Ingeniero

strategy+business

issue 70 S PRING 2013

Think Functionally,
Act Strategically
W hen a company competes on capabilities, its specialist leaders—
in HR, IT, finance, and elsewhere—play a new, influential role.

by DENIz CAGLAR, NAMIT KAPooR,
AND ThoMAS RIPSAM

reprint 0 0158

feature strategy & leadership

1

special section:
the new functional leader

by Deniz Caglar,Namit Kapoor,
and Thomas Ripsam

Illustration by Keith Negley

W hat should the role of the corporate support
function be in business strategy? Until recently,

the answer was relatively straightforward. System-wide,
service-oriented functions existed to carry out the many
specialized tasks that every corporation needs to have
done. Human resources (HR) recruited employees,
managedbenefits transactions, and oversaw evaluation and promotion practices. Information technology
(IT) ran and helped support the company’s computer
systems. Finance carried out all processes related to accounts, debts, and taxes. Learning and organizational
development offered training programs tagged to the
skills the company needed. Legal vetted contracts and
managed issues related to compliance. Andso on.
Though much has been written over the years
about the strategic importance of HR, IT, finance, and
other support functions, in most companies their roles

have been primarily transactional. They fulfilled dayto-day needs, met legal and regulatory requirements,
accommodated requests from business units, and put
out the inevitable fires that erupted when there was a
conflict orurgency. When functional leaders were asked
to make improvements, it meant doing the same things
more efficiently and at a greater cost savings.
Recently, however, there has been a leap in expectations. Over the past few years, CEOs, business unit
leaders, and functional leaders themselves have been
asking support functions to deliver more value to the
organization at large. Instead of balancingservices
among all business units equally, or striving to be best
in class in everything, support functions such as HR,
IT, and finance are asked to be “fit for purpose”: more
closely aligned to the enterprise strategy. Functions that
are more directly related to individual brands and busi-

feature strategy & leadership

Think Functionally,
Act Strategically
When a company competes
oncapabilities, its specialist
leaders—in HR, IT, finance,
and elsewhere—play a
new, influential role.le.

2

feature strategy & leadership
3

Namit Kapoor
namit.kapoor@booz.com
is a partner with Booz &
Company based in Chicago.
He specializes in formulating
shared-services strategies
and improving the effectiveness and efficiency of sales and
marketing functions.

nessunits—which may include operations, sourcing,
marketing, sales, and R&D—have also been affected,
though not always in the same way as their counterparts
at corporate headquarters. This leap is occurring for
several reasons.
First, market environments and patterns have
become less stable, and competitive intensity has increased. Many companies—facing changes in customer
demand, the emergence ofinnovative new competitors
from around the world, and greater macroeconomic uncertainty—are raising expectations accordingly. Today’s
functions must provide a far more complex set of activities and expertise than they ever had to manage in the
past. For example, IT must design systems that mine
“big data” to support real-time consumer offers that
change on the fly; HR must recruit a broad range ofpeople from around the world and design flexible career
tracks to match their diversity.
There is also a new opportunity to raise the return
on discretionary investment. Over the past decade,
through outsourcing and process improvement, many
functions have become more efficient in performing
their day-to-day activities. Therefore, the resources dedicated to routine, transactional...