CEO's column May

Many industrial companies are built for internal efficiency. The question is what happens when customer value is not allowed to govern, and what it costs the business.

In this month's column, Mikael Nylund points out why many industrial companies are organized for internal efficiency, and what it costs when customer value is overlooked.

Many industrial companies are organized for internal efficiency, not for customer value

Swedish industry has probably never had more expertise, more technology or more systems for follow-up than it does today. Yet many industry leaders describe the same thing: decisions take longer, business is slower and organizations find it harder to change, even though people are working harder than ever.

It's an interesting paradox. Because while productivity in many parts of the business has increased, the shared ability to unite the organization around the customer seems to have weakened.

This is especially noticeable in industrial B2B. Customers often encounter a company that looks strong on paper, but in practice feels fragmented. Sales drive one priority, production another and finance a third. No one is really doing anything wrong, but the whole thing is losing momentum. Customers quickly notice when a company is not really connected.

For a long time, the industry has organized itself for internal efficiency. It has been rational. Each function has been given its own goals, processes and key figures. The problem is that the customer does not buy functions. The customer buys the ability to solve a problem quickly, confidently and collectively.

This is where many organizations start to have problems.

Research on organizational communication also shows that companies tend to become more siloed as they become more complex. A major international study, based on billions of internal interactions, showed that over time, communication increasingly occurs within functions rather than between them. This is actually quite logical. When uncertainty increases, people seek control over their own processes, their own goals, and their own perspectives.

But the customer still perceives the company as slow.

That's why many industrial companies today find themselves in a strange situation where the organization is working harder than ever while business is slowing down. Internally, there is often high activity. Externally, the customer experiences friction.

And this is where many people miss the real issue of competition going forward.

The debate right now revolves around AI, digitalization and skills shortages. All of that matters. But for many industrial companies, technology is no longer the big constraint. The big constraint is organizational friction. How quickly people can make good decisions together. How quickly the business can re-prioritize when the market changes. How quickly management, sales and operations can rally around the customer.

That's where the winners will stand out.

Because in many industrial companies, silos have stopped being an organizational problem. They have become an obstacle to growth.

Heating Michael