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The Digital Fabric: Organizing for Convergence

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Traditional organizations must be redesigned to adapt to rising consumer expectations. In this article, Jerry Wind, Vijay Mahajan, and Robert Gunther explore how the same technologies that are transforming consumer markets can be applied to organizational architecture.
This article is excerpted from the book Convergence Marketing: Strategies for Reaching the New Hybrid Consumer (Prentice Hall PTR, 2001), by Jerry Wind, Vijay Mahajan, and Robert Gunther.

Traditional organizations are not designed for the current environment of interaction and rapid change. The traditional business architecture is primarily designed for internal management and control, and it has always been a challenge to make these organizations more adaptable to changing business conditions—like taking an ocean liner down a whitewater river. To take on these new challenges, you need a fundamentally different design for the organization.

New technologies and consumer expectations have intensified these challenges. Technology allows for more interaction with customers, and now they demand this interaction. Consumers want to be able to interact with organizations in real time, to be offered customization, community, multiple channels, flexible competitive value propositions, and powerful choice tools. These are what we call the five C's of convergence marketing, as discussed in a previous article. Consumers want to run the rapids—and even take the paddle into their own hands. But how can you create an organization that can take them where they want to go without losing control or breaking up in this turbulence, and without losing sight of the need to continuously create value for shareholders and other stakeholders?

The traditional organization was designed in tiers and silos. There were silos of business functions (marketing, finance, human resources), brands, industry, and geography. Even many corporate e-business initiatives initially were brought in as a separate line of business, creating yet another silo in the organization. Like the decks of the ocean liner, these silos helped to keep it orderly and allowed the company to seal off separate chambers if the boat sprung a leak. This allowed for clear lines of control and very efficient operations. It worked best, however, in more stable markets and organizations. As the environment demanded more flexibility and coordinated interaction with customers, and even integrated product and service offerings to customers, the weaknesses of this organization began to show.

To address the weaknesses of these silos, companies moved to matrix structures, in which one silo is overlaid upon another silo. But these matrix organizations often became very complex to manage, eroded functional expertise, made accountability more difficult to assign, and sometimes presented the customer with an even more complex and impenetrable organization.

Customers want direct access to the organization, but when they peer behind most organizational walls, the picture is not too pretty. The Web is all about openness and connection, but organizational "silos" create barriers to openness and connection. With the change in the balance of power, the walls of this "fortress" corporation need to be reconfigured. From the customer's perspective, the ideal is to organize the company around the customer. However, from the organizational perspective, such a customer-centric model makes the organization difficult to manage and creates the risk of not maximizing the value of the tangible assets of the firm, its products, and its services. Is it possible to do both?

A Browser for the Organization

The Web browser offers a fascinating model for transforming organizations. It does not require a change in the fundamental underlying architecture of the operating system. Instead, it takes as a given a cacophony of messy operating systems and networks and then places a coherent interface over them. This allows individual users to tailor the interface to their own specifications without necessarily changing the underlying infrastructure. Each person looks at the same scene and extracts a different picture, yet these individuals from different parts of the value chain can interact with one another through their tailored interfaces.

A similar Web browser model for the organization can be used to create what John McGuire, CEO of the technology firm Trintech, calls a "digital fabric." Trintech is one of the leading companies providing software and support to financial services organizations for handling credit card transactions in offline, online, and wireless applications. As a technologist, McGuire has applied information systems to his own organization, creating this "digital fabric." Trintech has begun to create an organization that is neither a functional organization nor a matrix organization.

This architecture can be dynamically "configured" to be viewed virtually by product line, by function, or by customer, without changing the underlying organization. Finally, the organization can be opened up to customers in ways that were never possible in the past. For example, customers can directly access their accounts, design new products, or check on orders—they are invited inside the organization. The matrix can be sorted in different ways to take whatever cut of the organization is needed at that point.

Trintech is organizing interactions with each customer around a dedicated "eRoom," an online collaboration technology that allows sharing of documents and information, drawing relevant experts from different parts of the organization together in a single virtual location. This means, in essence, that every customer has a virtual microcompany within the larger organization. Trintech's functional managers retain depth in specific areas, such as law or finance or engineering, and retain their identification with these areas. They do not become generalists, but they see the organization as a collection of specialists working together to create customer solutions. The leaders of product divisions see the organization as a set of product divisions that are managed for profit and loss (P&L) by segment. The CEO and top managers see the organization as a set of key metrics on the revenue and order pipeline that can be dynamically sorted using data lenses, where they can click down for greater detail. The management team also manages by exception through operational red flags.

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