Competing with flexible lateral organizations

What it’s about

Competing with Flexible Lateral Organizations argues that in an increasingly uncertain, global, and time-compressed business world, the organization itself becomes a hard-to-copy competitive weapon. Galbraith shows that traditional sources of advantage erode quickly, so companies must build 'lateral capability'—the capacity to make general management decisions across organizational units without routing everything through the hierarchy. Drawing on the Star Model and decades of consulting with firms like Boeing, Dow-Corning, Hewlett-Packard, SKF, NEC, and Cathay Pacific, the book presents a menu of lateral organizational forms (voluntary networks, formal groups, integrators, matrix, and distributed organizations) that vary in cost and difficulty. Its central discipline: diagnose how much cross-unit coordination your strategy requires, then deploy only as much lateral organization as needed—no more, no less. The book teaches managers how to build the underlying capability over time through rotation, co-location, information technology, aligned rewards, and planning processes, so flexibility can be summoned when strategy demands it.

The through-line

Who it’s for

A manager or organization designer who wants to compete effectively and respond flexibly to a rapidly changing, global, uncertain marketplace.

The problem

Traditional sources of competitive advantage erode quickly, and the hierarchy alone cannot coordinate the growing volume of cross-functional, cross-business, and cross-country decisions the strategy demands. The manager feels overwhelmed by conflict, slow decisions, missed opportunities, and the frustration that teams and matrix structures seem to fail more often than they succeed.

The plan

1. Diagnose the coordination requirements implied by your business, corporate, and international strategy.
2. Match the type and amount of lateral organization (voluntary, formal groups, integrators, matrix, distributed) to those requirements.
3. Build lateral capability by aligning Star Model elements—rotate people, co-locate, deploy information technology, align rewards.
4. Create formal groups and integrating roles only where the voluntary organization is insufficient.
5. Manage the lateral process: set strategy foundation, build capability, design groups, and review performance.

The payoff

The company makes more and better decisions faster, closer to customers. · The organization becomes multidimensional and flexible, responsive to many constituencies without constant reorganization. · A cadre of managers who can influence without authority creates a hard-to-copy competitive advantage.

See our guide

• Study People And Organizations With Scientific Rigor →
• The Behavioral Science Underneath It All →
• Build A People Analytics Function →
• Design The Organization And Change It →
• Do Research That Holds Up →
• Design Surveys People Answer Honestly →
• Understand What Drives Individual Performance →

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Additional reading

• Competing Against Time · G. Stalk and T. Hout

  Explains the strategic imperative of time compression, a key driver that necessitates the high-intensity lateral coordination discussed in the book.

• The Core Competence of the Corporation · C. K. Prahalad and G. Hamel

  Provides the strategic rationale for coordinating across business units, which is one of the three main applications of lateral organization detailed in the book.

• Managing Across Borders · C. A. Bartlett and Sumantra Ghoshal

  Details the challenges of international coordination (global integration vs. local responsiveness), providing context for the book's application of lateral organization to global firms.

• Organization and Environment · P. Lawrence and J. Lorsch

  This is the foundational academic research cited in the book that establishes the core principle of matching organizational integration to environmental uncertainty.

Featured in these guides

• The Behavioral Science Underneath It All →Pole in “Designed Structure Versus Emergent Order”
• Build A People Analytics Function →Pole in “Designed Structure Versus Emergent Order”
• Design The Organization And Change It →Pole in “Designed Structure Versus Emergent Order”
• Study People And Organizations With Scientific Rigor →Pole in “Designed Structure Versus Emergent Order”
• Do Research That Holds Up →Pole in “Designed Structure Versus Emergent Order”
• Design Surveys People Answer Honestly →Pole in “Designed Structure Versus Emergent Order”
• Understand What Drives Individual Performance →Pole in “Designed Structure Versus Emergent Order”

Where other books disagree

• Designed Structure Versus Emergent Order →
• Designed Structure Versus Emergent Order →
• Designed Structure Versus Emergent Order →
• Designed Structure Versus Emergent Order →
• Designed Structure Versus Emergent Order →
• Designed Structure Versus Emergent Order →
• Designed Structure Versus Emergent Order →