Flevy Management Insights Q&A
How to transform one business unit into three?


This article provides a detailed response to: How to transform one business unit into three? For a comprehensive understanding of Organizational Design, we also include relevant case studies for further reading and links to Organizational Design best practice resources.

TLDR Transforming one business unit into three requires Strategic Planning, a robust framework, and effective Change Management to ensure operational efficiency and growth.

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Before we begin, let's review some important management concepts, as they related to this question.

What does Strategic Planning mean?
What does Change Management mean?
What does Performance Management mean?


Transforming one business unit into three is a strategic maneuver that demands meticulous planning, deep market understanding, and a robust execution strategy. The objective is to leverage existing strengths to capture new market opportunities, enhance operational efficiency, and drive growth. This transformation is not merely about restructuring but reimagining the organization's approach to competition, customer engagement, and innovation.

The first step in this transformation is conducting a comprehensive Strategic Planning exercise. This involves a thorough analysis of the current market dynamics, customer needs, and competitive pressures. Consulting firms like McKinsey and BCG emphasize the importance of understanding the "why" behind the transformation. Is the goal to tap into new customer segments, capitalize on technological advancements, or respond to competitive threats? Answering this question provides a clear direction for the transformation process.

Following the strategic analysis, the next step is to develop a detailed framework for the transformation. This framework should outline the new business units' focus areas, how they will operate independently yet cohesively within the larger organization, and how resources will be allocated among them. It's crucial to ensure that each new unit has a distinct value proposition, targeted customer base, and a clear path to profitability. This stage often requires leveraging external expertise from consulting firms to validate the strategy and ensure it's aligned with best practices.

Finally, the execution phase is where the strategy is put into action. This involves detailed planning and change management to ensure a smooth transition. Key activities include defining new roles and responsibilities, establishing governance structures for the new units, and implementing new processes and systems to support their operations. Effective communication is critical during this phase to ensure buy-in from all stakeholders and to maintain morale and productivity.

Creating a Robust Framework

Developing a robust framework is central to successfully transforming one business unit into three. This framework serves as a blueprint, guiding the organization through the complexities of restructuring target=_blank>restructuring. It includes a clear template for each business unit that outlines its strategic focus, operational model, and key performance indicators. Consulting leaders like Accenture and Deloitte often stress the importance of a flexible yet comprehensive framework that can adapt to unforeseen challenges and opportunities.

The framework should also include a detailed risk management plan. This plan identifies potential risks to the transformation, including operational disruptions, customer attrition, and employee resistance. By anticipating these risks, the organization can develop mitigation strategies to minimize their impact. This proactive approach is crucial for maintaining momentum and ensuring the transformation's success.

Another important component of the framework is a roadmap for Digital Transformation. In today's business environment, leveraging technology is not optional but a necessity for efficiency, innovation, and customer engagement. The roadmap should outline how digital tools and platforms will be used to enhance operations, drive customer insights, and create competitive differentiation for each new business unit.

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Execution and Change Management

Execution is where strategy meets reality. It's the phase where detailed planning, strategic insights, and the transformation framework are put into action. This phase requires meticulous project management, with clear milestones, deadlines, and accountability mechanisms. It's also the stage where the organization's Change Management capabilities are put to the test. Effective change management involves not just communicating the changes but actively engaging employees in the transformation process.

Leadership plays a critical role in this phase. Leaders must be visible champions of the change, demonstrating commitment through their actions and decisions. They must also be adept at managing resistance, providing clear direction, and maintaining open lines of communication. This leadership approach helps to cultivate a culture of agility and innovation, which is essential for the success of the new business units.

Lastly, it's vital to establish a Performance Management system that aligns with the goals of the transformation. This system should include metrics and KPIs tailored to each new business unit, reflecting their strategic objectives and operational realities. Regular review and adjustment of these metrics are necessary to ensure they remain relevant and drive the desired behaviors and outcomes. This iterative process of strategy, execution, and review is essential for achieving the transformation's goals and ensuring the long-term success of the new business units. Transforming one business unit into three is a complex but rewarding endeavor. It requires a strategic approach, a comprehensive framework, and effective execution and change management. By following these steps and leveraging insights from consulting firms and real-world examples, organizations can successfully navigate this transformation and position themselves for future growth and success.

Best Practices in Organizational Design

Here are best practices relevant to Organizational Design from the Flevy Marketplace. View all our Organizational Design materials here.

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Explore all of our best practices in: Organizational Design

Organizational Design Case Studies

For a practical understanding of Organizational Design, take a look at these case studies.

Organizational Alignment Improvement for a Global Tech Firm

Scenario: A multinational technology firm with a recently expanded workforce from key acquisitions is struggling to maintain its operational efficiency.

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Talent Management Enhancement in Life Sciences

Scenario: The organization, a prominent player in the life sciences sector, is grappling with issues of Organizational Effectiveness stemming from a rapidly evolving industry landscape.

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Organizational Redesign for Renewable Energy Firm

Scenario: The organization is a mid-sized renewable energy company that has recently expanded its operations globally.

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Inventory Optimization Strategy for a Plastics Manufacturing SME

Scenario: A small to medium-sized enterprise (SME) in the plastics manufacturing sector is confronting significant Organizational Development challenges, stemming from a 20% increase in raw material costs and a 10% decline in market share over the past two years.

Read Full Case Study

Organizational Effectiveness Improvement for a Global Technology Firm

Scenario: A multinational technology company is struggling with declining productivity and employee engagement, impacting its overall Organizational Effectiveness.

Read Full Case Study

Retail Workforce Structuring for High-End Fashion in Competitive Landscape

Scenario: The organization is a high-end fashion retailer operating in the competitive luxury market, struggling with an Organizational Design that has not kept pace with rapid changes in consumer behavior and the retail environment.

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Related Questions

Here are our additional questions you may be interested in.

How can the principles of organizational design be applied to enhance remote work effectiveness and employee engagement?
Applying Organizational Design principles, such as structuring for remote efficiency, fostering a culture of engagement and collaboration, and emphasizing Continuous Learning and Development, can significantly enhance remote work effectiveness and employee engagement. [Read full explanation]
What strategies can leaders employ to ensure organizational design enhances global competitiveness?
To enhance global competitiveness through organizational design, leaders should focus on strategic alignment and adaptability, invest in technology and innovation, and foster a global mindset and inclusive culture, alongside implementing efficient processes, decentralized decision-making, and continuous improvement practices. [Read full explanation]
In what ways can data analytics be leveraged to enhance organizational alignment and decision-making?
Data analytics enhances organizational alignment and decision-making by informing Strategic Planning, improving Performance Management, driving Digital Transformation and Innovation, and strengthening Risk Management, as evidenced by successes at Amazon, Netflix, and Google. [Read full explanation]
How can the principles of sustainability be integrated into organizational alignment to support long-term business goals?
Integrating sustainability into organizational alignment involves Strategic Planning, Operational Excellence, and Leadership commitment to embed sustainability principles into core strategy, operations, and culture, driving long-term business success and resilience. [Read full explanation]
What are the key considerations for organizations when integrating ethical AI use within their operational processes?
Integrating ethical AI involves Strategic Planning, Operational Excellence, and continuous Risk Management and Performance Management to align AI use with ethical standards, legal requirements, and societal expectations. [Read full explanation]
What impact will the increasing importance of sustainability and corporate social responsibility have on OD strategies?
The growing emphasis on Sustainability and Corporate Social Responsibility is fundamentally transforming Organizational Development strategies to include sustainable practices, driving Innovation, Operational Excellence, and Risk Management, while enhancing Employee Engagement, Leadership Development, and Stakeholder Relationships for long-term success and resilience. [Read full explanation]

Source: Executive Q&A: Organizational Design Questions, Flevy Management Insights, 2024


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