Strategy Musings: Combine Structure with Infrastructure to build Capability (Part-2)

Examples of five real-world organizations

(Part-1 of this two-part article explained the notions of ‘structure’ and ‘infrastructure’, and how they could be combined to build and sustain advantage in the marketplace or socio-economic environment)

There are many examples of organizations that combine structure with infrastructure in their operating systems to build real capabilities and thereby remain relevant and effective. Here we look at five organizations from diverse sectors, of different scales, and with different missions.

Toyota

Capability for flexibility, efficiency, and mass customization

Toyota’s long-lasting success in intensely competitive car markets of the world rests on its ability to implement many well-designed interventions that combine structure and infrastructure. Take, for instance, the JIT system. Kanban system of interlinked information triggers that streamline flow of material with very low inventory is an example of structural intervention. However, it cannot work well if some stages in the production process keep generating defects. This is especially so when the organization (in this case, Toyota) wants to meet fluctuating demands of large variety of products with quick serviceability while keeping low inventory stocks.

Toyota and some other firms realized early that a strict quality control system that reduces the occurrence of defects to extremely low levels requires both technology and routine involvement of workers in identifying defects, diagnosing their causes and suggesting corrective actions at the process level. Operating workers’ engagement in these analytical and cognitive tasks, besides routine operating tasks, is an efficient way to improve process quality. That is so because, at any time, the workers on the ground have information about the changes that have recently occurred in their operations and surrounding environment. That information is crucial to carry out accurate root-cause investigation and identify the factors that might have caused specific quality problems. Therefore, workers need to be empowered with authority to test, diagnose and analyze process issues, and recommend and implement solutions. They also need to be trained in the skills and the use of instruments and technology to carry out such tasks efficiently. Further, they must be motivated to engage in these deeper tasks in addition to performing routine operating work. And a lot of such information collation, diagnosis and analysis can be done most effectively in teams, since no single worker would have all the relevant information and imagination required to accomplish those tasks.

Senior managers of Toyota created conditions to facilitate this practice, such as redefining work roles, appraisals and incentives, training the workers in individual and team skills for carrying out the analytic-cognitive tasks. Such tasks, when carried out on a routine basis, not only reduce quality problems and make low inventory JIT flow possible, but also build and reinforce valuable skills and knowledge among the workforce. This changes the work culture toward that of teamwork, problem solving, learning and acquiring deep process knowledge. When this culture is developed with the explicit objective of creating differentiation in the marketplace, it builds core competency. That is difficult to copy.

Apple

Capability for creating customer experience through design and innovation

Apple’s phenomenal success as innovator of breakthrough products derives from its core competence in market research and designing. The process of market research and designing is organized in an unconventional way.

Market research is interwoven into the designing process, and involves multi-stage, iterative, open-ended and intensive interactions with prospective users, rather than structured surveys. The design team members come with diverse skill backgrounds and experiences, from technical to anthropological. Significant steps of designing process include inter-disciplinary team-based ideation and prototyping. A variety of methods, materials, technologies and software tools — ranging from rough and low-resolution to precise and high-resolution — are used at different stages.

It is evident that these processes combine structures and infrastructures at nearly every step. Their outcomes are creative, out-of-the-box product designs that offer cool user experiences. These practices are an integral part of Apple’s work culture and are difficult to copy.

GE

Capability for custom and efficient services through digital solutions

As mentioned in my article on Supply Chain 4.0, GE is one of the success stories of digital transformation. From 1980 to 2022 they have transitioned from selling parts and repair services to providing expanded services and decision support that optimize customer assets and operations. The latter has been achieved on the back of digital technologies (structures) and changes in processes and organization (infrastructures).

Examples of structures are specific technology systems of IoT, network of machines, cloud, big data, analytical tools, mobile devices, and software platforms that work across the enterprise. Infrastructures include centralized teams of motivated solution developers and data scientists, and process changes in product management, marketing, sales, commercial operations, and delivery. For instance, inter-disciplinary teams of business process owners and technical people are now commonplace in the organization. Sales teams have solution architects and people who have the ability to understand customer’s business and operations. Their role has changed from traditional sales-persons to consultants. And GE’s business model has evolved from product R&D and manufacture to customer performance-linked services.

Aravind Eye Care and Eye Hospital

Capability for high quality and affordable eye care services

Aravind is reputed for conducting cataract surgeries and other eye care services whose quality is at par with the best hospitals in the world but whose cost is very low and productivity high. It has designed and implemented numerous systems — structural and infrastructural — that work together to create the capabilities that not many hospitals have been able to replicate.

Aurolab, the factory that makes ophthalmic components in large volumes and at extremely low cost, is an example of an effective structure. It sells these components not just to meet Aravind’s requirements but also to many developing countries. It has made an important contribution to Aravind’s mission of providing affordable services to patients from rural and low-income backgrounds. Hospitals and their locations and specialty clinics are, of course, structures.

Design of highly standardized processes for carrying out surgeries, other eye care services and in-process quality checks, and the doctors and nurses getting trained and integrated as part of those processes, are the infrastructures at the core of Aravind’s successful model. Another example of infrastructure are the outreach eye care camps conducted routinely for remote and dispersed rural communities which have poor access to mainstream healthcare services. These camps are an integral part of Aravind’s eye care delivery system. Over 2000 free eye camps are conducted every year and 30% of cataract surgeries are performed in them. Aravind’s doctors, nurses and other personnel have the ability to communicate with rural community members and take their help in organizing the camps.

Lok Samiti

Capability for engaging with and empowering rural community

As an example of a small non-profit organization, consider Lok Samiti. It was founded by a group of youth from traditional weaving-artisan families of rural Varanasi in India. It works for education, health and women’s empowerment among its own community whose socio-economic condition is extremely weak.

School facility, science laboratory, sewing skill training centres and health camps operated by Lok Samiti are examples of structures. Infrastructures include frequent within-team brainstorming sessions for planning programs and resolving conflicts, regular participation of all its core members at national level multi-organization meets to build perspective on relevant issues such as socio-economic empowerment of women and democratic organizing, and routine engagement with families in the community.

As a specific example, Lok Samiti collaborates with Centre for Learning and Empowerment (CLE, another non-profit, with which I am associated) to have the students at its school attend live, online courses in subjects such as English, Science, and Social Science. Majority of students have weak understanding of subjects and local teachers of Lok Samiti school are dedicated but not sufficiently qualified. Therefore, the objective of the online educational program is to generate students’ interest in learning, build their understanding of subjects from the basics, and drastically reduce school dropout rate. To achieve this, CLE selects teachers who are qualified, talented, and have passion for teaching creatively and engaging students in friendly ways. Lok Samiti and CLE conduct bimonthly exchange of feedback between the teachers and students, in written form as well as through live online meetings. It is a crucial infrastructural mechanism for teachers to carry out course-corrections, keep learning quality high, and identify the students who struggle with learning and pay special attention to them. As another example of infrastructure, the local teachers assist online teachers with offline assessments and follow ups with students, and in the process, get groomed in creative pedagogies. Classrooms, laptops, projectors, internet and online platform are, of course, structures. The program makes a positive impact on students’ learning and the school’s credibility has risen among the parents in the community.