A new growth strategy presents important organizational choices, although many companies often fail to pay sufficient attention to them. The most fundamental choice is whether the initiative fits within an existing business, belongs on its own, or should be combined with other new ventures. These are never easy decisions. The answers are not formulaic and depend on context.
However, there are some basic principles. When the growth initiative is either distinct from or disruptive to the established core, separation makes sense. This unit can then attack the opportunity with its own talent, incentives, and cadence. When the growth initiative is adjacent—and either supportive or nonthreatening—to the core, it likely belongs within the core business organization and operating model.
These two models were on display when two companies, an airline and a retailer, both built successful e-commerce businesses with very different strategies and organizational approaches.
The airline, unaccustomed to disruptive change or integrating new capabilities, created a stand-alone e-commerce unit that could not be overwhelmed by the main business. The retailer, on the other hand, was already accustomed to selling through more than one channel and store format, and wanted to give customers seamless service. It also had a strong record of change management and business model evolution. It opted to embed the new e-commerce strategy in the core business. Each decision was sound, given the organizational context, and ultimately successful.
Regardless of where the new growth initiative is housed, all companies will need to ensure that they have processes to promote cooperation across existing business and functional units. Forums, councils, and cross-functional teams are effective mechanisms for fostering this collaboration. In meetings of these groups, all parts of the organization come together to discuss progress, reset expectations, and make course corrections. These gatherings should also provide an opportunity for teams to celebrate successes, build engagement, and find a common purpose. And, of course, they also are the place to air disagreements and make trade-offs.
These forums are too often seen as contests with winners and losers, rather than platforms for effective team building. Executives must ensure that the right people—with the right information and the right motivation—are collaborating effectively to get work done. Well-designed mechanisms can mean the difference between the success and failure of a growth initiative.
When Gas Natural agreed to buy a controlling stake in competitor Unión Fenosa in 2008, the Spanish utility put in place mechanisms to define accountabilities and ensure collaboration. Gas Natural Fenosa, the new company, created a lean but effective corporate center by eliminating redundant roles and clarifying how the corporate functions and business units would work together. The corporate development function, for example, was made responsible for establishing growth targets and ensuring that the company stayed focused on growth.
This emphasis on collaboration and roles has paid dividends for Gas Natural Fenosa. From 2009 through 2013, its revenues grew by 14 percent annually.