Strategic Business Units Defined

A strategic business unit is a significant organization segment that is analyzed to develop organizational strategy aimed at generating future business or revenue.

Exactly what constitutes an SBU varies from organization to organization. In larger organizations, an SBU could be a company division, a single product, or a complete product line. In smaller organizations, it might be the entire company.¹ Although SBUs vary drastically in form, they have some common characteristics. All SBUs are a single business (or collection of businesses), have their own competitors and a manager accountable for operations, and can be independently planned for.

Why Divisional Structure?

When organizations get large, they become slow, awkward, unmanageable, inflexible, and difficult to focus. They distance people from each other, and consume more energy than they release.

Division Defined

Division is a business unit having a clear set of customers and competitors. A division can be independently planned for within the organization and has profit and loss responsibility.

 Case in Point:  Hewlett-Packard

Hewlett-Packard set the pattern for a divisional structure of an innovative organization long ago. Divisions aggregated into units such as Test and Measurement Organization are the core dominant organizational entities of the company. When John Chambers, President and CEO of Cisco Systems looked around for large-scale organizational models that sustained innovation, customer intimacy and satisfaction, he found Hewlett-Packard to be the best.

Corporate Leader: Specific Responsibilities and Expertise Requirements

As a corporate executive of your firm, you have a critical responsibility for the direction and successful operation of all business units within your organization. Corporate leadership involves a complex set of issues that demands a certain cross-unit expertise, which seldom is achieved through management experience at the business-unit level. You must search for synergies and explore achievements that are possible at the corporate level through cross-unit activity and the development of entirely new growth opportunities... More

Shared Services Organization

Some enterprises establish corporate-level functional groups to provide specialized services (e.g., “Corporate Marketing”, “Corporate Market Research”, “Central R&D”) that act as a resource to their counterpart functions in the business units. These groups often offer specialized skill sets not available at the BU level. They may conduct ongoing research (e.g., scanning for emerging technologies, large-scale trend analysis) or short-term projects, or seek out and contract with specialized third party resources... More

Flat Organization: Divisional Structure...

Problem to Address...

Owning Your Sustainable Competitive Advantage...

 Case in Point:  British Petroleum...

 Case in Point:  Dell Computers...

 Case in Point:  Cirrus Logic...

 Case in Point:  Cisco Systems...