Applied Innovation in Organization Design and Development

Ten Things High Performing Managers Know About Organizational Design

Number 6. Strategy Is Structure

“Engineers want to be successful, and that’s worth more than money,” explains Dean Dahnke, a soft-spoken software engineer in his early fifties. His voice is clear and level as he recounts almost thirty years spent inhabiting the cubicles, clean rooms and beer busts of Silicon Valley, a forty mile long swath of California suburban and industrial landscape riding the curves of Highway 101 as it hugs the San Francisco Bay between SJC (San Jose International Airport) and SFO (San Francisco International Airport.)

“Success is defined differently for different kinds of tech products,” Dahnke continues, seated on a green felt ottoman in his Sunnyvale, CA home, located within a triangle formed by Google’s main campus in Mountain View, Intel’s Santa Clara headquarters building and Apple Computer’s Cupertino headquarters, a short distance from SETI (Search for Extra Terrestrial Intelligence) and the NASA Ames Research Center as well as the headquarters of eBay, Hewlett-Packard and Facebook. “If I am the guy designing circuit boards for a Mac, my success is based on market share. If I am working on iWork® (an Apple Computer software product similar to Microsoft Office®,) my success is based not necessarily on market share, but certainly on acceptance. I want to read in a Macworld article that a feature I worked on was the coolest thing in a new release.”

It’s an accepted management axiom that “structure should support strategy.” This principle was first popularized in a 1962 book called Strategy and Structure: Chapters in the History of the Industrial Enterprise by then Harvard Business School Professor, Alfred D. Chandler, Jr.

As Dahnke’s statements reveal, however, strategy determines not only the power with which a company connects to its market, but also the power with which it connects to and engages employees. In this sense, strategy becomes an integral element of organizational design. In other words, Strategy is Structure.

Number 3. Effective Organizational Design Begins and Ends With Process Design

On Tuesday, May 10, 2011, seven-year-old Kaydn Halverson of Kensett, Iowa, lost her life in a hit and run accident that occurred while she was attempting to board her school bus. On average, 35 children die in school bus related accidents each year. Estimates of school bus related injuries range from 9,500 to 17,000 annually.

Every school day in the U.S., more than 24 million kindergarten through Grade 12 students, ranging in age from 4 to 18, board some version of a yellow school bus. More than 19 million U.S. families watch their children walk out the door to the school bus stop each day, entrusting their safety to the school bus operator and equipment.

What error rate is acceptable for safe transportation of children to and from school? Accepting an error rate of one-tenth of one percent would mean 24,000 children might be harmed or killed on the way to or from school each day. Accepting an error rate of only one-thousandth of one percent would still mean that 240 children might fail to arrive home safely each day. The current rate of about 68 injuries per day represents an error rate of roughly one-quarter of one-thousandth of one percent (0.00025%.)

Every organizational outcome—like the percentage of children transported safely to and from school—is the result of one or more business processes. A business process is simply the series of steps followed to produce a result. Whether or not they are intentionally designed to create consistent, high quality outcomes, business processes happen and represent the methods organizations use to create value. Few common business processes achieve error rates as low as those achieved in the student transportation industry. Read More...

Number 2. Organizations Are Arrangements That Allocate And Thereby Create Value


Grass, long brown and trampled in the fall morning light, covers hills growing out of the bay wetland. A black and white smooth coat Border collie, bred for green hills a half a world away, hunts the many small trails tunneling through the grass. He hunts for sheep perhaps, or if not that rabbits, or the scent of a female.

Come Sunday, the young dog waits in the back of the truck, not yet his time. Inside the county fair arena, older dogs take their turns to see which can most skillfully move three fresh sheep through two gates and a chute to finally reach the pen. For ten minutes, each handler does his or her best to tuck cares and distractions in a pocket with the leash, while he or she shepherds the small band through the obstacles.

The qualities of the sheep, the dog, the course, the weather and the handler combine to make this ritual infinitely unpredictable as it is repeated in fields and fairs throughout the state during the long summer into fall.

Throughout the afternoon, a small crowd of casual suburban onlookers streams in and out of the open arena. At the fair mostly for the wine tasting, they happen on the dogs, working under the dim arena lights with focus and gravitas as though on a secret mission, between the classic cars and the llama exhibition. The onlookers study the dogs for ten minutes or maybe twenty before moving on, satisfied that if like bowling they understand the course and the scoring they have come to know its purpose.

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Number 1. Customer Experience Matters

How do you answer the question, what does your company sell?

More importantly, what do your customers really buy or, as may happen, fail to buy?

Because of the way Walt Disney answered this question, he established a company that became one of the most celebrated and high performing ventures on the planet.

Because of the way Stew Leonard answered this question, his company, Stew Leonard’s, came to be recognized by the Guinness Book of World Records for having the highest sales per square foot of any U.S. food store.

Because of the way another well-capitalized, technologically advanced company answered this question, they were forced to file bankruptcy in 2005 and operate under court supervision until 2007.

While it may be valid to say that your customers buy products and services, Walt Disney and Stew Leonard knew and demonstrated a better answer is to recognize the overall experience customers receive at the hands of your company and how that experience affects each customer’s willingness to purchase, to use and to repurchase the value delivered by your company. Customer experience is the better answer because it provides a more useful and accurate perspective from which to understand why your company is getting the results it is getting.

Ten Things High Performing Managers Know About Organization Design

In March 1990, a groundbreaking article by Michael E. Porter, a Harvard Business School professor, was published in the Harvard Business Review. Titled, “Competitive Advantage of Nations,” the article cited findings from a multi-year study into the results of the world’s largest trading countries, collectively accounting for 50 percent of all world exports in that era. Results highlighted the importance of innovation in promoting and maintaining what Porter called our national competitiveness, or our relative ability to develop and maintain economic strength on a world stage.

Often in business, headlines and simple messages gather momentum while the rich detail of the message is lost. During the two intervening decades, innovation and national competitiveness have become tightly linked in the American business press, undoubtedly leaving many Americans to believe that our country’s economic future is determined not by their work but instead by a small number of high tech companies, R&D experts and product development specialists.

However, what Porter’s research actually demonstrated and what he reported was this. Read More...
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