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What is Organisational Strategy and why does it matter?

By Rupert Lion & Catherine McLaughlin Bhagwat

Amazon’s 6-page memos. Intel’s OKRs. Spotify’s “squad model”. The trappings of organisational strategy are well known – and oft replicated – in tech companies today, but all too often without the underlying context that made them successful. Getting your startup’s organisational strategy right is just as important as choosing where and how to go to market, and inextricably linked to it as well.

So how do you ensure you’re investing in a sustainable organisational strategy rather than a passing fad? This article addresses just that — demystifying organisational strategy, explaining why it’s so important to get right before hypergrowth, and providing some questions your management team can ask to make sure you’re making the right strategic choices to enable the most effective operating model.

What is organisational strategy?

Organisational strategy is a crucial, yet often-overlooked, component of strategy that specifies how the company will deliver on its mission and objectives. Practically, this means making choices around culture, ways of working, governance structure, and talent models that will align with and reinforce the company’s commercial, technological and operational value proposition.

Like any effective strategy, a good organisational strategy should be bespoke to the company’s mission and help guide employees to act accordingly based on a small but crucial set of criteria like frugality or customer-centricity. It should also relieve pressure on the CEO from needing to repeatedly make the same decisions and can increase productivity and engagement across the team by defining what success looks like.

How does organisational strategy fit with the overall company strategy?

Organisational strategy should help answer the critical questions of what management capabilities a company needs to win in its chosen space. These choices may be stated explicitly or implicitly in the company’s strategy, and then can expanded on in company artifacts like values, org charts, and culture statements.
The publicly available information on Netflix’s website provides a helpful case study of how company strategy should drive organisational decisions and tradeoffs.

Excerpt from Netflix’s “About Us” Page:

“At Netflix, we want to entertain the world. Whatever your taste, and no matter where you live, we give you access to best-in-class TV shows, movies and documentaries. Our members control what they want to watch, when they want it, with no ads, in one simple subscription. We’re streaming in more than 30 languages and 190 countries, because great stories can come from anywhere and be loved everywhere. We are the world’s biggest fans of entertainment, and we’re always looking to help you find your next favorite story.”

This paragraph is representative of a company strategy in that it clarifies Netflix’s mission and how it is supported through commercial, organisational, technical, and operational propositions. Decisions such as who Netflix serves (the world) and what they value (great stories and entertainment for all tastes) exemplify the types of capabilities the company will need to deliver on its mission. For example, to deliver best-in class entertainment across a range of tastes, it’s very likely that Netflix’s team will need to be diverse culturally and geographically, passionate about sourcing new ideas, and highly effective at deciding what ideas become entertainment.

Netflix’s culture page then demonstrates how components of the company’s target operating model, such as culture and organisational effectiveness, should align to the strategy. Cultural principles such as “encourage independent decision-making” and “share information openly, broadly, and deliberately” reinforce the organisational strategy.

Excerpt from Netflix’s “Culture” Page

“Like all great companies, we strive to hire the best and we value integrity, excellence, respect, inclusion, and collaboration. What is special about Netflix, though, is how much we:
encourage independent decision-making by employees
share information openly, broadly, and deliberately
are extraordinarily candid with each other
keep only our highly effective people
avoid rules
Our core philosophy is people over process. More specifically, we have great people working together as a dream team. With this approach, we are a more flexible, fun, stimulating, creative, collaborative and successful organization.”

By having clear alignment between the strategy and organisational components of the operating model, it then becomes easier to build a self-reinforcing organization.

It’s important to note that these decisions aren’t objectively right in themselves – in fact, it could be disastrous for some companies to operate with such high churn. The reason this operating model works at Netflix is because it’s aligned with the company’s strategy. Employees understand why Netflix operates this way and are able to opt in (or out) from the beginning because the company is so intentional about communicating it upfront.

Why Organisational Strategy Matters in Hypergrowth

It’s common for founders to reflect fondly on the early days when everyone was still sitting in the same room and could change direction seamlessly. But with success comes scale and complexity, and before long an entire day can be taken up by meetings and decisions that no one else seems to be able to make. That’s where organisational strategy comes in.

By taking the time before scale to explicitly communicate what the company’s mission and objectives are, how decisions should be taken, and what behaviors are valued, it becomes much easier for everyone from managers to new joiners to understand what is required of them. And after establishing the core principles that will guide the organisation, leadership can build out aligned processes that will facilitate this vision, such as strategic planning, hiring and compensation, learning and development, and meeting protocols. The key here is that there is no objectively right process – the only “right” ones are those that align with your organisational strategy. Don’t pursue the latest organisational trend – be it memos or free meals – unless it helps you achieve your mission.

Where to Start

  1. Take an honest look at your operating model. Before embarking on a new organisational strategy, first examine how your business runs today. Every company has an operating model, it just might not be explicit nor intentional. Look at how your company makes major decisions, plans for the future, allocates budget, hires and fires, and communicates. Then ask why this is the case, how it came to be that way, and whether it will serve the business in the future.
  2. Revisit your strategy. Have you clearly defined what your mission is, where you will go to market, how you will beat your competitors, and what the core capabilities you need to succeed are? Most companies are clear on the first three, but stop before defining the capabilities they need to be successful. Consider what types of management systems you need to reinforce the rest of the strategy. This is where organisational strategy comes in and could include culture, ways of working, talent, or organisational structure. The goal is not to come up with a plan for all of these but rather to define the elements that are absolutely critical to the company’s success.
  3. Align your organisation to your goals. Now that you’ve got a coherent strategy, it’s a matter of implementing it. The best way of doing this is to put pen to paper around your target operating model, which will serve as a detailed plan for executing on your strategy. This should include your organisational design (e.g., company structure, reporting lines), organisational effectiveness (e.g., strategic planning, decision-making, communication), culture (e.g., company artifacts, desired behaviors, shared assumptions), and approach to talent (e.g., hiring, promotion, development). Be sure that everything you include reinforces the overall strategy. Far too often companies introduce processes they’ve seen work elsewhere but that have nothing to do with the company’s goals.
  4. Test, learn, and communicate! Your operating model will change as you scale whether you like it or not, so make sure you’re continuing to shape it consciously and are regularly communicating how and why your company is making the decisions it is. Not only will this help reinforce the culture you’re trying to create, but it will also signal its importance to your team.

These steps won’t happen in a day or with just one person, they’ll need dedicated focus and input from the full management team and board. But the output – a clear strategy that provides a blueprint for how the organisation should operate and grow – will be invaluable to leadership and employees as difficult decisions arise and give investors confidence that you’ve got a plan to face the scale journey ahead.

Read about our recent Organisational Strategy projects here, or get in touch to book a 30 minute consultation and discover how we can support you or your portfolio companies.