Last year, Torrent made a strategic pivot to prioritize business units (or “lines of business,” as we call them): Core East, Core Central, Small Business and Guatemala. By segmenting in this way, we’re able to better focus on our customers across regions and industries.
The decision to structure our company this way was at least partially influenced by the book Scaling Up, by Verne Harnish. According to Harnish, businesses that have grown to 50 or more employees “need to start aligning teams around product groups, industry segments and geographical regions.”
The underlying goal here is to delegate: “[S]enior leaders must develop additional leaders throughout the organization who share the same values, passion and knowledge of the business,” Harnish writes in his book. “This way they have enough talent to whom they can delegate the myriad number of activities and transactions necessary to grow the business.”
Maybe it’s that notion of delegation that stops so many companies from adopting business units. After all, lots of people are afraid of giving up control.
Whatever’s behind this lack of adoption, we’ve found that making business units part of a core strategy can serve as a competitive advantage. Here are four reasons why.
Lesson #1: Business units empower people.
For any company that cares about building up leadership capabilities in its people, business units should be an enticing prospect. Every new unit creates the need for new leaders, giving more chances for existing employees to own new responsibilities and challenges. These new leaders will essentially be running their own businesses, gaining valuable entrepreneurial experience. And that’s great news for your company, because it means that top talent is much more likely to stick around.
Of course, it’s not just about vertical growth: Segmented lines of business create new horizontal opportunities, as well. There will be new openings for marketers, salespeople, service reps and more. Members of your team who have been curious about trying on another hat, so to speak, can finally have that chance. At Torrent, we’ve had a number of employees successfully move from one team to another and into a role that better suits them. These moves have brought tremendous value to the company.
Lesson #2: Business units allow you to service customers much better.
As Verne Harnish notes, the pressure to create new business units often comes from customers: “They’ll complain that they don’t know whom to call to get help — or that they get the runaround when they finally reach someone.”
We’ve seen this point borne out. By having teams with a more narrow focus, our company is better equipped to handle the specific needs of individual customers. For instance, one of our lines of business is “Small Business.” The companies we serve in this segment have fewer than 200 employees, which means their Salesforce needs are very different than companies with thousands of employees. Because we have an entire team dedicated to these smaller companies, we’ve become experts in the space, and can approach marketing, pricing, selling and customer service in ways that best suit businesses of this size.
Lesson #3: Business units give you greater insight into the market.
Whether your business units are divided by product, industry or geography, the very fact of segmentation will give you a much better understanding of the market. You’ll be able to see different challenges in different areas and address those challenges more directly, at a local level.
“The market,” after all, isn’t really one market anyway — it’s an endless amount of smaller ones. By targeting a number of specific segments, the company as a whole will acquire a knowledge that is both deep and broad.
Lesson #4: Business units give you a better pulse on your financials.
Broad metrics like revenue, expenses and profit don’t tell the full story of your business’ financial health. No, you need to get more granular: Which accounts are the most profitable? Which products are selling best? Is your cash flow process working the way it’s meant to? To make strategic decisions to help grow your business, you need to respond to specific problems.
If your company is divided into different business units, it will be much easier to get this kind of granular data. Leaders of different geographic regions, for instance, will have the resources and knowledge to zoom in closer on the map (so to speak). And those in charge of a particular industry segment will have first-hand knowledge of how factors specific to that one industry could be affecting sales. Specialization leads to expertise, and expertise can be leveraged to a build a more sustainable business.
Is it time for you to segment your company into business units? If it is, don’t hesitate to reach out. We’re happy to share more about our experience.