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How to Design a Team to Deliver Powerful Capabilities

Inside every exceptional company are teams of people working across functions, year after year, doing things together they couldn’t do alone.

Does the way your company manages its strategy influence the effectiveness of your teams? And does the way you manage teams affect your strategy? We believe the answer to both questions is yes, and in a new research study under way now, we’re testing that hypothesis.

You can see the evidence in companies with strategic coherence. These are companies with a distinctive identity. The few capabilities that make them unique all fit together, supporting a value proposition that few other companies can match. They choose to go in directions only where their capabilities give them a right to win. Great companies need great capabilities. And inside every company that does things exceptionally well are teams of people working across functional boundaries, year after year, doing things together they couldn’t do alone.

Apple, for instance, has long been known for its product development teams, which bring together people from a variety of disciplines, including engineering, design, and marketing. CEMEX, the Mexico-based cement company, uses its sophisticated knowledge management systems to bring far-flung people into continual contact with each other, to talk about capabilities at a global scale. Inditex and Haier are both known for connecting clerks in their retail stores with engineers in R&D and operations experts on the factory floor to customize their offerings to the changing needs and interests of their customers.

Capabilities like these, strong enough to set your company apart from the competition, have to be cross-functional. They have to assemble specialists in diverse fields — such as information technology, finance, learning and development, design, and marketing — to create offerings that deliver spectacular value to their chosen customers. They have to do this time and time again, not just for a one-time success. They have to instill these cross-functional capabilities deep into the enterprise, which is difficult and time-consuming. Apple’s facility with compelling product design, Starbucks’ ability to create high-quality retail experiences, CEMEX’s global operational skill, and Inditex’s rapid-response manufacturing capability were all hard-won and took years to build, refine, and bring to scale. If these skills were easy, they wouldn’t be distinctive, because every company in the industry would have them.

What kinds of teams can develop capabilities like these? Our colleague Jon Katzenbach says they have to be “real teams”: defined as having the following three characteristics: “First, all members of a real team have an [equally high] level of emotional commitment to the team’s purpose and goals. Second, the leadership role shifts easily among the members based on the skills and experience they have and the challenges of the moment, rather than on any hierarchical positions. Third, the team members hold one another accountable for the quality of their collective work. Members of real teams subordinate their formal affiliations, personal prejudices, and loyalties to the team’s purpose and goals. These practices together give real teams both the capability and the accountability they need to accomplish their tasks.”

Sound familiar? These may indeed be the kind of characteristics that make it possible to develop a powerful, distinctive, cross-functional capability. And working on distinctive capabilities seems to engender qualities like emotional commitment and mutual accountability. They come naturally when you and your colleagues routinely execute at a very high level. It helps that, on most good cross-functional teams, the members know exactly how their work contributes to the company’s success. In that context, narrow functional priorities are less important. There’s no need to keep up with the standard practices of your competitors if they are irrelevant to your strategy.

Notice one quality Katzenbach did not include in his description of real teams: internal competition. In many companies, there is an ongoing debate about the role internal competition plays in the organization’s effectiveness. Some argue that it drives innovation, accountability, and personal ambition: Pit your people against one another, the thinking goes, and the winners will push themselves harder. But others find that internal competition discourages meaningful collaboration and increases employee dissatisfaction.

We believe internal competition makes it harder to develop cross-functional capabilities. Resources are scarce in almost every company, but the real competition is outside your firm, and you need everyone pulling together, regardless of functional boundaries. You can’t afford to split your IT, procurement, or training competency among two or more internal rivals.

When people see their efforts make a difference, they create cross-functional teams that work.

Instead of internal competition, focus on developing real teams, dedicated to building distinctive capabilities and bringing them to scale. Though your team members come from different specializations, they will work easily and closely together if they are achieving a single powerful purpose. That’s why you need to articulate a clear understanding of your company’s right to win and the role each team plays in ensuring that success. When people see how their efforts make a difference, they create the kind of cross-functional teams that work. For more detail, and to help us learn from your experience, take our survey on great teams.

Paul Leinwand

Paul Leinwand is global managing director of capabilities-driven strategy and growth for Strategy&, PwC's strategy consulting group. Based in Chicago, he is a principal with PwC US. He is the coauthor of Strategy that Works.

Rutger Von Post

Rutger von Post is a specialist in organizations and people with Strategy& and a principal with PwC US based in New York. He is head of the Katzenbach Center in North America.

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