Hierarchy of Strategic Foci: How to Choose What Will Define Your Organization
In this article, I share the concept of a hierarchy of strategic foci, which helps to identify the list of the most important organizational capabilities. These capabilities then become the basis for designing the organization and selecting organizational design options.
Organizational Capabilities and Org Design
Let me remind you: in order to achieve strategic goals, organizations develop organizational capabilities.
“Organizational capabilities are the skills, competencies, and alignment of people that create competitive advantage.” (Jay Galbraith)
When you understand the set of capabilities you want to develop, you can start selecting organizational design options that can potentially support them.
Strategy defines capabilities and design
From my experience, most organizations skip this important step. They operate with various tools and Agile frameworks (SAFe, LeSS, Nexus, SaS, Spotify Model, etc.), without realizing whether these frameworks actually fit them, or which capabilities they really need to develop.
Three Strategic Paths: Product, Operations, or Customer
A strategic focus is what the organization builds its priorities and resources around. It answers the question: “What matters most for us in the competitive game?”
The idea is simple: you cannot be number one in everything at once. A focus is a filter for decisions — once it is chosen, the structure, metrics, and culture are aligned with it.
Product-centricity. The company creates the best products in the industry, and sometimes even those the market does not yet realize it needs. The value lies in the ability to bring innovations to market quickly and frequently. The culture accepts (and even encourages) mistakes and experiments in the search for new solutions.
Examples: Apple, Microsoft, BMW.
Organizational capabilities:
- Adaptability — quick response to changes in the market and technology.
- Encouraging and creating breakthrough innovations.
- Diverse product lines.
- Launching cutting-edge products.
- Deep expertise in R&D.
- Rapid launch of new products.
Operation-centricity. These companies achieve sustainable leadership through efficiency, scalability, and predictability. They often enter the market later than competitors and may not have the best products in the industry, but they win with price, availability, and consistent quality. The culture values standardization, repeatability, efficiency, and reliability.
Examples: IKEA, Walmart, Toyota.
Organizational capabilities:
- Adaptability — responding to changes in operational volumes.
- Being a low-cost producer.
- Establishing unified standards.
- Continuous improvement of process efficiency.
Predictability and quality.
Customer-centricity. Such companies build long-term relationships with customers, understanding their contexts, life events, and goals. They offer not just individual products, but customized solutions that cover the customer’s entire problem.
By building long-term relationships, the company creates a portal through which other products and services are later sold.
Examples: IBM, Hewlett-Packard (B2B), Spotify.
Organizational capabilities:
- Adaptability — customization of products at the customer’s request.
- Becoming the customer’s supplier of choice
- Selling complementary services and bundling products.
- Building alliances with other organizations to deliver comprehensive solutions.
- Using multiple sales channels.
- Long-term customer relationships and repeat sales.
Large Companies = A Mix of Foci. How to Build a Hierarchy?
In large organizations, you can always find a mix of several strategic foci.
Take P&G as an example. The company is known for its product innovations and strong product-centric focus. At the same time, P&G seeks economies of scale, so its back-office functions — production, logistics, and others — clearly operate with an operational-centric focus. In addition, P&G builds long-term relationships with specific B2B clients. For instance, there is a dedicated unit for Walmart in P&G’s organizational structure, which customizes products and “embeds” them into the client’s logistics chains — this reflects a customer-centric focus.
In such cases, it’s not just about having multiple foci, but about building a hierarchy of foci:
- understanding which one is primary,
- and which are supporting or secondary.
Why is this important? Because there is no perfect organizational design that can cover all possible capabilities. Trade-offs are inevitable. For example, adaptability often conflicts with predictability.
How to Identify the Main Focus: The Top-5 Capabilities Method
I suggest you bring your leadership team together and, after discussing your business model and strategy, select the top-5 organizational capabilities. Once you have this top-5 list, it’s important to put them in order — this way, the hierarchy and the relative importance of the foci will emerge naturally.
For example, I recently worked with a group of top managers from a retail bank who defined their hierarchy of organizational capabilities as follows:
Hierarchy of Capabilities in a Retail Bank
It quickly became clear that the leaders had chosen the product-centric focus as the main one for transformation. Why? Three out of five top capabilities were directly related to a product-centric focus:
- launching cutting-edge products,
- adaptability — quick response to market and technology changes,
- encouraging and creating breakthrough innovations.
Moreover, the top two capabilities on their list also came from the product-centric focus.
Hierarchy of Foci: What’s Next?
Now that you understand your key strategic focus and top-5 capabilities, you can move on to designing the organizational structure.
In the following articles, I will show how each strategic focus is reflected through Jay Galbraith’s Star Model of organizational design.