Setting Boundaries

What organizational design is in place to help a business leader understand the boundaries of their decision authority? Start with questions like:

• What are the boundaries between this business and adjacent businesses?
• What is the relationship of this business to any strategic investment portfolios (driving changes in business capabilities)?
• What is the relationship of this specific business to specific products, programs, and supporting systems?

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Identify Context

We will begin by describing a context, dedicated to the business unit, or line-of-business, set of related businesses, or a grouped set of cross-business offers. The first context-to-context relationship we’ll cover is the parent-child relationship.

The Parent Context for this business context is the enterprise (top-level) context, led by the C-suite . This business context is sponsored (and funded) by the parent to both run, and change, the specific business, which is modeled in the Journey/Job Map for managing a portfolio of businesses for the enterprise. The parent’s enterprise strategy is visible through the Parent Goals and specific Parent Results, usually corporate targets and share-price aspirations. The enterprise strategy sufficiently details the “Where to Play” and “How to Win” choices for the overall company such that the individual businesses (like this context) can define their own “Where to Play” and “How To Win”, within their business context.

Define Context Scope

The Mission of a business is to win in their market by delivering value to customers and realizing value for the company. Use the discussion of mission to establish the value that is offered to others outside the context. This can be expressed as a service catalog, if desired, to help these other contexts understand how to consume the value created from this context.

Its Responsibilities include:

1. Strategy Development - analyzing market trends, finding growth opportunities, driving plans to achieve revenue targets
2. Performance Management - monitoring and managing performance against key metrics and targets
3. Resource Allocation - decisions on staffing, budget allocation, equipment procurement, resource optimization, etc. to keep the business running smoothly
4. Cross-Functional Collaboration - coordinating with other business units to achieve shared goals
5. Stakeholder Management - managing relationships and expectations of internal and external stakeholders, and understanding the needs of customers, employees, suppliers, investors.

Assets owned and maintained by a business context include the systems that implement the business capabilities that allow the business to function, especially the core capabilities that provide a strategic advantage.

The leader(s) of a business context have the complete Decision Authority to decide:

• Where to play (i.e. markets, customer segments, etc.)
• How to win (i.e. differentiation or cost leadership, etc.)
• What to change (i.e. business capabilities that enable the strategy)
• What to fund (i.e. products and/or programs)

Decision Rights

Leaders delegate decision making by creating boundaries of authority. Decision rights enables the speed and effectiveness of decentralized decision making.

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Define Context Behaviors

The business context builds and maintains a set of business Capabilities. Performance and success for the context are governed by KPIs that show how effectively the business capabilities are executing, for example:

• Customer satisfaction
• Cost per order delivered
• Customer acquisition costs

Business leaders oversee a Workflow that produces outputs consumed by their customers:

1. Grow awareness with potential customers
2. Take customer orders
3. Fulfill customers orders
4. Enable customers
5. Support customers

Business leaders work with functional leaders and product leaders to execute the above workflow. Their workflow Needs Value from various (sometimes shared) functional contexts, like marketing. This business context is considered to be a Peer Context of the shared functional contexts serve it.

Business leaders drive several key Rituals to help communication and alignment across their stakeholders, and support cross-functional collaboration:

• Quarterly Business Review
• Monthly Goal Review
• One-on-ones (between context leader and related child and parent context leaders)

The business context pays a monthly Rate, to the various functional contexts (including a portfolio management functional context), product contexts, and program contexts that build business capabilities (changing the business) and deliver value to their workflow (running the business). These rates are generally proportional to the run rate for the peer context itself (i.e. staff).

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