Syncing the organization with the business

As flexible consumption (also known as subscription, usage-based, pay-per-use, or as a service) disrupts many industries, organizations should ask how their internal systems and structures support or hinder this new business model

Syncing the organization with the business

Posted by Hilary Horn, Laura Shact, and Andrew Niederhauser on April 27, 2017.

In an increasingly connected and digital world, customers are demanding the ability to consume technology and media content in flexible and scalable ways. Simply put, customers want to be able to choose where, how, and how much data they consume and pay for, and pay only for what they use. As a result, many companies are undergoing profound shifts and rethinking how they sell and deliver their products and services. Shifting to a radical new business model based on flexible consumption involves a comprehensive transformation: both the organization and the people in it should be ready and able to support the change.

According to Deloitte’s 2017 Global Human Capital Trends report, 88 percent of survey respondents believe that building the organization of the future is an important or very important issue. Transforming to a consumption-based business model is that kind of future-focused transformation, but is typically extremely challenging because it calls for a fundamentally different way of doing business. Established businesses are often at a disadvantage to new companies purpose-built for flexible consumption, because their current organizational capabilities may not support the new model, and entrenched stakeholders may be resistant to the required changes. In addition, they may need to sacrifice short-term performance for the sake of long-term success, which has significant implications both internally and externally.

The “people factor” is huge. The scope of disruption often requires a complete reconsideration, recalibration, and redefinition of operations, employee incentive plans, and cross-functional collaboration models—all of which may challenge the conventional wisdom and ways of working that drove organizational growth.

Five questions to guide the people side of transformation
As with any transformational effort, how you structure your organization, empower your people, and reward new, desired behaviors can improve your ability to effectively transition. Here are five critical and interrelated people questions to address to support transformation to a flexible consumption model.

1) How should we structure the organization to support flexible consumption?

Flexible consumption models demand that people interact in new ways, and the organization structure can either hinder or encourage collaboration across your sales, product development, and marketing functions. The goal is to drive agility in your operating model, streamline customer feedback loops, and make it easy and enjoyable for customers to engage with your organization.

Start by assessing current key organizational capabilities and critical workflows and processes that impact vital cross-functional interactions. How are information and feedback loops currently flowing from customers to the organization? Do regions/markets have the decision-making authority to influence range, channel, and marketing mix? Can you integrate disparate sales channels? What information bottlenecks are impeding your transition to a flexible consumption model—are structural changes even required?

2) Do we have the right people, with the right skill sets, in the right areas of our organization to drive a shift to a flexible consumption model?

The right talent in the right place, combined with a customer-first mindset, is paramount for an effective transformation to a flexible consumption model. Achieving this may require significant employee training and development to ensure that:

      • Your sales force can speak to the business implications of the shift and quickly identify cross-selling opportunities.
      • You have the right sales reps in place to account for any movement away from big capital deals.
      • Finance staff is equipped to support subscription pricing models and billing processes.
      • Customer-facing support staff are empowered to address customer questions without multiple internal handoffs.
      • Customer-analytics capabilities are strong enough to support continuous improvement throughout your organization.

3) Are performance goals and metrics aligned to drive customer-focused behaviors?

Traditionally, organizations have developed performance goals and metrics to drive desired behaviors across product lines, channels, and business units. However, a shift to a customer-centric flexible consumption model requires a fresh look at how goals are aligned to support new way of working across functions and traditional business silos, and then how performance is measured against the new goals. For example, sales goals should be refreshed to drive cross-selling and new-market penetration. Key workflows and cross-functional interactions among sales, product development, and marketing should be incentivized to further drive customer-first behaviors across the enterprise.

4) Do we have a solid case for change, and a strategy to foster buy-in among employees and external partners?

A number of factors influence the scale and pace of change of transforming to a flexible consumption model. The ability—or inability—to engage both internal and external stakeholders in the journey is one we see often. DO NOT underestimate what a big change this is and the conviction needed to successfully lead this change, especially in B2B environments. On the surface, everyone loves the idea, but the details matter, and those are what you must address in order to drive shifts in behaviors and ways of working.

You should take steps to help overcome the natural resistance to change.

    • Develop a clear, concise, and measurable end state outcome for the transformation.
    • Galvanize leadership support early and often, paying particular attention to leaders of customer-facing functions, such as sales, marketing, and customer support.
    • Focus impact assessments on evaluating changes to interaction models (internal and client facing), sales team working norms, and whether shifts in incentive compensation plans are helping to support desired behavioral change.
    • Keep in mind that while change starts with leaders, it must stick with all employees.

5) Have we considered the cultural implications of this transformation?

An organization’s culture is the foundation for driving an effective business strategy. If successfully aligned with strategy and tied to behaviors and business events, culture alignment can deliver powerful results. Further highlighting the importance of change management, transforming to a flexible consumption model will often challenge the very foundation your business was built on, which drives how employees and leaders view the world, interpret information, act, and behave.

In order to effectively transform to a flexible consumption model, you should have a clear understanding of your current culture and your desired future-state culture, and a data-driven plan to influence and monitor this cultural shift. Rather than a separate effort, shifting your organizational culture should be hand in hand with a shift to flexible consumption, so that customers are front and center, and your systems, processes, talent are all aligned to drive this forward.

Transforming your organization to a flexible consumption model is not an easy undertaking. In addition to system and process considerations, this journey demands a holistic and integrated approach to your people agenda. Taking a fresh look at these five people-related considerations can help position your organization to capitalize on shifts in consumer preference and demand and embed customer centricity into your company’s DNA. In turn, this can keep you in sync with the market and poised to win in an environment where your business model is not only influenced by but also fundamentally based on the belief that the customer is king.

Hilary Horn is a managing director in Deloitte Consulting LLP’s Human Capital Organization Transformation practice. She has over 18 years of experience leading and driving business readiness programs for Fortune 500 clients undergoing large-scale transformation efforts.
Laura Shact is a senior manager in Deloitte Consulting LLP’s Human Capital Practice, with more than 12 years’ experience in organization design, analytics, talent strategies, M&A, and global change management solutions for large-scale transformation and growth initiatives.
Andrew Niederhauser is a senior consultant in Deloitte Consulting LLP’s Human Capital Organization Transformation practice focusing on organization design, M&A, workforce transition, large-scale change management, and talent strategy assessment and alignment.

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