Making the Transformation to Vertical Alignment

On my flight home the other night I sat beside a woman who headed a line of business at an Environmental Waste compnay. She mentioned how they recently realigned the organization to a Verticals, LOB’s and Services model and that they are struggling with the transition…it sounded like I was talking to myself.We made the same decision this year. After advising and helping companies transition their organization to this structure for years, it is only now that we are beginning to feel their pain. And boy, are we feeling it.Some of the common challenges:
  • Everybody Will Be in EVERYBODY’S business – early on in the transition you’ll experience the “blob.” Everyone involved in the reorg will pretty much be stuck in the same place. Vertical guys will want to define products, LOB’s will want to do their own sales and marketing, etc. It will take time for the “blob” to spread out. Give it time.
  • Lane Violations – as the “blob” starts to spread out people will begin to find their lane. The challenge will be those who refuse to stay in their lanes. Lane owners will need to be protective of their space and tell others to “get out”…easier said than done.
  • Learning Curve – just because you’re the new head of a Vertical or LOB doesn’t mean you know how to do the job. You’ll find that it will take time to truly understand what you are supposed to do…try 6 to 12 months.
  • Marketing, Selling, Scoping Work, Pricing, etc. – all these functions will be debated over and over…where they best fit, who should do what, at what point in the process, etc.
  • Compensation – the elephant in the room. Yes, it will look easy on paper…Verticals = revenue…LOB’s = profit and/or contribution…Services = customer loyalty/satisfaction, but boy does it get messy. It should create a healthy tension in the organization as long as its proactively managed.  This one will take time to sort out and all those lane violators will want to make up their own rules and/or change the ones that exist. At the end of the day, err on the side of the customer and/or what makes best sense for the organization.

Tips on how to survive:

  • Clear Definitions on the Role/s – almost everyone will get the logic and/or rationale for the change and intuitively understand what they are suppose to do. The challenge is they may not, or most likely will not, know how to do it. I’ve seen this story a dozen times….create the org chart, make the announcement to the company; lay out some targets…now go. The missing piece? No one has given anyone instructions on how to do their job. Invest the time to be crystal clear on what and how you want the job to be done. It will go a long way in keeping the “lane violation” from causing problems.
  • Hiring From the Outside – it’s taken me a while to come to this but I think you may be better off hiring new blood to run the Verticals, especially if they are new. If your business is product focused and has been aimed at one or two specific industries consider hiring in talent from the industry you want to penetrate.
  • Verticals Go Forward – the role of the vertical should be to understand the needs of the industry/customers (market sensing), the positioning of competitors, manage pipeline, and position the organization/product/services value proposition to be successful. They may also own account management activities. If they do, a line should be established on how big an account should be to warrant that type of coverage (more on that later). Notice I didn’t say develop products and/or services because they shouldn’t! Vertical folks will be invaluable resources for informing new products/services and adapting existing, but they should not drift into the LOB lane…they own products. If done right they should have an idea of what customers will be 2-3 years out and should challenge the organization to catch up with offers.
  • LOB’s Go deep – the role of the LOB should be to develop a standard set of products and services that fit common needs of customers across industry and meet a defined profit target. They may or may not own the P&L, it depends on the industry but they should control PRICING. Enabling the sales organization (the Vertical) with good content to support their business development efforts and informing the services/solution organization on their needs is core to their role. LOB’s should also understand which channels support what products/services and provide them with the right funding/incentive model.
  • Services and/or Solutions Go Long – this group may often feel like the orphan in this new model but don’t neglect their needs, voice or insight. Most likely, they know the needs of the clients as well or better than the verticals, and how well products/services/solutions actually work. This group should focus on serving the needs of existing customers and finding ways to improve, strengthen and expand that relationship.
  • Not every ‘customer’ needs to be in a Vertical – small and some medium customers don’t need and/or fit into a Vertical. Their needs may not be that unique and/or warrant the type of coverage of other larger customers. Additionally, if you’re deploying a geographic coverage model it just doesn’t make sense in some areas. A dense concentration of customers like the Northeast can support a vertically aligned sales force but in the upper Mid-West…forgettaboutit. Run the territory models on what makes sense.