Choices and Commitments
If you are a leader in a corporate function, you may have a similar story to tell. The changes in your role may feel challenging or unfamiliar at times, but they represent a golden opportunity for you and everyone in your senior team and department. For years, you may have sought more opportunities to bring your specialty to bear, not just in day-to-day services, but in defining and developing the company’s distinctive edge. Now, the chance is finally here. In fact, in many industries, it’s become an imperative.
To be sure, you still have to manage your own house. Transactional tasks remain; businesses continue to demand service. You are still judged on your operational effectiveness and efficiency. Senior management may send mixed signals; it isn’t always clear how to resolve conflicts between the day-to-day needs of individual businesses and the long-range, in-depth efforts needed to build distinctive capabilities. Many things that you would like to see improved, including some highly important cross-functional initiatives, are outside your control or jurisdiction, yet seem to require your involvement and influence. Moreover, if your enterprise (like most) is struggling with incoherence—not quite able to settle on an overarching direction that is appropriate for all its products, services, and priorities—then the function you lead will undoubtedly struggle as well. Different businesses will make contradictory demands of you, you won’t be able to fulfill them all, and you won’t always know how to bring them together. Managing these types of situations requires a high level of leadership skill.
How, then, can you take on this new strategic role, maximizing your effectiveness, without being torn into pieces? You can accomplish it only by changing the way your function conducts business, overcoming the inertia of embedded habits and practices, and putting strategic activities first, before the usual long list of critical tasks and service requests. That is the purpose of the new functional agenda.
Like many other strategic exercises, converting to the new agenda begins with a statement of the value proposition: your company’s chosen way to play in the market, how it intends to attract and hold customers. This is, of course, set at the enterprise level, but it is incumbent upon you as the functional leader to understand and articulate it in the context of your specialization. Will your company distinguish itself as an innovator, launching technologically sophisticated products and services? Will it be a value player, outpacing rivals through lower costs? Will it provide a compelling customer experience? Or will it forge some other way of delivering value?
In every successful company, the value proposition is closely linked to the firm’s most critical capabilities: the things it has learned, over time, to do particularly well. Inevitably, functional leaders are involved in defining, building, and maintaining these capabilities. Thus, you need a clear understanding of the company’s overall value proposition, of the capabilities required to fulfill it, and of the role your function plays. To start, divide all the capabilities that your function provides into three broad categories:
• Basic business capabilities are the capabilities needed to keep the company running. These services—which include payroll, employee benefits administration, and basic computing services—remain the responsibility of the functions. They are critical but non-differentiating. They should be tightly controlled for efficiency, and often automated, outsourced, or relegated to low-cost shared services, thus freeing up resources that functional leaders can redirect to differentiating capabilities (see “Is Your Company Fit for Growth?” by Deniz Caglar, Jaya Pandrangi, and John Plansky, s+b, Summer 2012).
• Competitive necessities are the “table stakes” that enable a company to compete in its industry. In many companies, these include logistics, sourcing, back-office processes, and integrated IT architecture. They are essential to survival and success, but they can often be managed for cost and efficiency, rather than for performance at a world-class level, or even at the same level as competitors.