Businesses Restructuring for Increased Market Share Growth

February 13th, 2009 Posted in Market Share Growth

Businesses now exist in a hyper-competitive environment & where market share growth is hard. The more competition there is, the more power shifts from businesses to the customers (including prospects). Businesses that are still structured according to the model of power residing in the business will suffer competitive disadvantage versus businesses that adapt to the new order of customer-centric power.

This article explains why businesses need to be restructured to maximize share growth, and then goes on to outline how best this can be done.

Why Businesses Need to Be Restructured

The organizational structure of most businesses develops organically, from the competences of their founders. As the founders of most businesses are entrepreneurs with a vision for a product (including service), their focus is primarily on the product, and their structure is designed to facilitate the processes of making products and PUSHING them out toward customers in order to earn revenues. Accordingly, their primary interface with their customers is through the SALES function.

This model served these businesses well for the pioneering stages of the industries they were operating in. However, as their industries mature, and there are more and more competing products in each product category, the customer gets more and more choice in determining which product they purchase, and therefore, in influencing which business gets the revenues,

Customer’s don’t buy products, because the actual product is invisible and intangible to them, hidden in the physical or conceptual expertise with which they are manufactured or designed. Customers buy brands, which are the perceptions of the product, and which exist in their minds, rather than in the physical marketplace.

As customers exert more choice in their purchase of products, the businesses center of gravity shifts from the products to brands, the business mode shifts from the product-oriented PUSH dynamic toward the brand-oriented PULL dynamic; and the competitive arena shifts from the factories and offices of the business to the minds of customers.

These seminal shifts transform the business from and product generator to perception builder. if only because it is the perception that the business builds and maintains, that will determine customer preference, and customer preference determines their purchase, and their purchase is the primary source of revenue revenue for the business, which determines the business’ marketshare growth.

These are the reasons why businesses need to be restructured to maximize share growth.

How Businesses Need to Be Restructured

We have seen that the success of businesses will depend increasingly upon how well they transform themselves from PRODUCT GENERATORS to PERCEPTION BUILDERS. This involves a shift of expertise from product design, manufacturing, and delivery toward brand design, development, and delivery.

This does NOT mean that businesses won’t need expertise in product design, product manufacturing, and product delivery any more. What this means is that product design, product manufacturing, and product delivery expertise must increasingly be regarded as means to design a brand, develop the brand, and deliver the brand in the mind of the customer.

The ideal structure for a business that is primarily focused on perception building is based on regarding itself as a customer-interfacing organization. This calls for a circular structure, comprising three concentric layers:

1. An outer customer-interfacing layer. The business must be designed in a way that its entire perimeter is poised and ready to interact with customers in ways that deliver customer experiences and communications that establish and consolidate the desired brand perception effectively.

This outer layer will include all customer-interfacing functions: sales, sales support, customer service, billing, collections, credit-control, advertising, sales promotion, merchandising, product development, product manufacturing or supply, packaging, distribution, and merchandising.

2. An inner layer for facilitating the outer customer-interfacing layer. Immediately behind this customer-interfacing perimeter of the business must be another layer that is designed specifically to guide, support and facilitate the smooth, comprehensive and perpetually improving interactions of the outer layer with customers in each of the different customer-interfacing functions.

As the primary objective of these first two layers is to keep increasing revenues faster than the rest of the category in order to maintain market share growth, these two layers will be overseen by a Chief Revenue Officer who is responsible for ensuring that all customer-interfacing functions are optimally delivering experiences and communications that build the best possible brand perception for the business.

This Chief Revenue Officer will also be responsible for perpetually improving the second layer’s provision of facilitation and support toward improving the outer layer’s customer experiences and communications.

As each of the customer-interfacing functions in the outer layer, and the facilitating and support for each customer-interfacing function must perform specific function-based results other than their perception-building functions, each of these customer-interfacing functions must be overseen by a function head that is responsible for perpetually improving these-non-perception-building function results as well.

3. A core hub for the functions for monitoring and refining the business as a whole, and for finding and applying the best resources toward reducing the business’ expenses toward maximizing profit, and increasing the market value of the business.

This core hub will be overseen by a Chief Financial Officer, who is responsible for cost savings and efficiency, and for finances in general. All other function heads in the core hub, such as Information Services, Human Resources, Administration (Legal, Security, Facilities, etc.), will report to the CFO for their performance in keeping costs down.

All three layers of the new concentric structure of the business will be overseen by the Chief Executive Officer who is responsible for profit deliver of the business, which results from subtracting the cost-savings results of the CFO’s performance from the revenue generation performance of the CRO. The CEO also oversees all the function-heads for their performance in their respective functions as distinct from perception-building and cost savings respectively.

Phasing the Restructuring Process

It will not be easy to transition immediately from the traditional organizational structure to the new one immediately, or all at once. Hence, it might be better to effect this transition in two phases:

Phase I, as soon as possible.

Adding the Chief Revenue Officer function that has a dotted line responsibility for integrating all brand perception building functions, i.e., all customer-interfacing activities, such as: sales, sales support, customer service, billing, collections, credit-control, advertising, sales promotion, merchandising, product development, product manufacturing or supply, packaging, distribution, and merchandising. In the interest of avoiding delay, the CEO may initially assume the CRO function until this position is satisfactorily filled.

In this stage, the CFO will also assume dotted line responsibility for the efficiency (cost-saving) aspects of the core hub functions.

Phase II, from month 7.

Continue to consolidate Phase I and restructure the business into the three concentric circles, as shown above.

–Ravi Arapurakal

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