BUSINESS AND OPERATING MODEL

?? ?BUSINESS AND OPERATING MODELS

Business ?model can be viewed to be a larger concept. The Business Reference Model)(BRM) is targeted ?to facilitating the ?description of a business model through five perspectives(Open Group Whitepaper.2012):

? The Environment perspective addresses the context within which an organization must operate. It describes the external factors, such as the competitors, regulation, and customers for an organization, in addition to the overall strategy possessed by the organization for market positioning. This perspective is intended to describe why an organization is motivated to undertake particular courses of action.

? The Value Proposition perspective describes the offering produced by the organization in terms of products, services, brand, and shareholder value. This perspective is intended to describe what impact an organization wishes to generate and how that will generate value for stakeholders.

? The Operating Model perspective describes the resources at the disposal of the organization that will be deployed to generate the value proposition. This perspective is intended to describe how an organization will be able to deliver on its value proposition. Capabilities can be thought of as combinations of people, process, information, and technology that can be internally or externally sourced.

? The Risk perspective identifies the uncertainties that may surround an organization in its delivery of the value proposition. This perspective is intended to describe the threats that face an organization from within and without.

? The Compliance perspective represents the set of criteria that the organization must adhere to in order to assure that the value proposition is delivered using an acceptable standard of business practice. This perspective is intended to describe the constraints that prevent an organization from acting in negative, destructive, or inappropriate ways and the corresponding opportunities that can be exploited from a differentiated compliance position.

An operating model is essentially part of a business model. An operating model is the engine that is ?at the heart of the business model which?facilitates the working of?the business model.

CEO Magazine (2012) Posits that a Business Operating Model is the combination of roles, skills, structures, processes, assets and technologies that allow any organization to deliver on its service or product promises. In effect, it is the way the business is set up to deliver.

Common components of a Business Operating Model include vertical or horizontal integration, the way the organization thinks about its staff (e.g. contract or permanent), the way personnel work together or the way responsibilities are divided up within the enterprise.

A business model defines the following:

1,the stakeholders with whom the organisation will interact

2. the offer or promise that the organisation is making to each stakeholder segment

(customers, employees, investors, suppliers, etc both internal and external)

3. the contribution that each stakeholder segment is expected to make (work from employees, money from customers, etc)

4. the resulting financial models (income statement and balance sheet) taking account of size and growth ambitions

5. the operating model that makes it possible for the organisation to interact effectively with its stakeholders

?An operating model defines:

1.the core work processes that are needed to create and deliver value to each stakeholder group

2. the equipment and technology needed to execute these core processes

3. the information systems needed to support these core processes

4. other processes needed to support the core processes, such as financial processes or HR processes or governance processes

5.the suppliers and supplier agreements needed to support the processes

6. the people needed to do the work

7. the organisation structure, decision rights, incentives and accountabilities and culture needed to ‘govern’, motivate and support the people

8.the locations, buildings and ambiance where the core and support processes will be executed

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?????FACTORS THAT ARE CONSIDERED?FOR?IMPROVING BUSINESS OPERATING MODEL

• A clear understanding of what you want to be as an organization, and a high level plan to get there (the “strategy”)
• A set of principles to inform your organization design
• A willingness to look outside of the organization and even outside of the industry for different ways of doing things
• A willingness to challenge the organization’s assumptions and sacred cows
• An ability to capture role and process information in detail quickly (so you can plan how to get from where you are to where you want to be)
• A willingness to involve a broad representation of personnel and management in an intensive organizational design workshop (so the design is not just done at the desk of the CEO, but engages staff and maximizes buy-in).

?Organizational design principles usually guide the way it creates its ?Business Operating Model. ?

The following examples can be used to illustrate this viz;

• There is need to place functions where there is access to appropriate high quality skills and resources at a globally competitive price. If it is not necessary to co-locate functions, then they will be placed where there is the most advantage. Putting the peg in the right hole.
• Processes will have clear ownership at an executive level, and clear accountabilities will be designed into the roles, processes and structures (leaving no staff member in doubt)
• The organization will be structured first of all along process lines (e.g. Design to Procure), then along functional lines (e.g. Buying), then lastly along geographic lines
• Business processes will be designed for speed (as we are in the fast fashion business) and Ease of Use for our customers (as convenience is a key customer value proposition)
• We will outsource to the most appropriate provider where the function is not core to our competitive success
• There will be a full investment in the required technologies to ensure a ready interaction between all functional units

When considering these principles, there is no doubt that this organization will go where it needs to go to geographically, will source externally as required, and will design processes which ensure clear accountabilities (to ensure speed).

It is crucial that each organization develop their own principles, as they limit the possible design options. Without a clearly defined set of design principles you will end up either with too many options to consider, or you will apply a hidden set of principles that have not been tested(CEO Magazine ,2012).

?APPROACHES FOR DESIGN OF ORGANIZATION’S BUSINESS OPERATING MODEL

How are these principles developed into the organisational design? Common approaches include a discussion between the top executives, or a report by a consultancy. However, both of these options are often a poor way to proceed. To achieve a design that can be implemented, you need to engage the people who know about the realities at the front line, and who are influential enough to help maximise buy in. This will significantly improve your chances of implementation success

Bevington Group recommends a multi day design forum, spaced out over three weeks. The forum will bring together personnel who know the problems of the business today, and who can act as change champions. The forum will integrate deliberations of frontline personnel with executive management to agree the:

• Problems to be resolved
• Design principles
• Design options

The forum will produce a series of design options, with executive management making the final decisions.

In order to be successful, the forum should be facilitated by experts who have previously supported Business Operating Model redesign. It should also incorporate different thinking and practices from other markets and industries.

These forums are successful as they force timely decision making. At pre-set stages in the workshop, executive management need to approve (or otherwise) of the progress to date. This can save many months of costly deliberations, condensing it to just a few days. At the end of a design forum, the executive leadership should have no more than three options from which to choose.

The workshops are also powerful because they consciously engage the potential influencers. These influencers are not only the managers, but personnel who are willing to change and who have earned broad respect. Having participated in the decision making process, they will be more willing to back the solutions. This leads to a more readily implementable program.

Implementing a Business Operating Model redesign

Once decisions have been made on the preferred Business Operating Model, the organisation must progress to implementation. At a high level, the implementation must consider:

• A clear understanding of the current state so a pathway can be developed from the As-Is state to the designed To-Be state.
• A way to divide up the implementation into phases.
• A way to manage the change with agility so that solutions can be tested, monitored, and promptly responded to.

At Bevington group, over hundreds of engagements we have developed and refined methodologies and tools to meet these challenges and ensure redesign and implementation success, including XeP3 (robust process improvement methodology), SMART (role redesign tool) and Momentum Methods (change management system).

In conclusion, the current Business Operating Model of your organisation may have been consciously designed for a different time or different set of conditions and over time it has evolved, or alternately, it may never have been consciously designed in the first place. However, you are not stuck with this model.

You can redesign your Business Operating Model to improve performance, as long as you can also robustly implement the changes. Your new design must consider a broad range of dimensions such as capabilities, functions, geographies, roles and processes and technologies. A conscious and informed design based on principles will produce a good result, while one that actively engages critical change champions will produce an even better result. This sort of redesign activity will unquestionably become more common as the pace of global change accelerates.

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