Big companies used to follow a simple rule of organizational design: “structure follows strategy.” With this approach, executives would first set their strategy and then define the organizational model that best supported it. These days, however, big companies rarely have the luxury of following stable, long-lived strategies—and those companies’ organizational structures must now be as supple and adaptable as the strategies they reflect.

As Sir John Browne, of British Petroleum, puts it, “Our strategy is our organization.” In this model, organizational design, the quality of interactions within teams, and the distribution of energy in a company may be far more important determinants of success than the soundness of a given strategy.

The new belief in the importance of organization is closely linked to changing attitudes toward markets. As “The alchemy of LBOs,” one of the articles in this Reader, reminds us, substantial value can be unlocked when businesses are taken out of large companies and given market-oriented performance incentives.

But a balance is necessary. Our second piece, “The innovative organization,” argues that winning companies incorporate features of both large and small ones: they give entrepreneurial activities plenty of space as well as access to the parent companies’ resources and knowledge.

Yet another piece of the puzzle is sustaining change and innovation without losing performance discipline. “Teamwork at the top” offers practical advice on how managers can work together most effectively—a considerable challenge as the scope of business changes.

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Introduction 3

The alchemy of LBOs 4
Paul A. Butler
The McKinsey Quarterly, 2001 Number 2
How can investment bankers achieve better results at chemicals companies than engineers and chemists do? No, it isn’t black magic.

The innovative organization: Why new ventures need more than a room of their own 16
Jonathan D. Day, Paul Y. Mang, Ansgar Richter, and John Roberts
The McKinsey Quarterly, 2001 Number 2
Companies can grow quickly without sacrificing performance discipline. The trick is to balance partitioning and integration.

Teamwork at the top 28
Erika Herb, Keith Leslie, and Colin Price
The McKinsey Quarterly, 2001 Number 2
When the top team isn’t working well, the whole company suffers. How can top teams fix themselves?
Further Reading 40

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