Thoughts on strategy: Functional coherence

Organisations typically use functions to delineate the management tasks involved in bringing products and services to market. Engineering is responsible for delivering the infrastructure and technology platform, marketing is tasked with driving customer acquisition and building a brand, and operations ensure delivery reliability and quality.

Doing this successfully as a cohesive business requires that these functions coordinate on all aspects, from day-to-day performance through to long-term strategy. Yet this is often where organisations fail, setting strategy in silos as a set of functional statements with limited inter-relation. In the resulting scramble to codify the output, this often translates to single function dominance. Typically in today’s tech and software driven landscape this function tends to be marketing, perhaps as a consequence of increasing third party capital and inherent bias on growth, but also because of the natural proximity of executive management and the commercial imperative.

Terry Hill, in his book “Operations Management”, has long argued that this is because of a lack of common distinction between markets and marketing. Marketing is solely a function he argues, whereas markets in the broadest sense comprise the whole business. “The reality of delivering the needs of markets is only fully understood by those functions responsible for delivering those tasks”.

Viewed from a marketing perspective, markets are therefore segmented, assessed and codified poorly for other functions. Homogenous marketing segments for example, may represent divergent customer needs, and should therefore in reality be viewed as different markets and treated accordingly. In other words a functional marketing led strategy is a poor framework to set priorities in other functional areas of the business.

Following this logic therefore, corporate objectives should be linked to functional strategies through a markets-defined lens to ensure coherence. The whole process of defining a strategy then boils down to two simple steps. It first requires an inclusive cross-functional debate to define precisely which markets the business is competing in. Then, secondly for each of these markets, determining and prioritising the factors by which the business will qualify (be considered by customers for a given product or service) and win orders in the markets it is choosing to address. A prioritised set of order winners and qualifiers will then serve as a universal guide for setting priorities at the functional level. The best form of strategy.

Pity is isn’t quite so simple in practice…