Organisational Architecture

When you craft your strategy, you decide what Value Proposition you are going to sell to which Target Customers in the future.

You are then able to design an organisation that will deliver this value proposition as efficiently as possible. This is the second responsibility of the CEO.
Every organisation has a Business Model, which is a broad term that describes how a business makes money by delivering value to the customer for less than it costs. Every organisation must choose Core Competences, which are the activities that the company does better than any competititor, in order to deliver the specific value proposition to customers. As well as theCore, there is Context, which is everything else that the organisation has to do to stay in business (e.g. Sarbanes-Oxley reporting). A key architectural decision that has to be taken is which activities will be done by the company and which will be outsourced outside the Boundary of the Organisation. Finally, there is the recruitment of the External Partners and Channels, including suppliers, distribution channels and partners.

The Business Model describes the high-level organisational architecture. At least as important is how the pieces work together in harmony. This is Aligning every part of the Organisation to deliver the value proposition. If the company delivers the value through being outstanding in just one area, it can be copied by determined competitors. True sustainable competitive advantage is created when your entire organisation is aligned to delivering this value, for no competitor can copy your whole organisation. The most obvious part of aligning the organisation is the organisational Structure – who reports to whom, how jobs and responsibilities are carved up and what organisational boundaries are created. Also visible are the Policies, Processes and Systems of the organisation – for example the recruiting policy, Performance Management process and IT platform. Each of these can be designed to contribute to the value proposition. Less visible, but even more important is the underlying Culture and Values of the organisation – “How we do things round here”. The assumptions and mindsets that drive the organisation every minute of every day are part of the culture from the CEO down to the shopfloor. Finally, a valuable tool for the CEO to impact the organisation is through Catalytic Mechanisms – simple rules that produce disproportionate results.

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