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Business Strategy is Often Limited by Company Structure

on Wednesday, 02.05.2016

Companies can research and develop strategies that, in theory, would dominate a market, but not every company can execute a most-desired strategy, such as companies limited by how they are structured and how they function. For example, a company with many layers for securing approval to take action cannot generally move quickly, but also rarely makes a critical “process fumble.” By contrast, small entrepreneurial companies can change direction on a dime, but are subject to shortcutting processes that could hurt them down the road.

I like to use a very powerful analogy: In the northeast United States, the late summer and fall trigger activity in nature that enables different species of animals to deal with the lack of available food in the winter, each using a strategy unique to its structure and function:

  1. Birds fly south, where food is plentiful.
  2. Bears eat in excess and store large amounts of calories in their bodies, then hibernate in the winter to consume stored calories very slowly.
  3. Squirrels store calorie-dense nuts in the ground and access them as required.

These are structure-enabling and structure-limiting relationships. Bears and squirrels cannot make it to the south, like birds do, since they cannot fly. Squirrels and birds cannot store calories in their bodies, like bears can — and even if they could, they cannot reduce their metabolism rate and hibernate. Bears and birds cannot store food as squirrels do because they do not have the same incredible memory capabilities that squirrels have in relocating hidden food.

There is a lesson here: Just because there is an “ideal” or a “desirable” strategy does not mean that you can pull it off. A company is limited by how it is structured and how it functions today. You may ask dejectedly: Am I doomed to be stuck in a less desirable strategic position? The answer is decidedly “no,” because a business is not really restricted from changing its structure or function.

However, you cannot necessarily get there quickly without a concerted effort. The first step is to honestly assess existing structures and functions. Then, determining the key changes and the sequence of changes to implement requires a realistic sense of how change will be led and then reacted to by staff. Change is hard, and even harder to execute from within.