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Does your company work like five fingers, a fist or a claw?

by Mark P. McDonald  |  April 5, 2010  |  3 Comments

This is another way of asking whether or not you’re your company is an enterprise.  The answer means a lot to your strategy, how you run IT and the levers you pull to in your enterprise and technology strategy.

Every company consists of different divisions and operations.  Think of these as fingers on your hand.  Everyone has fingers and they define how you manipulate/interact with your environment.  They can also help you figure out how your company competes and how it should view itself and the decisions you make.

  • Companies that operate and are organized in multiple independent product line, lines of business or business units work like five fingers on a hand.
  • Companies that operate and are organized as an enterprise work like a fist.  They see strength in scale and concentrating market power across the organization.
  • Companies that think they are independent, yet run their operations as an enterprise work like a claw.

Here are few other questions to ask to test if you really operate as fingers, a fist or a claw:

  • Do you market to the same customers?
  • Do you expect a customer in one business unit to be interested in the offerings of another?
  • Are our offering an ‘integrated’ or ‘turn key ‘ solution in the marketplace?

If you answer yes to any of these questions then you should operate like a fist as you are presenting yourself as an enterprise to customers and the market.

  • Do you expect their to be synergies and savings generated from scale?
  • Do you expect the largest business unit to set the operating model and playbook?
  • Do you expect the largest business unit to set the tone for the rest of the enterprise?
  • Have you implemented shared services across the business units?

If you answer yes to any of these questions they you should operate like a fist because you expect the company to operate as an enterprise.

  • Have you moved executives from one business unit to another and expect them not to miss a step?
  • Do you have common metrics and measurement systems across business units?
  • Do you expect all business units to generate the same or higher return on capital as average for your company?
  • Are distinctions between business unit processes truly distinct such that one unit cannot learn from another, or that tailoring that process to a new industry would compromise its value?

You know the drill; in these questions it is looking at the management and financial aspects of your company.  Yes to one or more of these questions is indicative of being an enterprise.

There are no questions about technology.  IT often masks the true nature of an enterprise and is therefore not a reliable indicator.  CIOs and IT leaders like to see the firm as an enterprise with enterprise-wide systems because they are relatively easier to implement, manage and control as they place IT at the center of a unified/enterprise wide business model.  At the same time, business units ask for unique solutions and use IT to prove that they are different.  “We have XYZ core systems and not the 123 systems so we are different.”  So your IT structure actually tells you little about the reality of the firm.

The question of being a fist or fingers revolves around understanding the true nature of your firm and creating the right structures to support it.  Unfortunately too many companies are confused about who they are and how they operate.  In my experience these are the camps they fall into:

Fooling themselves, but not their customers: Companies that they are fingers based on a belief that they have unique business units, only to be an enterprise in their operational reality.  These companies struggle with the idea of centralized operations.  They equate power to size of budget and number of people working in the business unit.  They have trouble making decisions as artificial or inconsequential differences rob them of operating efficiencies and strength.  Their cost structures and capital requirements make them ready candidates for restructuring or consolidation.

Frugaling themselves and their customers: Companies that are fingers in the marketplace, but try to run their operations as a fist for financial and other reasons.  These are organizations that equate strategic management with financial management.  This view causes them to carry additional customer service and support burden because of their schizophrenic view of the market as the tension between their external market view and internal operations view damages themselves and their customers.

Focused from front to back: Companies that are fingers in the market place and are fingers operationally have decentralized IT federated operating models and a lightweight core responsible for allocating capital and providing corporate oversight.  These organizations value their unique markets more than they value any temporary or disruptive centralization effort.  These companies are unique because they know who they are, value it above apparent financial measures and seek to grow the parts as fast as possible.  Examples of these organizations are few, but consider Tyco or General Electric.

Formidable as scale drives success: Companies that are a fist in the marketplace and operationally, look to scale efficiencies based on recognizing their core similarities.  These companies used to be called ‘single line’ companies reflecting that they concentrate on single market.  These companies can have different divisions, but in essence they are in the same business.  IBM, McDonalds, most financial institutions and retailers are examples.

Do you operate as fingers, a fist or a claw?  The answer may not be readily apparent, but the reality has significant impact on your operations, the opportunity for IT success and your ability to compete in the marketplace.

Category: cfo  cio  leadership  strategy  technology  

Tags: business-leadership  enterprise  finance  strategy  strategy-and-planning  

Mark P. McDonald
8 years at Gartner
24 years IT industry

Mark McDonald, Ph.D., is a former group vice president and head of research in Gartner Executive Programs. He is the co-author of The Social Organization with Anthony Bradley. Read Full Bio

Thoughts on Does your company work like five fingers, a fist or a claw?

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