GM Acid Tests

Structure follows strategy, and determining the right org structure can make or break an organization's strategy. When thinking about creating the right org structure for any business, particularly those with diverse offerings or wide geographical reach, the decision to implement a General Manager (GM) model can be pivotal. This model is most effective in scenarios where a specific business line or geographic region has the potential to operate as a standalone entity.

The decision to adopt a GM structure depends on several critical factors:

Stand-Alone Capability: An essential factor is assessing whether a business line could independently function as its own entity. This determination helps differentiate between what is a product offering and what constitutes a distinct business unit, each potentially requiring a GM. For example, at Wayfair, categories like furniture, lighting, and rugs each had a GM, stemming from the company's initial strategy of building separate websites for each category before consolidating them under the Wayfair umbrella.

User, Supplier, and Use Case Cohorts: Distinct user groups, supplier types, or unique use cases may suggest the need for a GM structure. Weedmaps' experience is illustrative, where the delivery service, with its unique consumer and supplier cohorts and regulatory environments, warranted separate GMs for delivery and storefront operations.

Geographical Considerations: For marketplace businesses with a hyper-local focus, a regional GM approach can be highly effective. WM’s marketplace, which connected local consumers with local businesses, along with legal constraints like cross-state cannabis sale prohibitions, made a regional GM model a logical choice, though it was never implemented.

Business Model Dynamics: Different business models, such as performance-based models in marketplaces versus SaaS models, necessitate different skills and strategies. A separate GM for each type of operation allows for tailored strategies aligning with the unique aspects of each model. For example, in marketplaces, rapid testing and iteration are crucial for consumer-focused operations, while SaaS models demand a more client-focused and methodical approach to product development.

Whether considered through the lens of a business line or a geographic region, a GM structure is advantageous when there is a clear, standalone aspect of the business with distinct operational needs, user bases, or regulatory frameworks. Effective coordination across these structures is essential for ensuring smooth operations and maintaining strategic alignment throughout the organization.