Operating Models Reinvented

The best transformation-focused CEOs are establishing clear and concise strategic intent about where to do business, with whom, and how to win. They understand that their strategy and business model will shape their target operating model and that going from strategy to execution with an out-of-date operating model is not an option.

On the other hand, some CEOs communicate their strategy and then expect management teams to set about executing upon that strategy without any consideration for the essential bridge between strategy and operations, which is the operating model. If a CEO doesn't "get it", well-informed managers and leaders have a responsibility to speak up and help their CEO understand the importance of this bridge, before it's too late.

Operating Models

An operating model translates strategic intent into operational capabilities. It serves as the foundation for execution and provides a clear guide for enterprise leadership teams, line managers and operational teams. It articulates how an organisation delivers value to its customers and/or other beneficiaries as well as how an organisation runs itself.

Business Models

The business model describes how an organisation creates, delivers and captures value and sustains itself in the process. The operating model focuses on the delivery element of the business model, and the operating model is often the single biggest barrier to realising its true potential.

Being Realistic

No organisation should realistically expect to go from transformation strategy to execution and operations with an out of date operating model that isn’t fit for tomorrow’s purpose.

Despite any lofty notions of transformation, before an organisation can create new value and provide compelling customer experiences at lower cost, they need to commit to establishing a suitable operating model. One that defines a new way of running the organisation that combines technologies and operational capabilities in an integrated, well-sequenced way to achieve improvements in revenue, cost, and customer experience. As the table below from Deloitte suggests, there's good reason for transformation leaders to consider why and how their operating model might need a little more care and attention than it's currently getting.

Transformation Touches

The more areas of an organisation a transformation touches, the more important the operating model re-design becomes. McKinsey research suggests that transformations touching seven or more aspects of an operating model were?three times more likely?to experience a successful redesign.

Knowing where to start is key to success, because not all aspects are created equal. That said, it’s safe to say that governance, culture, and workforce now deserve much of the spotlight in many organisations. But popular words like 'culture' are far easier to say and write than have a positive impact on. As most experienced managers and leaders know, it's all easier said than done.

Predictable Problems

Organisations that attempt transformation without considering how their operating model needs to change typically run into all sorts of trouble. When this happens, it’s quite predictable that teams will experience ambiguity around accountabilities, roles and responsibilities, and operational inefficiencies as people invest their time on doing work that doesn't support strategic intent. Inadequate collaboration and integration between business units and functional areas will give rise to chaos and confusion, and staff won't share a common view of how the company is approaching transformation.

While digital technologies are rapidly changing the face of business, this shift is often happening at a pace that exceeds the pace of change found in operating models. But this is nothing new because for decades we've seen countless organisations implement enterprise-wide technologies without any consideration for their operating models.

Leaders are responsible for ensuring their organisation has the next-generation operating model required for it to be successful between now and 2030. It's a fundamental component of transformation which CEOs and other key executives are responsible for, because only these senior figures are positioned to create the alignment required across the organisation.

Getting an operating model right isn’t easy, which is exactly why it should be firmly fixed to the agenda of the most senior management board in the organisation. Your operating model is the vehicle that will allow or prevent the translation of strategic intent into operational capabilities and, ultimately into reality. It will determine your organisation’s ability to execute what it intends to do and how, what it intends to be, and for whom.

Operating Models Visualised

A new operating model is vital to drive an organisation forward, and how well that operating model is developed and implemented could be the difference between successfully transforming the organisation and failing.

One of the simplest ways to visualise a next generation operating model is to think of it as having two parts. The first part is moving from running uncoordinated siloed initiatives to launching an integrated business transformation focused around customer journeys and internal journeys, which are the end-to-end processes inside the organisation. The second part is moving from using siloed technologies, capabilities, and approaches to applying them to integrated journeys in the right sequence. Then there's the work of actually implementing the new operating model.

It's always interesting to see the myriad of frameworks used by consultancy firms and others such as the Operating Model Canvas. While these frameworks can be helpful, success and failure is determined by the people who use them, not by the frameworks themselves. As I mentioned in this post you could give me the finest set of paints and brushes, along with the world’s most well-respected artistic framework, but it’s safe to say that despite my best of intentions, the result won’t be very impressive, because I haven't spent years mastering that art.

Pulling Ahead of The Pack

A well-designed and purposeful operating model can help organisations balance growth with risk and overcome many of the typical transformation barriers. Those that are starting to pull ahead from the pack are looking beyond short-term tactical fixes. They're reinventing their business and operating models, and their definition of transformation is so much more than it is for others.

If you're ready to take a fresh look at what your organisation has called 'transformation' start by identifying what it takes to succeed in your current and future environment and then take a good look at what needs to change in your current operating model to enable your aspirations to become a living, breathing reality.