Structure Follows Strategy

"Structure follows strategy" is a principle first proposed by business historian Alfred Chandler. This theory posits that an organization's structure is developed to facilitate the implementation of its strategy. In other words, the way a business organizes its functional units, roles, responsibilities, and reporting relationships should reflect and support its strategic objectives.

Here's an exploration of the concept, its implications, and some examples.

Purpose and Role

This concept aims to align the organizational structure with its strategy for effective and efficient achievement of its goals. This principle encourages businesses to continuously adapt and change their structure based on their strategic needs.

Implications

The "structure follows strategy" concept implies that any strategic decision may lead to changes in the structure of an organization. For example, if a company focuses on customer service, they might adopt a customer-centric structure with teams dedicated to customer success.

If a business decides to diversify its products, it might adopt a divisional structure where each division operates as a separate business responsible for its own product line.

If a company expands geographically, it might adopt a geographic structure where operations are organized based on regions or territories.

Examples

Apple Inc.: When Steve Jobs returned to Apple in 1997, he implemented a strategy focused on simplifying the product line and bringing a few excellent products to market rather than many average ones. As a part of this strategy, Apple's organizational structure was modified to focus more on product-based grouping.

Amazon: Amazon started as an online bookstore, and its original structure was designed to support this. As it diversified into different product categories and services (e.g., Amazon Web Services, Amazon Prime), its structure evolved into a hybrid of divisional and functional structures to accommodate its vast array of products and services.

Importance

It's crucial to note that the alignment between structure and strategy is vital for achieving strategic objectives. A mismatch between the two can lead to inefficiencies, confusion, and failed strategy implementation. The concept of "structure follows strategy" helps to prevent such issues and promotes organizational effectiveness.

However, it's important to remember that this is a dynamic process. Strategy and structure should continually influence each other as the organization evolves and its strategic goals change.