Published in the September edition of Dialogue, an international magazine
It would be fair to say that there is a direct correlation
between the success of an Organization and its Organization Structure. The more aligned the structure is towards the
goals of the organization, the more impactful the execution of the
Organization.
While the design and pricing of the products, the
distribution efficiency and the marketing communication play an essential role
in determining success, they have to come together under the umbrella of a
tightly woven organization structure to have a multiplier effect on results.
In an increasingly globalized world, where most
organizations depend on markets which were hitherto untapped by them and are
thousands of miles away from their headquarters, the challenge that crops up is
– what is the structure that a company needs to put in place to reap maximum
benefits.
Can the theories of
Astronomy help us arrive at a model?
In mankind’s quest to understand how the universe works, two
theories, many centuries apart, were propounded.
The Geocentric theory was propounded by the
ancient Greeks that said that the Earth (Geo) was the Centre of the Universe
and the other planets and the Sun circled it. The Heliocentric theory
propounded that the earth and the planets revolved around the relatively stable
Sun (Helios).
Now, replace Sun with the company headquarters and the Earth
with the market.
The heliocentric theory has the company headquarters as the
all-powerful entity and its divisions and the markets toe the headquarter line.
The product, pricing, communication, employee policies are driven from the
Headquarters, with very little delegation of power, authority down the
line.
The complete opposite of this is
the geocentric model where the market determines the strategy of the Company.
The products, the pricing and communication vary basis the market.
Customization is a way of life in this model.
An example of a company run on the heliocentric model is
Apple. Whether it is design, pricing, communication or logistics, Cupertino
does it all. The product is the same
whether the customer is in Chicago or Canberra and the communication the same
in Mumbai or Mexico City. This approach has worked wonders for the Organization
and made brand Apple a gigantic success.
A geocentric model example is Nokia. In its heydays, it made
customer centricity its mantra. The product, pricing, distribution models etc
varied from country to country. If power starved and noisy India required a
differentiated product, Nokia launched phones with higher decibel levels and
longer battery life and if Europeans bought their phones on contract, Nokia
invested in strengthening that distribution model. The customization worked,
propelling it to market leadership position for many years, till it all came
crashing down.
When do these models
work?
The heliocentric model works when the product portfolio is
sharp and the brand has mystique and aura. When an Organization sells products
like Chanel, Louis Vuitton or Rolex, a tightly run Organizational structure
with decision making vested in a few individuals is ideal. The more rigid the
brand and the farther the product is from empowering its customers, the more
the allure.
The heliocentric model also works in the non-so elegant
worlds of bureaucracy and defence forces. This is because, by definition, these
organizations cannot mean different things to different people.
The geocentric model works best when the product portfolio
is not compact and the market determines the product choice. A Walmart in the
US has to sell products that are substantially different from ones sold in
China. And, the decision making has to be vested in the local market. Just
imagine the pace at which Walmart would move if for procuring bananas in
Mexico, the decision were to be made in Arkansas, Bentonville its headquarters.
For Organizations like Unilever and P&G, the geocentric
model becomes the Hobson’s choice. By their very DNA, these Organizations have
to work on an empowering mode. The decision making has to be vested with the
teams running the local markets and customization of products is a must.
Whether it is the average size of a shampoo bottle or the look of a model to be
used in communication, the calls have to be taken by the people close to the market.
What is the right
model?
To determine the right structure, an Organization has to
dispel the notion that the market determines the model. It is its mindset that
should determine its model.
Want to create a brand? Want to create a mystique around
yourself? Want to be seen as alluringly distant? Want to create a unique user
experience? Go heliocentric.
The pitfalls – the investment in brand, design,
communication and people has to be ahead of the curve, always. The Heliocentric
Japanese Organizations like Sony, Panasonic and Mitsubishi are pale shadows of
their old selves now for the simple reason that they could not continue to be
ahead of the curve.
Want to mean different things to different people? Want to
sell branded commodities? Want to appeal to the bottom of the pyramid? Want to
sell a portfolio of products? Go geocentric.
The pitfalls – these organizations would find it difficult
to reach meteoric levels, the growth rates are stymied by the level of economic
activity. They would find it difficult to sell brands and easier to sell
products.
And the caveat, Heliocentric Organizations with weak
leadership would get propelled into obscurity is seemingly no time, but
Geocentric Organizations with weak leadership might result in Centres of
Excellence, close to the market.
To sum up, when planning an Organizational structure, the
leader/ leadership should be clear about its mindset. What it wants to create
should result in the structure, not the market.
