The disruption of the last year has shown that leaders need to make decisions in real time to stay ahead of the competition. They often have the data to do it, and 75% of leading companies are using data insights to adapt their operating model to meet shifting strategic priorities.i
But are they moving quickly enough? It would appear many are not. Sixty-three percent of executives have cited slow decision-making as a barrier to agility.ii
The impact of the pandemic has fundamentally reshaped markets and changed consumer behaviors. In this environment, organizational agility and resilience are arguably more important than ever, so now is the time to bring decision-making to the edges.
This means empowering your people to make critical business decisions using real-time data. It means giving employees more autonomy and accountability for outcomes and removing layers of time-consuming central approvals. It is a change in mindset from being beholden to central leadership approvals, to instead being beholden to data and the customer.
While the advantages are compelling, a recent Accenture C-suite survey showed that only 32% of CXOs believe they have the agility to make decisions at speed.iii I believe this must change soon or businesses will forgo opportunities to drive growth.
<<< Start >>>
<<< End >>>
Leap—don’t creep—to the edge
The events of this past year taught us that tough decisions often require extreme urgency—Hugh Johnston, Vice-Chairman and CFO of PepsiCo, knows this well. “One of the things we have learned is that empowering our front-line leaders and our regional operating executives…to make fast decisions locally…has enabled us to accelerate our growth.”
This idea is gaining traction—Accenture’s Business Futures report found that 71% of C-suite executives have already decentralized or are planning to decentralize decision-making. If localizing decisions and releasing centralized decision authority sounds frightening, recall that many decisions that formerly required approvals are now not just delegated or localized, they’re completely automated. Many of the companies I speak with are using predictive analytics to forecast sales, assess supply chain constraints and order inventory. No surprise then that 88% of executives we surveyed agreed that using more forward-looking data sets and analytic approaches to better predict future events will be core to their success.
Just as with these automated decisions, the key to managing the risk of removing centralized approvals is data and analytics.
Consider one global retailer. In the face of disruption from digital natives that could deliver direct-to-door at discount prices, the company created a hyper-localized pricing and marketing strategy. They established a centralized pricing team responsible for developing machine learning-driven pricing recommendations, but unlike traditional models where pricing thresholds are centrally managed and deviations must go up the chain for approvals, the approvals and decision rights resided with a team of product-specific experts and local leadership teams.
These local teams had final pricing approval and set the localized strategy using the advanced analytics outputs of a centralized team. This approach resulted in mid-single digit margin improvement and revenue uplift, and created a solution that is scalable, data-driven and highly customer-centric.
Successful decentralization is a delicate balancing act. It should be done in a controlled manner that empowers the edges of the organization but simultaneously maintains clear lines of communication and coordination with the center. This is necessary to ensure consistency with the corporate strategy, purpose and values — successful decision democratization requires knowing where, and how, to best delegate control.
<<< Start >>>
Decision-making at the edges not only results in faster decisions that can be the difference between an opportunity captured or lost, it can drive better decisions.
<<< End >>>
Begin the journey toward the edge
We are helping clients begin this journey, starting with these actions that organizations should consider:
- Build the backbone. Businesses have ample data, but to gain maximum advantage they must reach beyond their four walls. Now, decision-making is less reliant on historical data and more reliant on external traditional and non-traditional data. Combined, they feed the predictive and prescriptive analytics necessary to empower edge-led decisions.
- Centralize data for distributed decisions. Data and analytics must be accessible across the enterprise to enable distributed decision making— but only 29% of CXOsiv we surveyed strongly agree that they have the analytical tools and predictive modeling to anticipate people's needs during change. Establishing a strong data and analytics foundation is especially important for organizations that are less mature. Define your data and analytics operating model and consider creating a centralized hub to integrate data, govern data management, and build advanced analytics skills and models. Offer self-service reporting and analytics that can inform decision-making at the edges.
- Lead from the top-down to lead from the bottom up. It’s not a paradox—federated decision-making starts at the top. Leaders must be comfortable entrusting workers with data to make decisions and take action. The cultural change for the center to relinquish decision rights to the edges is difficult, but necessary. It’s also about more than establishing policies, approval thresholds, new processes and RACIs (Responsible, Accountable, Consulted and Informed).
Show your leadership team you’re committed to empowering more autonomous teams by allowing those closer to the data and the customer to make decisions. Model the behavior, build trust throughout organization, make it part of your mission and core values—then design the teams, metrics, processes and policies to engrain the culture.
- Foster cutting-edge skills for edge-led decisions. People need the right data skills and capabilities to make localized decisions. More than half of the companies we surveyed (53%)v said that providing learning and upskilling opportunities to refresh digital skills is among their top actions. This doesn’t mean hiring data scientists in every department or teaching everyone how to code in Python—but it does mean increasing data literacy so your people can better understand, pressure test and action analysis outputs.
Gain your edge
Decision-making at the edges not only results in faster decisions that can be the difference between an opportunity captured or lost, it can drive better decisions. By focusing on what customers want and need, not on internal hierarchies, organizations can create more targeted and profitable solutions. Will your business move to the edges and pave new pathways to growth? If you’re ready to empower the edges of your organization to make decisions with greater speed and agility, we’re here to help.
<<< Start >>>
<<< End >>>
See more Enterprise Strategy insights.
[i] Execution in Perpetual Motion, Accenture, 2019
[iii]Accenture CXO Survey 2021