SMART ORGANIZATIONAL ADAPTATION – NOT LAYERS OF SHORT-TERM EASY FIXES – FUEL DEVELOPING-MARKET COMPANIES' GROWTH

Bain & Company's research identifies the hallmarks of developing-market company champions locally and globally

New York – Oct. 7, 2015 – Ambitious entrepreneurs and companies in developing markets, face one of the most challenging hurdles in recent memory: creating and sustaining the next wave of growth, by adapting the operating models that made them successful in the first place. While mirroring the;methods of established multinational corporations can be somewhat useful, research from Bain & Company, What's holding back developing-market companies?, shows that only 20 percent of executives believe their current operating model actually helps them outperform competitors. Therefore, as these firms approach or hit the limits of their organizational systems, Bain argues the best investment they can make is evolving to ensure they function as effectively as in the early days.

Beyond a certain size, growth for developing-market firms involves any number of complicated and risky moves – making acquisitions, expanding overseas, taking on new investors, layering in professional management, etc. – which can interfere with the company's corporate strategy and derail its growth trajectory. The scarcity of high-caliber talent and issues of decision-making and governance may also arrest a company's effectiveness, as can external forces, including the macro environment and customer behavior.

According to Bain, developing-market champions that successfully manage these challenges consciously align all the elements of the operating model with their strategy.

"In response to increased competition from both sophisticated multinationals and nimble, local start-ups, leaders of developing-market firms often address their organizational problems with partial, temporary fixes that only inhibit growth," said James Root, head of Bain's Organization Practice in Asia Pacific. "A more effective way for them to thrive amid the turbulence is to adapt their operating model holistically, integrating adjustments to the corporate structure, governance and talent. That is what it will take to ride the next wave of growth."

While there is no single best way to organize a company, Bain has identified several common principles among leading developing-market firms as they design operating models that suit the strategy, yet allow them to adapt to the rapid changes of their businesses:

• Stitch the organizational seams to match exactly how the company creates value. Every organizational structure creates boundaries between departments, geographic units or lines of business, and people must learn to collaborate across them. What's important is that a company's operating model closely fits the company's strategy and the ‘seams' naturally reflect how the company creates value.
• Professionalize without piling up bureaucracies.  As companies grow and diversify, professionalizing starts by recruiting people from outside who fit the culture but bring their own strengths and perspective so that they can take on more of the decision making. It also involves changing governance – and in family-controlled firms, that often means creating a family council with an agenda that is separate from the board of directors' business agenda.
• Explicitly link the talent plan to the strategy. Talent may be tight in many developing markets, but even in the tightest markets, smart companies have devised creative talent plans to advance growth. Developing-market leaders define what skills and capabilities they need to support the strategy, identify how they cultivate those skills internally or recruit them from outside, and build an attractive value proposition for their people.
• Develop and deliver the capabilities that matter most. Successful companies choose which few capabilities they need to excel at while being "good enough" at others. Once senior leaders have set the strategy and agreed on which capabilities they need to execute effectively, they harness the right people, processes and technology to deliver the capabilities.

Editor's Note: To schedule an interview with Mr. Root, please contact Dan Pinkney at dan.pinkney@bain.com or +1 646 562 8108

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