In September 2001, Hewlett-Packard CEO Carly Fiorina announced a monumental $25 billion merger with rival Compaq Computer Corporation, the largest deal in the history of the computer industry at the time. Four years later, Fiorina was out at HP.
What went wrong?
The strategic rationale was bold and straightforward: create a tech behemoth with the scale to compete head-to-head with giants like IBM and Dell. The hope was that combining two struggling companies would create one stronger, more competitive entity.
Each company had challenges of its own, and not everyone believed combining the two would lead to growth. One critic argued that the merger was like “tying two stones together and believing they would float.”
The organizational design challenges were immense. The plan involved integrating two vastly different corporate cultures. HP took time to make decisions driven by consensus. Compaq took the opposite approach, with an aggressive, fast-paced, sales-oriented culture. (So already you see the two companies weren’t just misaligned but diametrically opposed on this dimension of business alignment.)
The move wiped out $13 billion off the companies’ combined market capitalization in just two days. For years, the merger was seen as a failure that ultimately played a big part in Fiorina’s ousting.
Understanding Business Design
Design is where strategy meets execution. In the 7 D’s Business Alignment Framework, Design refers to the strategic and structural alignment of your business. It’s how you design your organization to implement your vision.
This includes your strategy (where to play, how to win) and your organizational structure, processes, and systems that support that strategy.
Think of Design as the blueprint of a building: if the blueprint is sound and each beam is where it should be, the structure stands strong. If the blueprint is flawed or the pieces don’t fit, the building is wobbly.
Aligning on Design ensures that your big picture plan and your day-to-day execution machinery are in harmony.
It asks questions like:
- Do we have the right departments and roles to carry out our strategy?
- Do our processes facilitate our goals or frustrate them?
- Is our business model designed for the current market reality and future trends?
Every Dimension of a Business Must Work in Harmony
The HP-Compaq merger is another reminder that harmony across all the dimensions of business alignment is crucial. In hindsight, it looks like Fiorina got a lot right.
She sold a clear vision (Destiny): build an end-to-end, standards-based systems company with the scale to challenge IBM and Dell, funded by cost synergies. That north star was coherent across both firms (even if contested internally).
“You look back now, and [Fiorina] was right – there was a lot of synergy between the two companies,” Tommy Wald, CEO of White Glove Technologies in Austin, Texas, said. “The merger worked out well in retrospect. I think they turned the combined company into a strong channel company[.]”
But vision can’t carry a company if the rest of the system is out of tune.
They nailed the operational planning of integration, but the strategic steering wheel wobbled. Destiny was clear, but there was a DNA clash. The HP Way and Compaq’s sales-first culture weren’t easily reconciled.
The 7 D’s are a system. Each dimension is affected by every other dimension. Strategy without culture is rumor. Structure without decision rights is theater. Metrics without customers are spreadsheets, not a business.
The merger worked only when leadership re-tuned the whole instrument—simplifying the design, clarifying decision rights, pushing ownership down, and balancing cost data with customer value. Harmony beats volume.
Symptoms of Design Misalignment
A poorly aligned business design manifests in very tangible pain points. Watch out for these signs:
Role Confusion
Employees often say “Who’s doing that? Is that my job or yours?” or tasks fall through the cracks because ownership isn’t clear. Alternatively, you might have multiple people inadvertently doing the same task.
A direct conflict emerged between HP’s existing services organization and the IT unit, which was led by former Compaq executives. At HP, the services unit was responsible for deciding on internal technology purchases, and the IT group’s role was to implement them. At Compaq, the IT organization had a more traditional, centralized role, responsible for both purchasing decisions and implementation.
Both groups survived the merger, leading to a clash over who had the ultimate authority for technology purchasing decisions. This created confusion and conflict until a new process was established.
Process Bottlenecks and Firefighting
Workflows are not well thought out, leading to constant emergencies. For example, if every minor decision needs CEO approval (because no decision rights were delegated), things bog down. Or teams have to create workarounds because the official process is too cumbersome or broken.
The leadership team created a rigorous and successful plan for operational integration. The tactical merging of systems, supply chains, and staff involved over 1,500 people. However, management became so consumed by this complex process that it created a bottleneck for strategic integration.
Key questions from customers and employees about the new company’s long-term direction and vision went unanswered. This lack of strategic clarity led to “internal conflicts and delays in the integration process,” as teams lacked a clear north star to guide their work.
Strategy-Execution Gap
You have a shiny strategic plan, but quarter after quarter, you fail to meet goals and can’t quite pinpoint why. The HP-Compaq merger’s initial inability to translate its theoretical goal (achieving scale) into tangible shareholder value is a prime example. Despite the new structure, the company’s performance lagged rivals IBM and Dell for years.
Silos and Turf Wars
Teams or departments operate in isolation (or competition). The clash between HP’s deliberative culture and Compaq’s rapid-fire style created immense internal friction, a classic symptom of misaligned design on a grand scale.
Consequences of a Misaligned Design
When your business design is out of whack, execution suffers. Even a great idea or strong team can’t overcome a broken system. Deadlines get missed frequently, quality drops, and costs can soar because of inefficiencies. Employees grow frustrated and disengaged. Top performers might leave, tired of the dysfunction.
The HP-Compaq saga reveals a critical distinction between two types of integration. The post-merger integration team, led by Webb McKinney, was highly effective at the tactical level of operational integration. They established a rigorous planning process involving over 1,500 people and ultimately exceeded their cost-cutting goals by over $1 billion. This suggests the mechanical aspect of the redesign was well-managed.
Despite this, the company languished. The problem was a failure of strategic integration. Top management became so consumed by the immense complexity of the operational merger that the strategic direction faltered.
They failed to communicate a clear, compelling vision for the combined company to customers and employees, leaving them to ask, “Where was the firm heading after the integration was complete?” This demonstrates that organizational “Design” is not a static org chart.
A major redesign creates a period of intense internal focus. If leadership does not simultaneously design a process for external strategic alignment with the market, the new internal structure will drift aimlessly. The structure was sound, but the steering was absent.
It was only when a new CEO, Mark Hurd, arrived and re-established operational clarity that the benefits of the newly designed, larger company were fully unlocked. Now, most see the merger as a success.
A Case Study in Successful Organizational Structure
A classic example of strategic design alignment is Amazon’s famous “two-pizza teams” structure. Jeff Bezos had the strategy of innovating fast and being customer obsessed. To execute, Amazon deliberately designed small, autonomous teams (a team small enough to be fed by two pizzas) for new initiatives. This structure prevented bureaucracy and kept teams agile, aligned with the strategy of speed and innovation.
Additionally, Amazon’s org design heavily emphasizes metrics (tying into Data alignment). Every team has clear KPIs and a high degree of ownership. That design has allowed Amazon to innovate in everything from cloud computing to logistics, often simultaneously, without collapsing under its own weight as it grew. In short, Amazon aligned its structure to empower its strategy.
Of course, Amazon’s approach won’t necessarily work for your business. Don’t just copy an existing successful model. Your organizational structure should express your company’s DNA, aligned with its Destiny, and stay coherent across all seven D’s.
How to Align Your Business Design
Aligning design starts with revisiting your strategy and ensuring your structure serves it. Here’s a step-by-step approach in plain terms:
- Clarify (or Update) Your Strategy. What is our focus? Who is our target customer and what’s our value proposition? Sometimes misalignment comes because the strategy itself isn’t clear or is outdated. Ensure you have a solid strategic direction. Think of this as deciding “what game are we playing and how will we win?”
- Check Structure Against Strategy. Now ask, “Do we have the right structure to execute this?” If your strategy relies on innovation but you have no team dedicated to new product development, that’s a gap. Adjust roles, teams, and reporting lines so that critical strategic functions are prioritized.
- Streamline Processes. Look at your key business processes and identify choke points or unnecessary steps. Often, asking the people involved “how could we do this better?” yields simple fixes.
- Define Roles and Decision Rights. Every important function should have an owner. Create clear job descriptions and accountability charts if you haven’t. Equally important: decide who gets to decide what. Clarity here prevents paralysis and turf wars.
- Communication & Coordination. Establish regular forums for alignment. This could be a weekly leadership team huddle, monthly all-hands meetings to share progress on strategy, or cross-functional project teams for key initiatives.
Quick Wins to Improve Alignment in Design
- Conduct a “Stop-Start-Continue” Process Audit. Gather your team (or key reps from different departments) and pick one core process that’s been troublesome. Quickly map the steps on a whiteboard. Ask three questions: What should we stop doing (step that adds no value or causes delay)? What could we start doing (a new step or tool that would make things smoother)? What should we continue because it works well? In an hour or two, you’ll identify concrete tweaks.
- Role Clarity Round-Robin. Especially useful for small businesses where people wear many hats. In your next team meeting, have each person list their top 5 responsibilities on a board or slide. Discuss overlaps and gaps openly. You might discover that two people both thought they were managing social media (overlap), and no one is actually handling “inventory management” as a focus (gap). As a quick fix, assign clear ownership moving forward. This simple clarification can eliminate a lot of confusion and ensure every critical function has an owner.
Remember, Design alignment is about making sure the engine of your business is well-tuned and firing on all cylinders in the same direction. A small investment in structuring things right can pay huge dividends in efficiency and stress reduction.
