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Corporate alignment is a new management paradigm, one that expands its view beyond the financial aspects of the corporation and provides better ways to prepare for the business’ future. It is a method built on the value of information, but also on recognising that all information is a simplification of the underlying reality. It is a tool that recognises the new reality of the knowledge economy in a globalising world.
Unlike the dominant business management theory of the past 40 years, corporate alignment does not view a business as an exchange, but as a dynamic enterprise of people. It recognises the unpredictable nature of the future, and explains the source of value that drives prices. It is reactive and adaptable to recent discoveries regarding psychology, performance and the long-term effects of business decisions.
The following ten principles are the basis of understanding and applying corporate alignment.
1. BUSINESS CREATES A CUSTOMER
To do so, a business must deploy a marketing function to identify precisely the needs and the value individuals assign to these needs. It must then deploy an innovation function to create a service or product within these parameters that the individual desires to acquire, and thus becomes a customer. Any other functions within the company exist solely to support these two functions.
Marketing is the function of looking at a business from the point of view of its final result, that is to say the individual’s point of view.
Innovation is the function of transforming goods, information and organisations so as to respond to needs in a new manner and for a different value to the individual.
Both these functions are so basic they cannot be separated from other aspects of the business enterprise. Marketing is not sales, nor is innovation limited to research & development. These two functions are elements that permeate any supporting function the business might require to develop itself.
2. BUSINESS IS DEFINED BY A PURPOSE
Only a clear definition of the business purpose enables clear and realistic business objectives. It is the foundation for priorities, strategies, plans and work assignments. The business purpose is rooted in the future and extends towards the present. It is the starting point for the design of management, organisational structure and strategy.
Decisions affecting the entire business and its ability to perform are taken at all levels of the organisation. A clear business purpose makes the method behind all decisions common and coherent. Business is a collective action, and as such requires forming a collective vision and a common understanding. This is the company’s business purpose.
A business purpose is not a vague set of values. It is a clear statement from which one can infer the organisation, management and objectives a company aims to achieve. A purpose is inherently unique, and is strengthened rather than weakened when imitated by others. It is never definitive, but is a product and an effect of its environment and should be challenged as such; a purpose that resonates deeply with the business and their environment will emerge strengthened from this process.
3. SUCCESS LIES IN FULFILLING THIS PURPOSE
Business purpose provides focus that enables a company to clearly identify key activities and the methods necessary to succeed in them. Management that is committed to fulfilling the business’ purpose will create a company that seizes opportunities, resonates with customers and attracts talent.
Fulfilling the business’ purpose creates an organisation that is designed to implement marketing and innovation at a fundamental level in every system and process. It enables the enterprise to constantly improve itself by looking through the individual’s eyes and clarify its value proposal.
A business that has achieved autonomy is not necessarily one that is completely independent, but merely one that has enough power regarding stakeholders to guide its own development. Businesses that define and work towards a clear purpose enable shareholders, creditors and regulators to become long-term partners and raise issues accordingly, rather than sources of unexpected problems. With reduced risk in the short term and greater managerial stability, these companies are therefore also better equipped to deliver increased value to the customer.
4. BUSINESS COSTS ARE A CHOICE BETWEEN FUTURES
A corporation’s costs are however more than merely the expenses at the end of the year, but also the opportunities that were foregone, missed and turned down. Certain of these costs are strategic and deliberate, but many more are related to decision-making, lack of collective action or ignored insight and therefore involuntary.
Turning involuntary costs into deliberate costs is achieved through repeated action to build a purpose within the corporation. Focusing on the customer and how to transform individuals into customers is therefore the only valid approach a business can have.
Which costs a business chooses to undertake in order to secure revenues is therefore a choice by management of the corporation’s future. There is no disconnection between projects for the future and actions today, but rather the future is the continued realisation of current actions.
5. SUCCESS DRIVERS ARE UNQUANTIFIABLE
Progress towards objectives, performance in key activities and productivity can be quantified, and management should monitor their evolution closely. However, there are no quantifiable measures of marketing, innovation, or adhesion to the business’ purpose. Quantitative data is a tool for management to compare business performance, but does not give an accurate or complete view of the conditions that produced the data.
The necessary condition for a company’s survival is the ability to manage human resources efficiently. Management’s ongoing concern is therefore for the company to secure effective long-term collaboration of the most able individuals and to create with them the organisation that is best suited to them fulfilling both marketing and innovation functions within their mission. Successful businesses respond to this concern in a manner that is directly derived from their purpose.
6. ORGANISATION IS A TEMPORARY STATE
Organisation is the product of the techniques and processes available to the corporation at any given time with the structural requirements to achieve the business objectives. As the environment a business operates in changes, or new techniques and processes become available, then corporate organisation must be redefined.
The costs of changing an organisation are insignificant when compared to the recurring additional efforts and costs expended by corporations where their organisation is not suited to their objectives. The business is a human collaboration, and should therefore be at all times considered as such; the formal organisation professed by management is at best a guideline, and at worst an obfuscation of how the corporation is actually organised.
7. BUSINESS GROWTH IS INNOVATION
In certain cases, innovation is exterior to the corporation; new techniques of organisation can be made available through the actions of another industry. In most cases however, innovation is from within the corporation. Businesses therefore need not only to create incentives and encourage the habit of innovation, but they must also pro-actively engage in integrating innovation within every department, process and function of the corporation.
Management should not be lured into believing that anything that leads to change is innovation. Innovation is purely the method of finding a novel solution to an individual’s economic needs, with the objective of transforming them into a customer. To distinguish change from innovation, the business needs to have a consistent frame of reference that guides its action, the business purpose.
8. SUCCESS IS A CAUSE OF PROFIT
Achieving objectives is restrained by profit, in that the profit motive must be greater than the associated risk of doing business. Prioritising key activities, setting clear objectives and defining an appropriate organisational structure are essential to controlling the effort, that is to say the cost, which a business expends to achieve an objective. Constant focus on the needs and their associated value is the only way for a corporation to clearly judge revenues, and therefore profit.
Businesses do not maximise profit, they enable it. By determining a business purpose and continually working to achieve it, corporations are more reactive to individuals’ needs and better tooled to profitably answer them.
9. ORGANISATION BREEDS DECISION
The main factors that influence decision within a corporation are neither hierarchy nor the individual incisiveness of middle management. A clear purpose enables the methods of decision to be known in advance, by creating a shared conscience of business’ strategy and objectives. An organisation suited to these objectives establishes a clear level of relevancy for each decision, and devolves sufficient authority to the person at that level so that the decision can be made in the best possible conditions of time and effort.
10. TOMORROW IS A METHOD
Management is the function of defining, carrying out and sharing this method. An efficient method is one that guarantees the business’ survival, its autonomy and the development in all tasks of the marketing and innovation functions. As such, this makes management the creator of a sum that is larger than the parts that compose it. In order to harmonise present capabilities and future opportunities effectively, a business is therefore dependent on how clear its purpose is.