The EVA Challenge: Implementing Value-Added Change in an ...

The Need for a Winning Strategy and Organization 41
of organization is best. Where the firm faces a more complex environment,
and that environment can be segmented appropriately to
address the complexity, the decentralized organization would be the
form of choice. If no effective segmentation is possible, the functional
organization becomes the default choice.
In the case of dynamic organizations, some form of lateral, or
even cross-functional, relations may be required to help generate
needed information or promote integration across segments or
functions. Lateral relations range from informal contacts between
segment managers or functional managers, to integrators (corporate
staff or group executives), to the most complex form: a matrix organization,
with its dual authority and dotted-line relationships. Duncan
cautioned that the least invasive form of lateral relations that
does the trick is the right one. Matrix organizations can become
very difficult to manage, in part because they have the unfortunate
side effect of obscuring accountability.
For most organizations of any significant size or maturity,
segmentation and decentralization are the answers. Truly indivisible
organizations, except small ones, are rare. Segmentation may be
along geographic, process, product, industry, or customer lines. How
do companies embracing the three different value disciplines that
we have discussed handle segmentation?
Cost leaders focus on streamlining processes to minimize cost;
thus, they tend to standardize operations as much as possible. If
processes are not particularly interdependent, as is the case with
many commodities, creating separate business units for the several
processes is likely to produce the best results. If processes are integral
to the product, as in the production of internal combustion
engines, segmentation by product is likely to deliver the highest
value.
Product leaders, by contrast, are product innovators. They
will generally operate better with a more loosely knit, flexible organization
divided along product lines, where each segment has all