Strategic Alignment

The division of labor into specialized tasks was, and is, a primary support in the development of the modern organization. Around the time of the American Revolution, Adam Smith glowingly described the efficiencies inherent in specialization using the example of a pin factory. ^[1] Specialization, however, had a downside that Smith did not anticipate. Specialists don't always see the big picture, and different specialties often have conflicting goals.

The division of labor creates boundaries between functions, and those boundaries develop into walls. We call the divisiveness inherent in the specialization of labor the Great Wall Syndrome, and we often see its negative impact on the performance results of the companies with which we work. When companies suffer from the Great Wall Syndrome, the formulation and execution of strategies are segmented and isolated into functions. One department completes its work in isolation from the other functions within the company and tosses it over the wall into the next function. Each successive department does the same until the goal is achieved. ^[2]

In Smith's eighteenth-century pin factory, the isolation of functions was not a particularly serious matter. But in today's diverse organizations, this isolation is one of the primary causes behind the failure of corporate initiatives and other change efforts. The most common results of the Great Wall Syndrome include inefficient strategy execution, inhibited communication, and slowed response times to customers and the marketplace. For instance, we've seen designers create new products with little or no input from the rest of the organization (or customers themselves); marketers create advertising campaigns and literature in a vacuum and salesforces uncover major customer needs and fail to report them.

What's missing here is the alignment of functions around the corporate value proposition. Organizations need a mechanism that can create a cohesive team, communicate and reinforce messages, get everyone working toward the same goal, and measure the progress toward that goal. Everyone in the organization should be concerned with how to create and capture value for customers. Everyone should feel a responsibility for the welfare of the customer.

One way to generate alignment around corporate goals is to require that each function involved in the formulation and execution of the go-to-market strategy cycle through the four phases of the sales process. The four stages of our method - Discover, Diagnose, Design, and Deliver - offer a single, customer-centered process through which each organizational function can explore the marketplace and ensure that their efforts are aligned with the functions.

The pharmaceutical industry is a good model of how this alignment mechanism plays out in the real world. When the R&D function of a prescription drug maker undertakes the creation of a new product, it uses a process that can be framed around the four phases of the sales process. R&D seeks to Discover a market of patients that is large enough to support the investment required to create a new drug. It Diagnoses the indications, causes, and consequences of patients' problems. It seeks a Design that will best solve the problems. And it Delivers the new drug through a highly regulated process of testing and government approvals.

The process is repeated as the company's marketing function and then the sales function create and align their efforts to bring the drug to the doctors and health care organizations that will prescribe it. The discovery process is used to segment and refine the markets for the drug. The indications of each segment are diagnosed, the solution design is altered to fit each, and the solution is delivered.

The doctors who prescribe the medication repeat the process yet again. They discover the profile of patients who are likely to need the drug, diagnose the individual case, design the proper dosage, and then prescribe the best solution and monitor the patient's progress throughout the delivery phase.

Each cycle of the process builds on the one before it; each is aligned with and supports the total effort. We can apply these same four phases to any product or service that grows out of a corporate value proposition. The major impact results from the accumulation of knowledge by each function and the efficient transfer of that knowledge as the product moves from development to deployment. In the absence of our sales process, there is a significant dilution of the ability to create and capture value as the organization moves from creating a strategy to creating results.

Organizational Learning

The second mechanism that enables the successful execution of a go-to-market strategy is the capacity to learn. MIT's Peter Senge popularized the idea of the learning organization in the early 1990s. A learning organization, he wrote, is an organization where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning how to learn together. ^[3]

Interestingly, when Senge identified the seven learning disabilities common in today's organizations, the first was the fact that employees tend to identify with their jobs and limit their loyalty to their functional responsibilities. This identification and loyalty, said Senge, does not extend to the purpose and vision of the larger organization. The Great Wall Syndrome strikes again!

The problem, of course, is that when learning is stifled, so is the ability of the organization to adapt and respond to customers and, ultimately, so is profitability. Some of the largest and most successful of today's businesses were born out of the inability and/or unwillingness of existing companies to respond to the marketplace.

Intel Corporation is a notable example. In the late 1960s, Fairchild Semiconductor, which was owned by Fairchild Camera and Instrument, was one of the nation's hottest high-tech companies. Two Silicon Valley legends, general manager Robert Noyce and head of R&D, Gordon Moore, were the guiding forces behind the company's success, but their ability to respond to the fast developing market for integrated circuits was being blocked by the parent company.

"I was running the laboratory and having increasing problems trying to push product ideas through Fairchild's management before they were pursued by a half dozen startups around the valley," explained Moore. "It was just a good time for us both to go do something new." ^[4] Moore and Noyce's "something new" was Intel, a company that raised $2.5 million in startup capital in a single afternoon in July 1968 and went on to become the 800-pound gorilla of the semiconductor industry. In 2001, Intel recorded revenues of $26.5 billion; Fairchild Semiconductor's revenues were $1.4 billion. I like to call it the "two guys in a garage syndrome." The question is "Are there two guys in your organization that are feeling the need to do something in their garage to respond to your customers?"

Whether an organization must respond to new opportunities, changes in the market environment, or correct miscalculations in its own go-to-market strategy, it must have a mechanism capable of capturing and responding to feedback. It needs to be able to identify, communicate, and respond to customer needs throughout the value creation process. When this process is distributed across the organization, it can serve as that mechanism.

This process requires that the various functions within the organization charged with delivering value to customers take to the field in one voice and one process. To effectively discover, diagnose, design, and deliver, they must frame their assumptions in terms of the customer, and they must test those assumptions against the reality of the customer's world. We want the R&D professionals to view their ideas and creations through the sales process. We want to push marketing and product development out into the real world where they can directly observe the symptoms of the absence of value, and experience first hand the pains that their customers feel. We want the salespeople to communicate the issues they uncover as they conduct a diagnosis, and we want service and support staff to report the issues they find during the delivery and implementation of solutions. This ongoing diagnostic feedback loop creates a learning flow that, in turn, can be used to generate continuous improvement and breakthrough innovation.

How might this play out in the everyday world of business? Picture a financial software maker that has a 250-member salesforce calling on CFOs around the world. As the salespeople are busy diagnosing the problems that their prospects are experiencing, they are developing valuable information. If at the end of a month, they report back that 76 percent of the CFOs that they have called on are experiencing and have identified "Issue X" as their greatest concern and relay that information to marketing, how soon can a 50,000-piece mailing aimed at CFOs having trouble with "Issue X" be in the mail? And if the company's software does not already address "Issue X," how soon after the information is delivered can the programmers modify an existing product or develop a new one that does address the issue?