Strategic Business Unit

A strategic business unit is a separate, specialised subsystem in the company which acts as an independent company. Having SBU assists organisations to plan their strategies and make manufacturing decisions. A Strategic Business Unit (SBU) is a basic organisational unit for which it is meaningful to formulate a separate competitive strategy (Grant, 2002). Typically the SBU is a business providing a single product or a number of closely related products that serve a well-defined product-market combination and compete with a well-defined set of competitors. "SBUs operate as autonomous units, and have the primary responsibility and authority for managing their basic functions (Johnson et al., 2008)."

Creating A Strategic Business Unit

How to Create a Strategic Business Unit
Creating a strategic business unit enables companies to pursue new businesses, products, markets, and technologies, without the constraints of working within a large organization. The business unit has a dedicated management team, a unique brand, different goals than the parent organization, and often a different physical space. It benefits from the advantages of a startup, such as an autonomous team, but isn’t strapped for resources like most startups are. And it benefits from the advantages of a large company, such as an established brand and customer base, but can sidestep the challenges faced by large companies, such as excessive bureaucracy.

In order to, create a business unit that builds successful products, you need to get a few things right: the organizational structure, hiring, culture, and compensation.

• Organizational structure: “Move fast and break things” has long been the mantra of Silicon Valley startups. These startups are always testing new ideas and iterating quickly based on customer feedback. “Breaking things” is an inevitable part of this process. In other words, many of your ideas are likely to fail. In “Incubation is Product Management,” Jeremiah Zinn, Chief Product Officer at Bark & Co., said that his team doesn’t ultimately pursue about 80% of their ideas. Separating the business unit from the rest of the organization gives the team room to experiment – and break things – without being stifled by process and brand concerns.
• Hiring: Building a new business is different than operating an existing business. People who excel at operating existing businesses may struggle at starting a new business, and vice verse. In “Building Human Machines is Product Management,” Tommi Forsström, VP of Product at Shutterstock, shared his approach to hiring, and how hiring helps him instill strong culture. During job interviews, Tommi asks questions that help him understand a candidate’s long-term goals, and works to help the candidates he hires to achieve those goals. This has been a helpful strategy for Tommi to keep his team motivated. Hire people who want to build a business from the ground up and work effectively in an environment of uncertainty and experimentation.
• Culture: If you walk into a startup’s office, you’re likely to find a ping pong table and a keg of beer. While it’s easy to understand why employees would appreciate such perks, Lina Stern, Head of Employee Experience and Organizational Design at LearnVest, said that in order to truly create a culture that keeps employees motivated to innovate, you need to do more. “People want to feel valued for the contributions they make to the organization,” she said. Lina recommends personalizing your approach to employee experience according to the values of the company and what will help each individual employee work most effectively. So, if your developers do their best work at night, Lina believes it’s ok for them to stroll into the office at 11 am. These practices, along with encouraging employees to test ideas and learn from them, help create the right environment for new product development.
• Incentives: The reward for starting a successful company as an entrepreneur is obvious: wealth and fame. Unfortunately, large corporations can’t always offer stock or other significant financial incentives. Fortunately, they don’t need to. According to Bob Dorf, Author of The Startup Owner’s Manual, employees are often motivated by career upside. They want to be recognized for their work and grow within the company. Both Bob and Aaron Eden, a former innovation leader at Intuit, recommended giving the team exposure to senior leadership to keep them motivated. Give your business unit opportunity to present progress to senior leadership at the parent company, and invite senior leadership to join brainstorming sessions.