21 07 2010

Not vertically integrating strategy can result in the successes of one department adversely affecting the workings of another

The case for vertical integration of strategy was ably demonstrated earlier today by an organisation of which Cowan Global is a member.

What made the demonstration doubly interesting was that the same organisation delivers workshops on strategy and planning and, as a result, had previously informed us that they would not want to work with us on our own strategy and planning workshops as they had no need.

‘The Organisation’ (let’s call them that for the sake of anonymity) has recently been struggling to provide a satisfactory level of service to members, taking an age to respond to emails and phone calls (if at all) and generally giving a “we could care less” impression.

Fortunately, they do care about their members and I was telephoned by one of their managers to discuss the issues. The root cause soon became clear; poor strategy or, more exactly no Vertical Integration of Strategy.

‘The Organisation’ had a strategy for membership sales and a strategy for membership relationships. This is called ‘Horizontal Integration of Strategy’ where every department/function of a business has a strategy and it is therefore assumed that every aspect is covered.

For ‘The Organisation’, the membership sales strategy was proving a huge success with incentivised staff attracting new members at an exceptional rate. The strategy for membership retention on the other hand was proving less successful as membership grew without the additional staff/hours/resources to continue providing the previously very good service. End result? Dissatisfied members such as Cowan Global!

For many businesses the above may sound familiar. Unfortunately they will blame everything for ‘not working’ except the real cause. This is because they believe that as a strategy is in place, the flaw must lie elsewhere whether it be staffing levels, the staff themselves, the management or a combination of these and an endless roll call of other reasons.

The problem actually lies in flawed strategic thinking. Had ‘The Organisation’ recognised that in a successful business no department is entirely independent of other departments they would have applied ‘Vertical Integration of Strategy’. By doing this, the impact of a successful membership sales strategy would have been planned for as a part of the membership relationships strategy.

Many businesses operate with horizontally integrated planning never realising how much more successful they could be applying vertical integration. In its purist form there would be one Company Strategy with departments operating sub-strategies closely aligned to the Company strategy and cross referenced (integrated) with each other at the outset and at regular reviews.

In less pure, but nonetheless still effective, cases the business will regularly review the performance of each strategy against other strategies within the Company. In both systems waste and inefficiency is substantially reduced and duplication of effort usually removed altogether. This results in not only a better strategic focus and outcome but also a more profitable business.

For ‘The Organisation’ this would help to prevent members leaving at the same rate as new members join.

Meanwhile, I am left wondering whether ‘The Organisation’s’ strategy and planning workshops have left their members so well equipped?

© Jim Cowan, Cowan Global Limited 2010



One response

17 09 2010

[…] ‘An Accidental Demonstration Of The Need For Vertically Integrated Strategy’  […]

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