Unlocking Strategy Execution Success: How an Operating Model Aligns Vision, Execution, and Value Creation.

The principle that "structure follows strategy," introduced by A.D. Chandler in 1962, emphasizes that an organization's structure—including its divisions, departments, and technology—should be crafted to achieve its strategic goals. Chandler highlighted the inefficiency that results when the structure does not support the strategy.

Understanding Operating Models

Imagine a team trying to complete a big jigsaw puzzle together. The team leader has a beautiful picture of what the finished puzzle should look like, inspiring everyone with the "why" – the reason they're all working on the puzzle. The team members are skilled at finding and connecting the pieces, knowing exactly "how" to fit them together because they've done puzzles before. But, sometimes, the puzzle doesn't come together as hoped, even with a clear picture and a skilled team.

The reason?

The team can't see how the individual pieces fit into the bigger picture. It's like they have the edges and corners figured out, but the middle remains a mystery, leaving gaps and making it hard for the puzzle to truly look like the leader's vision.

What's missing?

The box top picture—the "what."

This is a clear, shared understanding of what the completed puzzle should look like, linking the inspiring vision to the hands-on work. It's like having a guide that shows everyone not just the individual pieces they're working on but also how those pieces fit into the larger image. This guide, or Operating Model, helps the team understand the bigger context of their work, aligns their daily actions with the team's goals, and ultimately helps them work together to bring the leader's vision to life, completing the puzzle as imagined.

An Operating Model acts like the detailed picture on a puzzle box, guiding a team in understanding how each piece contributes to the overall image. It ensures that the vision (the strategy) and the execution (day-to-day operations) are aligned, helping to complete the puzzle as envisioned by the leader.

In essence, the operating model is:

A clear, shared vision of the organization's goals, connecting the strategic "why" with the operational "how."

A guide for daily actions, showing how each piece fits into the larger picture to achieve the strategic objectives.

This model not only bridges the gap between strategy and operations but also outlines how the company creates value and specifies the roles within the organization. It defines the interaction of various elements like people, processes, and technology, guiding the team and enabling behaviors to realize the strategy.

Importance of an Operating Model

An operating model is crucial for organizations to:

- Refine and reinforce strategy.

- Guide operational decisions.

- Provide a scalable framework tailored to the organization's size and needs.

Without an operating model, companies risk failing to realize their strategies, encountering inefficient processes, and lacking alignment among employees.

Designing an Operating Model Aligned with Strategy

To design an effective operating model, leaders must first agree on the company's core focus—customer satisfaction, operational efficiency, or product innovation.

This decision lays the groundwork for creating "Design Principles," which are straightforward statements that clarify how the organization will execute its strategy. These principles help align leadership around clear criteria for the operating model's design.

Core Elements of an Operating Model:

1. Design Principles: Guidelines that provide consistency and structure, ensuring the operating model aligns with the strategic vision.
2. Governance: The framework for decision-making processes, delineating authority and responsibilities.
3. Culture & Values: The essence of accomplishing work, reflecting the organization's ethos and motivating employees towards a common goal.
4. Processes: The critical capabilities required to execute the strategy effectively.
5. Technology & Tools: The necessary systems and tools that enable the organization to operate efficiently.
6. Geography: The locations where the company operates or intends to operate.

(More on these elements in the next article)

An operating model is a blueprint for organizing resources, processes, and technology, ensuring they align with the organization's strategic goals. It's vital for leaders to carefully design and implement this model, as it significantly impacts the organization's ability to execute its strategy successfully.

Designing an operating model involves several crucial steps to ensure it effectively supports the organization's strategy and operations. Here's a simplified overview:

Steps in Designing an Operating Model:

• Evaluate the Current Situation: Begin by analyzing what aspects of your current operations are effective and which are not. This involves interviewing key stakeholders and reviewing existing documentation to understand the strengths, weaknesses, and the overall operational landscape. This step is essential for identifying areas for improvement and setting the stage for change.
• Assess the Need for Change: Determine the urgency and need for change by identifying critical issues that could hinder achieving the strategic goals or growth. Develop a compelling case for change, highlighting the risks of inaction, and communicate this across the organization to build support for the transformation.
• Engage Key Stakeholders: Involve representatives from various parts of the business to ensure the right mix of perspectives. This collaborative approach speeds up decision-making, ensures buy-in, and leads to a more effective operating model that reflects the organization's diverse needs.
• Establish Design Principles: Based on your strategic objectives and insights from the current state analysis, define the core principles that will guide the design of your future state. These principles will act as a framework for the new operating model, ensuring alignment with your strategic goals.
• Outline the Future State: With a clear understanding of the necessary changes and input from key stakeholders, outline the essential components of your future operating model. Prioritize elements critical to your operations and address any issues through focused workshops to define each aspect of the model.
• Document the Operating Model: After conducting workshops, synthesize the findings into a clear, cohesive document. This document should articulate the operating model in simple terms, making it accessible and understandable to all stakeholders.
• Implement the Changes: Turn the planned model into reality by initiating implementation. This includes launching new initiatives, integrating them into the broader operational context, and managing their execution with clear accountability. Support these efforts with strong change management and communication to ensure understanding, buy-in, and commitment across the organization.

Key Considerations

Ongoing Maintenance: Assign responsibility for regularly updating the operating model to keep it relevant and aligned with the strategic direction. This ensures that the model remains effective over time.

Balance Detail and Flexibility: Avoid detailing in defining processes to maintain employees' flexibility, creativity, and entrepreneurial spirit. Finding the right balance is crucial for success.

Implementing an operating model takes effort but is invaluable for aligning resources, processes, and culture with the organization's strategic vision.?

Successful examples include Apple's focus on product portfolio and innovation, Amazon's customer-centricity and operational efficiency, and Toyota's commitment to lean manufacturing and continuous improvement.?

These cases illustrate how an effective operating model can drive organizational success and value creation.

More on Operating model Frameworks... coming soon