This brings us to a central truth about organizations: they are inherently messy. There are no panaceas, no structures that solve all problems. Any attempts to completely eliminate the mess are doomed to failure. Yes, there are costly inefficiencies in decentralization, but the fire of personal ownership—of being our own little business—elevates human motivation and stimulates innovation in powerful, albeit somewhat chaotic, ways.

If you’re starting up your own company and your goal is innovation and flexibility, try to keep decision-making decentralized, with few interdependencies between functions, in order to nurture loose coupling from the outset. It will be a whole lot trickier to introduce once your organization has settled into a tightly coupled structure.

All this said, tight coupling does have at least one important organizational benefit. In a tightly coupled system, strategic change is easily aligned throughout the organization. If the CEO wants all departments throughout the company to focus on sustainability and ethical sourcing, then she can control that through her centralized decision-making.

Ultimately, there is no perfect place to start and the process isn’t linear—you need to go back and forth between the levels, just as you need to loop back and forth between the five questions in the strategic choice cascade. However, you can use three principles to help the company put together integrated activity systems at multiple organizational levels.”

(Lafley and Martin, “Playing to Win”, p.122) “1. Start at the Indivisible Level...

Build activity systems starting at the ground level—the point of indivisible activity systems

—and work your way up from there. Why? The capabilities at the indivisible level drive the

ones above.” (Lafley and Martin, “Playing to Win”, p.122-123) “2. Add Competitive Advantage to the Level Below...

Activities that don’t add value to activity systems below should be minimized, because they destroy value. For example, only if the hair-care category can demonstrate value (from sharing of activities and transfer of skills) that is greater than the financial and

administrative costs that it imposes on Head & Shoulders, Nice ’n Easy, Pantene, Herbal

Essences, and so forth, should it exist as a level of aggregation in the corporation. Otherwise, the level should be eliminated.

Thus, we should seek coordinated policies only when the gains are very large. There will be costs to demanding coordination, because it will ride roughshod over economies of specialization and more nuanced local responses. The brilliance of good organization is not in making sure that everything is connected to everything else. Down that road lies a frozen

maladaptive stasis. Good strategy and good organization lie in specializing on the right activities and imposing only the essential amount of coordination.

Integration is not always a good idea. When a company can buy perfectly good products and services from outside suppliers, it is usually wasteful to go through the expense and trouble of mastering a new set of business operations. However, when the core of a business strategy requires the mutual adjustment of multiple elements, and especially when there is important learning to be captured about interactions across business elements, then it may be vital to own and control these elements of the business mix.