The theory of the "horizontal organization"—an organization focused on meeting customer needs and built around natural work flows instead of conventional functions like marketing, sales, or manufacturing—is no longer new (see the boxed insert, "Horizontal organization principles"). Yet the reality of actually transforming a business consisting of 1,000 or even 10,000 individuals into such an organization is still largely uncharted territory.

This piece is an effort to start drawing those charts. We hope to do so by recounting some early lessons from two companies that have successfully experimented with this new organizational model: Kraft Foods and Ford Motor Company. Other companies such as General Electric, British Airways, AT&T, Motorola, Saab, Tesco, and American Express Financial Advisors have also made an effort to become horizontal. While the total effort can take 18 to 36 months, some companies are beginning to see dramatic performance results:

• By reorganizing all its supply management activities around a single process for each commodity group, Motorola’s Government Electronics Group was able to reduce cycle time by 80 percent, reduce late deliveries by 30 percent, and improve supplier quality performance by a factor of 10.
• General Electric’s Salisbury Plant improved productivity by 50 percent, reduced...