As a Director or Manager, will you focus first on Strategy or Structure? Gabriel Domale Consulting helps business leaders to make the right decisions with regards to strategy and structure.

For decades, scholars and practitioners have debated the question of which comes first – Strategy or Structure. There has been no agreement on which comes first. The consensus is that it is a chicken and egg situation.

However, let us provide a framework.

The choice of what comes first will depend on the phase of maturity or newness of the company.

For companies that are in the start-up phase, the strategy should come first and structure then comes next. As they need to drive performance and organizational effectiveness.

However, companies in the more matured phase already have existing structures. These companies will refresh their strategy to drive competitiveness in the market.

It is matured companies that have their structures thickened or restructured with adaptive strategy. But how do you know you have the right strategy and structure for growth?

The flexibility of strategies available to firms.

Strategy should come first, that it should then be checked against structure and capabilities, before leading to an action plan. This action plan will then include changes in structure and capabilities if that is what seems needed to implement the strategy, which is followed by the real actions to bring the strategy to reality.

Putting strategy first is a more ambitious choice. It implies that one considers the firm's options irrespective of constraints and that one then works very hard at removing the constraints that might exist.

When putting strategy first, we do believe indeed that every firm has a certain flexibility in its choices and that the outcome of each choice is indeed most of the time "unchartered territory".

The choice is made by an "educated" faith of management based on:

1) the experience they bring from related business situations earlier in their career,

2) their business personality (whether more or less ambitious in their goals for themselves and the organization) and

3) their confidence in their own ability of seeing a strategy through to execution.

Examples:

Annick explains her experience:

When trying to find an example for this flexibility of choices, I came to remember a few events from my first-hand experience working in the telephony industry. In early 2008, I faced the challenge to defend the Nokia brand in Europe at the time of the launch of the Apple i-Phone.

This period was for me a perfect example of how three industry players : Apple, Nokia and Samsung made very different strategic choices in front of the same situation, leading to dramatically different results.

Apple’s strategic step

At the time, Apple had already launched the i-phone in the USA where it was gaining significant ground. Their major constraint for a global roll-out was in their production capacity for the phone. They could "only" produce 11 million phones for the whole first year of the European launch, well below the expected pent-up demand.

Apple chose what I believe to be the perfect brand strategy for their roll out, very akin to the typical brand strategy of luxury brands. They decided to turn their constraint into an opportunity by turning their lack of capacity into a "rarity effect".

While they could have chosen to only launch one big market of Europe and exhaust the 11 million phones there, they rather chose one operator only per country, gave them a limited allotment of phones only at the condition that this first operator accepts a totally new business model where Apple would receive a share of the operator's turnover from the expected high online usage of the early adopters.

Operators were so keen to be "the chosen one" as they were always fighting to differentiate themselves to consumers to sign up new phone contracts, that Apple had no issue in selling their plan while benefiting from very high marketing investments from the operators.

While operators announced their exclusive launch of the i-phone (Apple also demanded to use the advertising developed by Apple and not to let operators develop their own cheap promotional spots which was the habit until then). This strategy created a rarity and aspirational effect for the i-phone across all key markets of Europe.

Nokia strategic response

What did Nokia do in the same period and when finding out about the above ? In its history since 1871, Nokia had shown a very strong capability at total renewal since it started in the business of wood pulp mills, then on to rubber production (tires), then cables, televisions and finally mobile phones.

Yet, starting about two years prior to the iphone launch in Europe, Nokia had clearly made the strategic choice to focus on its then core competency of very large global phone manufacturing capability by selling lots of cheaper phones to developing markets while at the same time, downplaying the future role of the smart phone segment which had at that moment only a very small global market share.

To develop a defence plan, I faced a product program of no less than 80 new phones for the year of 2008 (compared to 1 model for Apple), yet none of them remotely approaching the functionality of the iphone.

In the whole product program, there was only one model that had some kind of touch screen of first generation (you could tap on "buttons" on the screen but you did not have the "finger swipe" technology of the iphone).

As the market leader in Europe, I inquired how I could get hold of the limited global supply of that phone to use it as the "Nokia answer" to the i-Phone in large European markets, launching it as well with one leading operator only in a limited number of markets.

My request was turned down for a totally unexpected capacity constraint in the Nokia system: launching in various countries would require to develop distinct software packages for that phone for each country/language and, with a global product program of 80 phones to be launched in most global markets, the Nokia system did not have the software developer capacity to implement my desired strategy.

In other words, the company continued to choose not to see the i-Phone as a threat and to give priority to their "normal" sequence of activity. They decided instead to launch the only touch screen phone they had in the Middle East - a non-strategic market (sorry, Mohamed) - where they could sell the full capacity with a single Arabic software solution.

Samsung’s strategic response

What did Samsung do in the meantime ? It is clear that Samsung management understood that the i-phone and Apple in general were going to be game-changers. They also clearly understood that the mobile phone was just one of the electronic gadgets that a large sway the of consumers would adopt in the medium term.

They did shake up their R&D and copied Apple in phones, tablets, etc. They shaped up a strategy prior to looking at their structure and capabilities of the time. And they worked hard at delivering.

Yes, Samsung might have lost a court case for copying Apple i-phones and tablets, but isn't this a compliment ? They are today pretty much the only alternative to Apple.

Ambitious strategies seen through to execution is what changes the economic world. Structure is a by-product.

Isn't this a strategy coming after structure ?

In further discussions with the global company's management, I was told that the i-Phone was a "fad", that touch screen was a "gimmick" and that consumers would soon realize they cannot write a text message with it and would then come back to buttons and to Nokia.

With such thoughts at the top, there was no attempt to shake up the product program to speedily develop a Nokia equivalent to the i-Phone. Once again, the management of the time was looking at structure and capabilities before formulating strategy, unlike the original leaders of the company across the 20th century.

We will recommend to directors and mangers that strategy should come before structure in most cases.

Authors

Dr Leesi Gborogbosi and Dr Annick Desmecht

CEO, Gabriel Domale Consulting – Dr Leesi Gborogbosi

Dr Leesi Gborogbosi is the CEO of Gabriel Domale Consulting, a management consulting firm based in Nigeria, that helps companies in Africa to grow, provides insights to leaders and transforms institutions.

He has about three decades of leadership experience in the oil and gas industry (Shell Nigeria). He is an expert in finance, strategy, corporate governance, transformation, cost management, leadership development and due diligence.

Dr Leesi Gborogbosi was Project Finance Manager of Upstream Oil & Gas Projects (7 projects - Headline size: $8 bln) - Southern Swamp Associated Gas System, Forcados Yokri Integrated Project, Otumara, Adibawa, Agbada and Assa North/Ohaji South Projects.

He provided advisory services namely, strategic planning, budget management, funding strategy, risk management, governance, due diligence and investment plan covering the full life cycle of the seven major upstream oil/gas projects, power facilities and export pipelines.

He collaboratively works with business leaders and their organizations to identify growth opportunities and create value through operational excellence in strategy implementation and capital efficiency by delivering projects within costs, building strategy and planning frameworks and crafting of innovative funding solutions.

Dr Leesi Gborogbosi provides support to finance leaders to make crucial decisions and optimize performance through financial excellence in finance systems and accounting operations, budgeting, finance transformation, cost reduction, governance, risk, and compliance.

He has doctoral degrees in strategy and business studies and MSc (Research Methodology in Management) from IE Business School, Madrid and an MBA (Finance and Banking) from the University of Port Harcourt, Nigeria; and BSc (Accountancy) from the University of Nigeria, Nsukka. He had his secondary education at Federal Government College, Jos, Nigeria.

His doctoral dissertation focuses on strategy implementation, collaboration, the role of middle managers, and the dynamics of social movements (host communities).

Dr Leesi Gborogbosi leverages his professional experience as a Certified Management Consultant (CMC); Fellow, Institute of Chartered Accountants of Nigeria; and The Institute of Management Consultants. He is member of the Chartered Institute of Procurement & Supply, London; Nigerian Institute of Management (Chartered); and Strategic Management Society, Chicago, United States.

He was nominated by the Strategic Management Society, Chicago for "Best International Conference Paper Prize Awards" in 2017 and 2015. He was appointed the Chair for the Session on “Leading change implementation processes” at the Strategic Management Society conference in Denver, United States in 2015.

Dr Leesi was a member of the Strategic Management Society “Special Committee on Diversity and Inclusion”, Chicago, USA, with the responsibility of providing the Strategic Management Society Board of Directors with a good audit of where the Strategic Management Society stands with respect to inclusiveness in its activities.