue to remain unexamined, and the organization becomes even more ill-prepared for the next crisis.

To implement change and sustain an organization during Disruption warrants viewing minutely both the Organizational Design and the Organizational Culture.

It is the organizational head’s responsibility to ensure the structure and the culture are ready for the needed changes and set to sustain the new

Organizational head has to genuinely believe in what is needed and be relentless in its pursuit.

strategies and each other.

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Responding to Disruption in most cases necessitates change in Organizational Design IMPLEMENT & SUSTAIN ORGANIZATIONAL DESIGN Response in majority of Disruption cases demands a move to a more agile, concentrated, and strategically aligned Organizational Structure.

Organizational

Structure

should

be

such that inspires employees to change, instead of ensnaring them in obsolete processes or approval hierarchies.

New structure has to allow employees to collaborate completely through internal boundaries, even if that contradicts established channels of communication or control.

The type of organizational change usually required to counter Disruption ought to

Organizational heads ought to be bold enough to entirely change Business Models.

be a continuing endeavor.

It is about persistently inspiring and crafting an organization that is never contented and thinks for the next objective to strive for.

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Effective response to Disruption is almost impossible without a change in the Organizational Culture IMPLEMENT & SUSTAIN CULTURAL CHANGE Changing a large organization’s culture in response to a Disruption can be even tougher than Organizational Redesign, but it is as significant as the former.

Quite a few organizations devise new strategies and

Leaders have to start interacting at multiple levels of

Operating Models but do not pay attention to or do

the organization to get effective feedback regarding

not know what to do with Organizational Culture.

matters.

The only actual manner of changing an organization’s

This interaction enables permeation of the change

culture is to change its behavior.

spirit among the lower tiers of the organization

Cultural change has to be defined at the top and

making those employees catalyst for change.

has to start at the top and is more effective when

Being an insider gives a tremendous advantage to

practiced first rather than announced first.

the head of the organization compared to coming from outside and trying to make a change.

Head of the organization has to make clear what kinds of behavior are required.

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Functional

Strategy

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Constant pressure on businesses to compete in this Age of Disruption has forced them to rethink the role of their corporate functions ARTICLE OVERVIEW

T

he role of corporate functions, traditionally, has been to conduct the various serviceoriented specialized tasks necessary to

run the organizations. Corporate functions are of strategic significance in achieving organizational objectives, yet their role at most organizations is kind of contractual at best. These units assist in routine operations, facilitate other business units, and manage conflicts and relevant pressing matters.

This article outlines the 4 key opportunities that organizations can tap into by transforming their corporate functions:

1

Change in Market Environments

3

Increased Pressure on Process Improvement

2

Increased Focus on Discretionary Activities

4

Development of Distinctive Capabilities

This article also deliberates on the 3 categories of Corporate Capabilities that each corporate function requires to achieve the enterprise value propositions: Basic Capabilities, Competitive Capabilities, and Distinctive Capabilities.

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The role of corporate functions has customarily been transactional CORPORATE FUNCTIONS OVERVIEW The role of corporate functions, traditionally, has been to conduct the various service-oriented specialized tasks necessary to run the business.

For instance: Human resources (HR) function is typically responsible for staffing people, managing their benefits, and administering performance appraisals

and

career

advancement

procedures.

Information technology (IT) unit deploys and manages the organization’s technology infrastructure, systems, and applications.

Finance unit performs activities concerning accounts, credit, payroll transactions, taxes, and financial reporting.

Learning and Development unit administers training programs to build and maintain organizational

capabilities

integral

for

Typically, when functional

developing competitive advantage.

leaders are asked to make

Legal department evaluates contracts and

improvements, it implies doing

ensures regulatory compliance.

the same things more efficiently and at greater cost savings.

Corporate functions are of strategic significance in achieving organizational objectives yet their role at most enterprises is kind of contractual at best.

These units assist in routine operations, facilitate other business units, and manage conflicts and relevant pressing matters.

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The role of Corporate Functions is evolving with the fluctuating business environment CORPORATE FUNCTIONS OPPORTUNITIES Lately, the expectations from corporate functions have evolved to the degree where the leadership anticipates the support functions to be of more value for the company.

These corporate functions are now required to align more strategically and directly with the Corporate Strategy.

Functions supporting brands, like R&D, supply chain, procurement, sales, and marketing have also undergone changes, but not as much as support

Change in Market Environments

functions.

The Transformation of corporate functions is inevitable due to various reasons.

To undergo

Increased Focus on Discretionary Activities

Transformation, businesses should act quickly to tap value that these 4 key opportunities offer:

Increased Pressure on Process Improvement Alignment of functions with strategy is a must for businesses to survive in this highly competitive age.

Development of Distinctive Capabilities

Source: Think Functionally, Act Strategically; Booz&Co; 2013

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With changing markets, expectations from corporate functions is intensifying CORPORATE FUNCTIONS OPPORTUNITIES (DETAILS, 1 OF 2) Change in Market Environments The expectations from corporate and support functions

is

increasing

because

markets

are

becoming more and more volatile, uncertain, and rife with innovative rivals.

Now leaders

With this, the constantly shifting customer demands

have more time

are forcing organizations to put more pressure on

to focus on

strategic as well as support functions. They have to

discretionary

develop expertise to deliver on more complex tasks

activities that

than in the past.

For instance, IT needs to be able to now design

produce more value.

applications capable of unearthing vast data lakes to reveal valuable insights in real-time. Likewise, HR should be capable of onboarding diverse key talent globally and offer flexible career paths to retain people.

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Increased Focus on Discretionary Activities Traditional corporate functions were more occupied with routine operational

activities—resolving

financial

errors,

emailing,

overseeing employee compensation, and managing IT assets.

However, now, thanks to Process Optimization and Outsourcing, corporate functions have been streamlined and become efficient to the point that they have slashed the requirement for resources to deal with routine activities significantly—about 35% of staff time compared to 70% in the past.

This has freed immense resources, leaders’ time and effort to be spent on discretionary strategic initiatives that have the potential to bring more value for the organization.

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These changing times have pushed the businesses to streamline their processes CORPORATE FUNCTIONS OPPORTUNITIES (DETAILS, 2 OF 2) Increased Pressure on Process Improvement

Development of Distinctive Capabilities

Changing market dynamics and intensifying

The changing market dynamics have made the

rivalry has strained the organizations to ensure seamless implementation of strategic initiatives, boost effectiveness, and bring on operational excellence.

companies realize the significance of creating unique capabilities—differential edge acquired due to the ability to do things remarkably and inimitably.

For instance, distinctive capabilities in developing

This competitive landscape has forced the functional leadership to reduce expenditures, find new avenues of operational improvement, and enhance value.

online

user-friendly

interfaces,

pristine

supply

chains, and technological prowess have contributed immensely to Amazon’s success.

Likewise, Hyundai’s success in the US market is attributed to distinctive capabilities in developing impeccable automobile design, marketing and continuous quality improvement.

Functional units are now more than ever required to support new capabilities in addition to doing their routine activities with excellence.

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Corporate functions have taken a more pivotal role in devising and implementing the Corporate Capabilities lineup today FUNCTIONAL STRATEGY OVERVIEW With disruption and volatile market dynamics, the responsibility of Corporate Functions is mounting across industries and organizations.

Organizations are now more focused on empowering

Rather than just assessing fulfilment of requests

their global corporate employees.

from the team members, rewards and recognition of functional leaders is now being tied more with

Marketing, R&D, and procurement functions are

their efficiency, judgment, ability to create key

being incorporated across all business units of the

differentiators for the organization, and finding

business.

efficient ways of doing business.

The Corporate Functions have now become more

Corporate functions should define their role in

and more important for the organization’s Corporate

view of the overall capability schema and how they

Strategy.

can drive that capability outline—rather than just

The increasing significance of Corporate Functions

realizing their functional excellence agenda.

demands from the functional leaders to operate more strategically.

Functional leaders need to now concentrate on Conflict Resolution among different units—e.g. disagreement over dissonant IT systems or unnecessary talent programs.

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In today’s changing market dynamics,

delivering enhanced value by the corporate functions should be treated as a strategic initiative FUNCTIONAL STRATEGY CAPABILITIES The “enhanced value delivery” initiative requires preparing a statement of the Value Proposition at the outset.

This has to be done not only at the enterprise level but also at the unit level, in addition to finding answers to the following key questions: Do we strive to become an innovation-centric organization, introducing cutting-edge product and service offerings?

Are we aiming to compete on the basis of low costs?

Is it delivering amazing Customer Experience that we aim to create our “way to play?”

Is there anything else that we want to adopt to deliver value?

In successful organizations, the Value Proposition is closely aligned to the enterprise’s key strategic

To accomplish this, leaders need to define their organization’s selected approach to creating value for its customers and the way to attract and retain customers.

capabilities—the knowledge, skills, and things an organization does exceptionally well.

Functional

leaders are the ones who outline, develop, manage, and retain these capabilities.

Therefore, it is critical for them to have a clear perception of the enterprise’s value proposition, capabilities required to achieve them, and the responsibilities of each function in this regard.

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DAWGEN GLOBAL INSIGHTS I MARCH 2022

This warrants segregating the capabilities each function bring to the table into 3 broad categories:

BASIC CAPABILITIES

DISTINCTIVE CAPABILITIES

COMPETITIVE CAPABILITIES Functional leaders should know in which category their capabilities fall—and balance the allocation of their resources accordingly.

Source: Think Functionally, Act Strategically; Booz&Co; 2013

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Basic Capabilities are essential for the survival of an organization FUNCTIONAL STRATEGY CAPABILITIES (DETAILS, 1 OF 2)

Competitive Capabilities enable bringing in efficiency and Cost Optimization.

BASIC CAPABILITIES

COMPETITIVE CAPABILITIES

These capabilities involve payroll management,

Competitive Capabilities, as the name suggests, are

administration of employee benefits, and basic

integral for an organization to compete with rivals.

Information Technology services.

Examples of such competences include distribution, These roles are performed by specific units.

procurement, logistics, back-office operations, and integrated IT architecture.

Basic capabilities are, although, critical but do not set a company apart from its rivals.

Competitive Capabilities are crucial for reducing costs and improving efficiency.

However, these

These capabilities need to be managed efficiently,

competencies can’t make an enterprise a world-class

automated, or outsourced to low-cost service

organization.

providers to free up valuable resources to focus on creating Distinctive Capabilities.

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Distinctive Capabilities are essential to gain a Competitive, Differential Advantage FUNCTIONAL STRATEGY CAPABILITIES (DETAILS, 2 OF 2) DISTINCTIVE CAPABILITIES This category of capabilities are the ones that are

made possible by the involvement of product

integral to create a Competitive Advantage integral

development, manufacturing, finance, and market

for outpacing rivals.

research functions.

Their product, the Swiffer

WetJet mop, was created and perfected by a product To develop these capabilities, a number of functions

launch team that paid multiple visits to consumers

have to collaborate in ways that are difficult to

struggling with conventional mops.

imitate by the competitors.

Procter & Gamble’s success in Innovation, for

Differentiating Competencies

instance, isn’t attributed merely to the capabilities

should be invested in

of its R&D unit. This level of Innovation has been

and focused on to realize Competitive Advantage.

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A Functional Operating Model outlines the way strategic objectives are going to be implemented FUNCTIONAL OPERATING MODEL DESIGN OVERVIEW Effective implementation of strategic initiatives is essential for the success of an organization, in this disruptive age.

A Functional Operating Model development involves reimagining:

To build Distinctive Capabilities, organizations should have:

• The approval authorities, processes, and systems.

• Global centers of excellence

• How performance is evaluated at the unit level.

• A supportive Organizational Structure

• Organizational structure, roles and responsibilities.

• Decentralized operations

• Centralized

• Allowed shared services or outsource supportive

authorities.

control

versus

delegation

of

capabilities.

• Collaboration between business leaders and functional managers to make strategic decisions and build innovative distinct capabilities.

Collaboration across different functions assists in gathering valuable customer insights, critical knowledge transfer, and designing new products.

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Each corporate function should contribute towards developing Distinctive Capabilities and value for the company ultimately

FUNCTIONAL OPERATING MODEL DESIGN FUNCTIONAL PERFORMANCE KPIS With changing environments and markets the main concern of corporate functions should be to aid in creating and maintaining Distinctive Capabilities. But before doing that, Leadership should be able to clearly outline and gauge the value each corporate function is bringing.

In order to gauge the productivity and value contributed by each corporate function, senior Leadership needs to utilize 4 Key Performance Indicators (KPIs):

1 Quantifiable Impact 2 Clear Drivers of Value 3 Cost Effectiveness 4 Internal Market Validation

These functional KPIs are important to measure successful execution of projects to deliver value.

Source: Think Functionally, Act Strategically; Booz&Co; 2013

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Leadership needs to calculate the results of organizational initiatives that corporate functions undertake in specific timelines FUNCTIONAL OPERATING MODEL DESIGN

FUNCTIONAL PERFORMANCE KPIS (DETAILS)

Quantifiable Impact

Clear Drivers of Value

Each corporate function has to evaluate the impact

Ascertain the key contributors of a corporate

of their initiatives against the assigned business

function’s value to the enterprise.

objectives, in accordance with the organization’s strategic priorities.

For example, improved demand management ability depends on developing superior analytical methods

For example, centralized consumer insights can be

to enable better access to info and scalability. Metrics

gauged by the reduction in time required to create

should track the ability to assess the degree of tools

new products within a specified time.

availability versus their usage.

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DAWGEN GLOBAL INSIGHTS I MARCH 2022

Utilization of these KPIs assist the functional leaders in assigning adequate resources to higher-value activities.

Cost Effectiveness

Internal Market Validation

Each corporate function’s contribution to the

Gather and integrate input from internal and external

organization should be assessed based on improved

stakeholders,

financial performance and enhanced profit versus

effectiveness and value.

the expenses incurred on achieving profitability.

to

improve

corporate

functions’

For example, using service-level agreements, chargebacks, or in-house versus outsourcing decision.

Deploy tools to align function’s operations and investments with the functional priorities and operating model, to maximize value creation.

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Capabilities-driven strategy needs corporate functions to get involved unequivocally FUNCTIONAL OPERATING MODEL DESIGN

LEADERSHIP CONSIDERATIONS Functional leaders need to distinguish Distinctive Capabilities and design tools and procedures to develop and use them to implement their Functional Strategy.

Functional Leadership needs to consider the following key considerations to design an effective Operating Model: A functional leader’s interpersonal skills and strategic insights are the hallmark of the function’s as well as organization’s success.

Distinctive

Capabilities

aren’t

developed

by

a

single function itself; this necessitates meaningful collaboration between various units.

There should be open communication with the

Higher degree of alignment between the HQ and local business leaders and focus on the most critical capabilities enhances functional leadership.

functional leaders if their performance and priorities conflict with the organizational priorities.

Leaders should collaborate to build Distinctive Capabilities and to discontinue investing in unviable initiatives.

Functional leaders should transform their mindset from a service-oriented approach to a strategic approach.

Effectiveness and harmony between functional leaders demand greater delegation of authorities and curbing practices that suppress innovation.

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DAWGEN GLOBAL INSIGHTS I MARCH 2022

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DAWGEN GLOBAL INSIGHTS I MARCH 2022