Why Updating Your Operating Model is Key to Transformation
Digital transformation is a growing trend in the business world. In a recent blog post, I shared my definition of transformation: changing an organisation for the better so it’s able to achieve its strategic goals. Successful transformation means you can deliver value to your customers faster.
Sounds like an ideal way to run a business, right? Who doesn’t want to move more quickly to better serve their customers?
But I see a common problem crop up when companies strive toward transformation: they try to apply these concepts in small, concentrated areas. They mistakenly believe that transformation only needs to happen within certain teams, like product or development. As a result, they don’t involve the entire company and other teams like HR and compliance get left out.
While the people trying to drive transformation have good intentions, they fail to look at the full ecosystem of their organisation. As a result, the return on their investment is minimal. A focus on any one area alone will not result in sustainable change. Since they aren’t dealing with some of the underlying systemic issues, they’re inadvertently blocking their organisation from working differently.
So what’s the solution? I believe organisations have to look at their overall operating model to successfully transform how they work. In this post, we’ll explore what I mean by operating model and how you can begin to understand yours.
What exactly is an operating model?
Let’s start with a definition: “An operating model is both an abstract or visual representation (model) of how an organisation delivers value to its customers or beneficiaries as well as how an organisation actually runs itself.”
Having the right operating model for your context is fundamental to successful transformation. Organisations can’t maintain most of their existing operating models and hope to drive the level of innovation and value that they are depending upon for ongoing success.
There are four key components of an operating model. Let’s look at each one in a little more detail.
Structure: The way the organisation organises and collaborates to execute work and to take advantage of new opportunities to create value. This component focuses on breaking down silos and creating cross-functional teams. The end goal is to have an end-to-end process for identifying problems or opportunities, discovering ways to address them, removing uncertainty through testing and prototyping, all the way to delivering value to customers.
Decision-Making: The framework, processes, and accountabilities that enable priorities to be clearly established, decisions to be made, and the ability to adapt when warranted. One of the biggest challenges organisations face is that the people who are closest to the customers and their problems are far removed from strategic decision-making.
Ways of Working: The daily practices, cultural norms, and mindset that shape how work is done within an organisation. Do you tend to prioritise outputs over outcomes? What types of behaviours do you reward? Do handoffs introduce more chances of miscommunication or a loss of accountability?
Capabilities: The disciplines, techniques, and tools that enable an organisation to deliver high-value outcomes. For example, you may have someone whose job title is “designer” who doesn’t know how to do user research or design iteratively. The goal in assessing and mapping out capabilities is to determine how best to support people during transformation. This might involve coaching or training, for example, to help team members develop new skills.
Remember: It is critical to look at these aspects holistically to create a system that supports people in achieving business and customer outcomes. Simply focusing on one aspect won’t work.
5 elements to consider when rethinking your operating model
There are five elements to consider when deciding the type of operating model that will drive the most value for your organisation.
Maturity of the organisation: How do you deliver value to customers?
Degree of innovation: How committed are you to being innovative? How prepared are you for disruption?
Customer journey: How complex are your customers’ journeys? What level of interdependencies and interconnections need to be managed to deliver a customer experience?
Speed to value: How quickly can you identify a need and deliver on it?
Risk: What degree of risk can you tolerate in your environment? (Hint: It is likely much more than you currently believe!)
Based on how your organisation answers these questions, you can get a sense of which levers to pull when evolving your operating model to create the right environment for success.
How Northshore can help you rethink your operating model
At Northshore, we help organisations examine their current operating model, identify priority areas for improvement, and co-create a future state operating model. Our approach is collaborative, research-based, and relies on running small experiments to see what works well and make sure it’s the right solution.
We offer the following steps:
Discovery: We develop a baseline understanding of how your company defines, prioritises, and delivers value to your customers.
Design: We combine the baseline information and prioritised areas identified during Discovery with our knowledge of organisational transformation to provide recommendations for the target state.
Define + Deploy: Once the higher-level design principles and target model have been agreed upon, we then define the activities and sequencing that will be necessary to implement the changes. We believe in a “test and learn” approach, so we will recommend rollout strategies that enable quick learning and validation of concepts.
Deepen: We support you through scaling and maturing your new approach. We offer coaching that’s tailored to your needs, whether you’d like some light-touch support or a more hands-on approach to reframe your ways of working, decision-making, etc.
Operating models—just like products—need to evolve to stay relevant. The organisations that succeed at transformation understand that this is not a one-time process. They develop a growth mindset and continuous improvement to keep evolving.
If this sounds intriguing and you’d like to learn more about how we can work together on your operating model and digital transformation, don’t hesitate to get in touch.
