Internal Evolution at a Time of Profound External Change for Scale-Up Stage Technology Companies

1. STRATEGY, STRUCTURE AND
TRANSFORMATION
Internal Evolution at a Time of Profound External Change
for Scale-Up Stage Technology Companies
MAY 11, 2020
DAVE LITWILLER

2. INTRODUCTION
• At times of major exogenous shocks like we are going
through now:
• New opportunities emerge
• Changes take place in demand and availability of supply –
• For some extreme surges
• For some declines
• For others a mix of both
• Everyone’s master evaluation rubric of what matters most
changes a lot, qualitatively and quantitatively
• The first phase internal response to adapt is now largely
complete for most scale-up stage technology companies

3. INTRODUCTION
• Today, most scale-ups are moving from initial response to
a second phase of further adapting company strategy,
internal structure, communication and decision
mechanisms
• Solidifying and optimizing business performance capacity
and productivity in the new normal
• This is mainly about innovation and improvement in the
organization itself, above and beyond first phase
adaptations in products, tech, staff and management,
operations, suppliers, channels, and target customer
segments

4. STRATEGY
If there’s anything further to be done that hasn’t already:
• Reassess the external environment in its new altered state
• Get to a revised understanding of target market size, growth
rate, core profitability, and forces of competition
• They aren’t now what they were before, for better or worse
• Decide on the best strategy for how to participate and win in
the ecosystem
• New skills and execution velocity that will be needed
• Traditional strengths that remain vital, and ongoing sources of
shared pride
• Legacy skills that will be less significant and slower changing
• →The ELT should lead the strategy renewal process, but
keep the board involved with room for directors’ influence

5. STRATEGY
EXECUTION
• Any time there is a major strategic shift, fully realizing the
dictum of form following function usually takes longer to
complete to best adapt internal structure to a revamped
external environment
• Even after formal structural changes are made, there are
still holdovers of
• mindsets & skills
• relationships
• patterns of working
• communication and decision making
that continue to reflect the old more than the new
• Past success can partially blind people and organizations
to the degree of transformation required

6. STRATEGY &
STRUCTURE
• The motivation for what follows is that with large systems,
be they corporations, technological systems, or
otherwise:
• Empirically, as much as half or more of the value in
performance optimization still remains to be gained from
further refinements after the first wave of changes has
been made
• The question we are out to answer:
• What are the structural and dynamic considerations to best
complete the re-optimization and ongoing tuning of growth-
stage technology businesses in this environment?

7. ORGANIZATIONAL
STRUCTURE
• Starting point: There is no universal best internal structure
• The org structure to best compete is contingent on
manifold external and internal factors
• There are however a set of enduring, practical methods to
help guide suitable joint architecture of:
• Internal structure
• Integrating mechanisms and decision methods

8. COMMON ORG
STRUCTURES
• Functional
• Best for businesses and environments with a low rate of
change and a few strong people at the top, or, with a narrow
product, service or or project focus
• Flat
• Best for homogeneous businesses with short learning curves
and low complexity
• Matrix
• Best for conducting concurrent projects out of multiple shared
skill sets
• Divisional
• Best for multiple business units, each with significant or full
capacity to conceive, build and sell product independently

9. COMMON
STRUCTURES
• A few businesses fit well adhering almost exactly to model
forms of the common structures
• In most cases though, to best deliver on strategy requires
tailored adaptations to organizational structure,
communication and decision mechanisms

10. ORGANIZATIONAL STRUCTURE
DESIGN INFLUENCES
• A common external input is to look at the structures of
well respected, analogous businesses
• Internal approaches to adapt structure usually look at
• Reductions
• Additions
• Splits, and
• Convergence of formerly delineated activities
as the basic operators for how to move from one org
structure to the design of a renewed one
• Other internal approaches use time horizon of concern as
the basis for sorting vertical management hierarchy

11. ORGANIZATIONAL STRUCTURE
DESIGN INFLUENCES
• The limitations of benchmarking, the common operators,
and time horizon methods that I’ve always found:
• A lot of context often has to be reimagined in the
benchmarking input case which becomes pretty subjective,
as well as requiring a number of assumptions
• The simplicity of the internal operators doesn’t provide
enough guidance beyond the most obvious weaknesses to
fix and new activities to introduce or promote when
designing a restructuring
• Time horizon-based hierarchy works better for some
functions than others, and can leave a lot of unresolved
tensions where complexity and rate of change are high

12. DIFFERENTIATION &
INTEGRATION
• In my experience, the most versatile and effective mechanism for
devising a strong, adapted organizational structure is through
consideration of
1) Differentiation, and
2) Integration

13. • One of the paradoxes that drive success in a
rapidly evolving environment is the need
internally for both differentiation (specialization)
and integration (synthesis)
• Differentiation is required to develop and sustain
industry-leading specialized skills
• Integration is needed to combine domains of
expertise across functions internally, across external
dimensions, and over time
• The environment demands both differentiation and
integration; the people, structure and processes
within the business need to deliver them together
DIFFERENTIATION &
INTEGRATION

14. DIFFERENTIATION
Differentiation, creating new specialized organizational units,
is usually favoured in cases where:
• A high rate of change for the skill or capability is expected
to remain in enabling technology, applications, analytical
tools, or form of delivery
• There is a large degree of uncertainty intrinsic to the skill
area, the science, or the technology
• The timescale of achieving definitive feedback is long
• The environmental opportunities are many
• The tasks and work products are complex

15. DIFFERENTIATION
Differentiation is sometimes misused when:
• The reflex of leadership or governance is to add a new box to
the org chart to address new challenges
• The issue needing improvement may be better integration
practices, not the need for further specialization
• Despite good intentions, the desire to create an added or
elevated focal point can devolve to having those people trying
to act as coordinators or facilitators when this needs to be
done directly by the principal players to shorten
communication chains and improve accountability
• There is an overreaching desire to define new efforts in ways
that most readily lend themselves to monitoring and control

16. DIFFERENTIATION
Differentiation, even when used appropriately in a local
sense, can fail to deliver its full potential because of
insufficient increases in integration:
• Despite the hopes of some to the contrary, there’s no free
lunch
• Increasing differentiation (heterogeneity) requires increased
integration capacity to synthesize the parts into a productive
and resilient whole
• Interconnectedness is everywhere

17. INTEGRATION
Integration is the process by which information flows, decisions
are made and where decision authority is located
• It benefits from having many people in the business who are
more entrepreneurial than managerial, but, it requires
managerial mechanisms as a back-stop to encourage the
right individual and team behaviours and learning
• Integration is foundational to an enterprise, across
• Functions/horizontally
• Reporting lines/vertically
• Technologies
• Time
• Internally and externally
• Integration relies upon both formal and informal practices

18. INTEGRATION
• Decision mechanisms and conflict resolution are all part
of enterprise integration
• Integration happens in many places, the more formally
designated among them:
• C-suite, the ELT and increasingly senior levels of
management
• Product managers
• Project & program managers
• Chief engineers
• Teams and task forces
• Committees and working groups
• Continuous improvement and corrective action efforts

19. INTEGRATION
• The reality in a business of scale is that the formal org
chart describes only one set of the modal paths of
communication and decision making
• Much of the work, progress, and learning relies on other
communication and decision making groupings and
channels
• The faster moving and more complex the environment, the
more important distributed integrative capacity becomes

20. INTEGRATION
• Integration comes down to people who without even being
officially appointed, show a clear interest, wherewithal and
motivation to work across functional boundaries
technically, organizationally, internally, externally and
contemplating different time horizons
• At a time of consolidating and furthering gains from recent
changes within and exterior to the enterprise:
• Identify who those people are to call to action in efforts to
grow and revamp integrating bandwidth in the enterprise

21. INTEGRATION
• Integration is complex to achieve and sustain at scale, but
the prizes for doing so in more organic ways are several
vs. heavier reliance on more hierarchical integration and
decision mechanisms:
• Better acceptance of creativity
• Flexibility in dealing with novel opportunities and problems
• More response capacity and speed for those with first
hand knowledge who are closest to emerging issues
• Morale and loyalty tends to be higher

22. INTEGRATION
Common traits of people who create integrative force:
• Comfortable with paradox, ambiguity and change, but can
still drive toward decision and action
• Tend to be able to understand other peoples’ points of
view, and communicate across different dialects of
specialization
• Stay positive and constructive in the face of setbacks and
challenges
• Quick studies
• Wired for impact
• Driven as much by accountability to peers as superiors

23. INTEGRATION
Rewards
• Charlie Munger: There are only a few forces more powerful
than incentives
• For more integrative behavior at a time of change, it is
necessary to shift incentives toward team-based measures
• This can be difficult for people who rather more
individualistic forms of measurement and reward

24. INTEGRATION
The Role of Trust
• The minimum viable level of trust to promote integrative
behavior:
• Trust that colleagues will be mutually transparent and open
• Trust that superiors can be relied upon to act consistently
• Trust that expressing disagreement will not be harmful to
the transmitter

25. INTEGRATION:
SUBTLE DIFFERENCES,
BIG IMPACTS OVER TIME
Culture of
Performance
Initial Reactions
Among Group
Members to Emerging
Issues
Learning and
Decision Making
Response to
Further
Challenges
Integration Outcome
Strong
Performance
Ethic
• Confidence rooted
in paranoid-
optimism
• Clear, conclusive
goals
• Aligned, pan-
business frame of
reference
• Rapid learning
• Doing things
right
• Positive sum
decision trade-
offs
• Good
improvisation
• Expectation
that further
challenges will
need to be
overcome
• Focus is
sustained on
what matters
currently
• Fuller, more resilient
enabled benefits
• Skill growth,
especially cross-
functionally and into
identified gaps
• Change sticks
• Enhanced future
integration capacity
Mimicry of
Strong
Performance
Ethic
- or –
Simply
Weak
Performance
Ethic
• Less urgency
• Vaguer goals
• Misalignments
• Localized frames of
reference and
parochial
benchmarks
• Doing what is
comfortable
• Getting things
off the to-do list
fast
• Using specious
facts &
arguments
• Zero sum
decision making
• Difficulty ad lib-
ing
• Further
challenges are
minimized
• Goals drift and
diverge
• Partial
solutions are
implemented
• Success
criteria stay
rooted in
history
• Weaker results
• Slower skill
development
• Skill gaps remain
• Change is slower and
more hesitating
• Regression is
common down the
line; old habits die
hard

26. DIFFERENTIATION &
INTEGRATION
• At a time of rapid external and internal change, renewing
and expanding integration is usually the greater challenge
• Differentiation (specialization) is more reductionist
• It has its own learning curves and challenges, but they are
usually relatively straightforward to implement and to
monitor for whether competitively leading abilities are
being attained as the basis for further investment and
course corrections
• Synthesis challenges of integration are more demanding,
contemplating many relevant dimensions to a high growth,
technology-based business
• Especially if fatigue is high, or stress is well beyond
optimal, it is easy for people who would otherwise do well
at integration to have a more limited field of concern

27. CONFLICT AND
DECISION MAKING
• Intrinsic to integration is conflict and resolution
• Conflict and decision-making capacity are two parts of the
same thing
• Conflict is unavoidable to have enough sensory and
deliberation redundancy in communication and decision
methods to achieve enterprise resiliency
• The desire among some people for parsimony in
communication and others to manage the message has to
be superseded by the need for a web of multi-channel
dialog to overcome individual and social limitations in
communication
• Beyond resiliency and decision making, conflict is
inherently part of identifying and managing risk

28. CONFLICT AND
DECISION MAKING
• Conflict is also a necessary part of emotional investment;
when there is conflict, it means there are further truths to
be revealed
• Conversely, if there is routinely no conflict, it usually means
there is little or no interest
• With high rates of internal and external change, even
sensible solutions to today’s challenges will generate
conflict in the future
• Whether conflict is good or bad depends on how it is
handled
• It can be constructive or detrimental

29. CONFLICT RESOLUTION
HEALTH CHECK
• Is influence coming from where knowledge and
competence are strongest?
• Are differences being discussed openly, or are
smothering, forcing, or passive-aggressive tendencies on
display?
• Is conflict constructive, where knowledge is exchanged,
decision criteria and weightings are shared, learning is
mutual, and the solution space is expanded?
• As a first measure toward constructive confrontation:
• Are people able to agree at least at some higher level of
abstraction about what needs to be achieved, before
getting to the specific decisions and implied actions to be
taken?

30. CONFLICT RESOLUTION
HEALTH CHECK
• Are decision criteria reflective of what best meets the
superordinate needs of the business?
• When decisions are taken, are the language and outputs
clear, or is there ambiguity so that interpretations among
participants diverge a lot over time?
• Superficiality test: Is easier outset agreement frequently
concealing unexposed significant difficulties still to come?
• Are escalations bi- or multi-lateral, or are they unilateral?
• Do people often come up with creative solutions, or just
split the difference or even take one-sided approaches?

31. CONFLICT RESOLUTION:
THE CRUCIAL ROLE OF THE ELT
ELT Traits to Model and Backstop Sufficient Integrative Behaviours
Good leadership, continuity and flexibility to situational leadership
Individual accountability
Group purpose empirically matches the broader organization’s mission
Efficient meetings: agendas and preparation, discussion, decisions,
delegation, follow-up, and feedback
Conflict is more constructive (transparent, positive sum) than not
The group measures its effectiveness by its influence on the rest of the
business, and the competitive fitness of the business in its external
landscape
 ELT performance for fostering integrative capacity throughout the rest
of the business tends to only be as good as its weakest links, and the
weakest interfaces within the ELT

32. CONFLICT
RESOLUTION
• The formal organizational hierarchy including the ELT always
has to be the ultimate work-out and backstop mechanism for
decision making and conflict resolution
• Even for firms strong at integration and team-based
communication and decision making
• A known and reliable escalation mechanism helps people to
make decisions rather than having to rely on others doing so
for them
• Prevents issues bouncing around indisposed
• For adaptive, responsive organizations though, most conflict
and decision making occurs by a web of horizontal and
vertical communication throughout the business

33. CONFLICT
RESOLUTION
• If a decision is unavoidably zero sum, one wins and another
loses, then integration effort for that issue is largely a waste
of time, and possibly detrimental
• The time spent on openness and constructive confrontation
builds an expectation for parties that they will get at least
some accommodation
• When that expectation can’t be met in the zero sum case,
disappointment results, and even cynicism
• When a zero sum decision is the only way to resolve a
conflict that has been sufficiently explored and understood:
• Explain the decision, to impart context and show respect
• But otherwise, make the call and move forward

34. HIGH IMPACT
INTEGRATION
• Two examples of communication protocols that are
forcing functions for improving information flow and
integration
• Monday Notes
• Automatic Responsibility

35. HIGH IMPACT
INTEGRATION
• These examples are admittedly very strong levers to
improve integration
• They are borne of life-critical, fault intolerant technology
development environments
• Monday Notes and Automatic Responsibility are too
strong in their raw for some less formal environments
• But, they are offered for their exceptional clarity and
inferential value as concise cases in point for how
integration can be improved
• From these, situationally adapted forms can usually be
readily devised to suit a particular business

36. MONDAY NOTES
• Circular communication and feedback mechanism
• Encourages amenability to ideas from everyone,
regardless of hierarchy or function
• Pushes communication up, down and across
• Communication and filtering moving in the upward
direction is a particularly limiting issue at scale. Monday
Notes help reduce this friction.
• As well, resistance to horizontal communication usually
increases at scale, as specialization and the size of
functional groups increase so that the average zone of
concern for individuals decreases

37. MONDAY NOTES
• The practice makes conflict more constructive by opening
up dialog and making considerations and deliberation
more transparent
• Pushes the organization toward:
• Multi-disciplinary technical and multi-function operational
depth
• Enterprise-wide consideration of issues, internal & external
• Short-, medium- and long-term balance of considerations

38. MONDAY NOTES
How the protocol works:
• A presiding executive’s direct reports and second level
reports all submit weekly a one page summary of progress
and problems:
• Achievements and setbacks in the past week
• Achievements expected over the coming week
• What the reporting manager most needs from others
• What others most need from her and her team
• Biggest worries
• Position and arguments for pending decisions

39. MONDAY NOTES
How it works (cont’d):
• Direct reporting managers do not edit second level
reporting managers’ submissions
• There is an element like skip meetings built into Monday
Notes
• Reports are encouraged to be:
• Written in prose
• Candid in their assessments, and
• Submitted with an understanding that there will be no
repercussions for disclosing unsolved problems or past
decisions that don’t look so good in light of new information

40. MONDAY NOTES
• These are submitted to the presiding executive’s office by
the open of business on Monday morning
• Response protocol and reciprocity:
• The presiding executive annotates all submitted notes with
comments, suggestions of who should connect with whom,
and questions
• The entire package of submissions, and annotations, are
returned to all contributors by Tuesday morning
• 1:1 submissions become N:N exchanges and awareness

41. MONDAY NOTES
• Transparency:
• Activity, issues and debates are moved into the open for a
large number of influential people
• Disagreements are forced to a more constructive form
• A wide group of managers horizontally and vertically learn
how the leader thinks about major technical and
organizational issues, how to communicate, and the
process for how to move toward decisions
• The leader directly understands the evolving points of view
of a range of managers

42. MONDAY NOTES
• Considerations:
• Such a high degree of transparency amplifies the impact of
the presiding executive, both good and bad
• It requires thick skin and tolerance for real debate among
all participants
• The more free form and less bureaucratic, the better, to
keep the Monday Notes protocol from becoming sterile

43. MONDAY NOTES
• The benefits of the kind of weekly reflection event by
submitters as they write helps with organizational learning
and resulting distributed action
• As familiarity with Monday Notes grows, participants tend
to more proactively self-address issues vertically and
horizontally throughout the organization, increasing
integrative initiative

44. AUTOMATIC
RESPONSIBILITY
• It is pretty simple:
• If you encounter a problem, you are automatically
responsible for it
• If the person who detects the problem or likely problem
can handle it, then he must
• If he cannot, then he is duty-bound to refer it up the chain
of command to that the appropriate skills and resources
can be dispatched

45. AUTOMATIC
RESPONSIBILITY
• Considerations:
• Favours people who want responsibility; it is harder for
people who would rather have narrower concerns
• It creates a high, and for some uncomfortable, level of
transparency
• Automatic responsibility provides a web of horizontal and
vertical concern to make sure that issues are identified and
acted on
• Encourages truth speaking to power

46. INTEGRATION
Final remarks:
• Whatever are the right communication, conflict and
decision mechanisms in any particular business,
integration is greatly enhanced by:
• An emphasis on upward-directed communication, which
then naturally sparks bidirectional vertical and horizontal
dialog
• Doing communication in a way that brings risks out into the
open, not downplaying them, and then manages the risks

47. TRANSFORMATION
At Times of Major Change like Now
• Two crucial issues:
1. The case for change and the necessary degree of change
2. Overcoming the forces of reaction, beyond those that more
simply desire to stay close to the status quo
• These dimensions make change more complex than just a
linear move from old to new
• Some of the work of transforming can be data driven, some
of it not
• Portions of it necessarily involves trade-offs that don’t have
the same units of measurement or comparison
• Some of it can be analytical, some of it is about emotions

48. TRANSFORMATION
• The crux of leading change:
• Get to the podium of technology and market leadership in
your chosen sectors of operation in the new normal
• Maximize ecosystem influence in the new setting
• Build and expand the competitive moat while staying
responsive to further developments, opportunities and
difficulties

49. TRANSFORMATION
• The crux of leading change (cont’d):
• To do this usually requires spending more on some things,
while less on others
• The toughest part of being a leader is convincing people to
do both at the same time
• Paraphrasing Jim Collins, the job is less difficult with the
right people in the right roles
• Get the right people on the bus, the wrong people off, and
the right people in the right seats to be able to carry out
the new mission, live the needed values, and deliver the
vision
• Be influenced more by what people do, than what they say,
especially as time goes on through the changes

50. SUMMARY
• Complete the reassessment of the external environment in its
new, altered state
• Decide on the best strategy for how to participate and win in
the reformed ecosystem
• Revamp the architecture of the organization
• Provision for improved specialization through differentiation in
the areas of greatest uncertainty, most rapid change, and
longest timescales of attaining definitive feedback
• Introduce more or better integrative mechanisms for the
packages of expertise and decision making required to lead
the market
• Integration across the enterprise, technologies, externally and
over time is often the more complex and difficult aspect of
organizational change to match structure to strategy

51. SUMMARY
• Conflict and decision making are where the power meets the
pavement to renew organizational structure and dynamics in
line with evolving strategy and new business ecosystem
realities
• Keeping conflict open and constructive
• Basing decisions on competence and knowledge
• Be explicit and deliberate about chosen conflict resolution
mechanisms
• Changes in org structure and strategy require new or
augmented decision methods, especially for multi-disciplinary
matters with high uncertainty
• Explicit and implicit decision processes presage a great deal
about the forward culture, values and likely competitiveness
of the business

52. SUMMARY
• ELT performance is magnified throughout an organization
adapting to rapid change
• The benefits of improving ELT dynamics and output have a
high payoff during high speed business evolution when the
enterprise needs to transform quickly
• ELT behaviour tends to be emulated throughout the
organization over time

53. SOURCES (PARTIAL)

54. ADDITIONAL RESOURCES
Strategy and Strategy Reform
https://www.slideshare.net/davidjl/improving-and-updating-corporate-
strategy-in-growth-stage-technology-enterprises-dave-litwiller-jan-10-2020
https://www.slideshare.net/davidjl/strategic-intelligence-in-growth-stage-
technology-businesses-dave-litwiller-june-2018
Co-Evolving Strategy, Tactics and Business Performance in Real Time
https://www.slideshare.net/davidjl/business-review-meetings-in-growth-
stage-technology-companies-dave-litwiller-july-2019
Building Leadership and Change Capacity
https://www.slideshare.net/davidjl/leadership-development-in-growth-stage-
technology-companies-dave-litwiller-september-2019-public

55. FURTHER
DISCUSSION
For additional discussion about strategy, corporate structure
and transformation for high growth technology businesses:
dave.litwiller@communitech.ca