Core vs. Support Function Decision-Making
The decision making in core functions i.e. Operations, Marketing, and Finance is significantly different from the support function, such as IT and Digital.
Impact of Marketing Decisions
In one of my previous roles, one rupee change in the sale price per unit meant Rs 16 crore impact on the bottom line, and we would have very often marketing decisions taken (at least 4-5 times/month) for an average Rs 10/ (mostly reduction) each time impacting adversely Rs 160 crore on the bottom line, at a time.
Operational Decisions and Real-Time Impact
Similarly, in operations, one percent excess consumption, excess scrap, additional freight, etc., had several tens of crores of impact, and decisions were taken (or corrective action not taken) almost in real time, all the time.
Bureaucratic Decision-Making Processes
While realizing that strategic initiatives have very large positive impacts on the business, somehow the decision-making process is so bureaucratic and so slow that the pain is endured while a solution at a minuscule fraction of the cost exists, is under evaluation but never decided upon like any operational decisions as alluded to above.
Fear of the Unknown
Does it have anything to do with the status quo mindset of doing what is routine and anything new has a fear of the unknown, however small the cost of doing it? Fear of the unknown is also exaggerated since similar initiatives may be delivering at hundreds of locations and are well proven.
Perception of Initiatives as Costs
Is it because these initiatives are seen as costs (in fact, most organizations brand them as cost centres) instead of investments with ROIs? Also, the mindset of the functional owners of such strategic initiatives is one of service providers and not of one impacting the P&L, which also contributes to the lack of ownership for such initiatives and hence soft peddling.
The Invincible Company Model
“The Invincible Company” distinguishes the organization as “Exploit” & “Explore,” organizing the parts separately with the Explore organization reporting to the CEO with great outcomes, e.g., Bosch, Ping An, etc. Mind-space, resources, and governance for strategic initiatives should be different from Operational issues which most leaders are adept at.
Call to Action for Decision Makers
I urge decision makers to make the change from cost centres to investments with attractive ROIs on strategic initiatives and graduate to “Ever Flourishing Organizations.”