Thursday, 28 October 2010

Degrees of freedom for subsidiary businesses

I've talked to several large US technology companies over the last couple of months about their product and go-to-market strategies in Europe. The common theme running through these discussions has been how to maximise the effectiveness of their regional operations. This is a complex question to answer as it covers all aspects of the business, from broad brush strategy down to staff incentivisation. It's also very possible that there's no best practice that applies to all companies in a sector.

What struck me, however, is that there's a dearth of methodologies for establishing the correct strategy for subsidiary businesses. To that end, I've started developing such a methodology. The first component in my view is defining the dimensions that promote or restrict freedom of action for a subsidiary company. These aren't hugely different from the dimensions of any business at the macro level - I see them as freedom to act on:
  1. Brand and marketing strategy
  2. Portfolio strategy
  3. Product development
  4. Go-to-market strategy
  5. Organisation structure
  6. Operating processes & systems

1-4 represent strategic degrees of freedom, 5 & 6 are executional degrees of freedom. In the picture below, I've used the framework to compare the typical subsidiary strategies of three companies:

This is interesting and fun, but I see the most value being in comparing the success of different regional operations in an enterprise with their freedom of action against the degrees of freedom. That'll mean interviewing heads of regional operations and getting into the financials in some detail. My next step, therefore, is to refine my strawman scoring system with some colleagues who are expert in this area before going out and finding a guinea pig.

While I'm doing that, any thoughts on the categorisation would be greatly appreciated - I reckon this could be an interesting area of study in FY11.

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