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Business Transformation

How to translate your company’s business goals into a successful operating model

Friday, July 5, 2019

Answering four key questions can help you identify the capabilities your company needs to enable its operating model and unlock its strategy.

Organizational change happens at a rapid pace today. As often as every two years, companies are reorganizing and introducing a new operating model that takes two years to implement. That means they rarely have the time to complete one reorg before starting on the next one.

That’s where the disconnect comes in between a company’s strategy and its operating model – aggravating existing problems, causing pointless reactions and spreading confusion across the organization. Often times, operational redesigns create little value because moving departments and changing reporting lines fails to change how an organization fundamentally operates. Or the redesign is not rooted in the company’s strategy, and instead only confirms existing biases and social dynamics.

Four key operational questions

The importance of the link between strategy and operating model cannot be overstated. Answering these four questions honestly and completely can help you strengthen this link and pursue a robust business strategy:

What do we need to be able to do to create value?

For any company to achieve its strategy, there are always business units, process steps, or brand attributes that make huge contributions to creating value relative to others. And yet, many companies don’t actually know what they do that creates the most value. Many have not mapped out the value chain of their industry to identify needs to differentiate itself.

The first and most important step in redesigning your operating model is to understand which specific parts of the work or steps in the value chain are most critical to creating value. This determines not only how to design an effective model, but also where to allocate resources. Once you know that, you can proceed to the next step and begin thinking through the capabilities you need.

What capabilities do we need to capture this value?

Now it’s time to get specific about what your company needs to be able to do to deliver on the most important parts of the value chain. Remember that no company is great at everything and operating models are not designed to satisfy everyone. Your company simply needs to clearly identify where you can really excel in order to achieve your strategic goals.

Do we have these capabilities today, and where?

Here is where your company needs to look inward to understand whether the functions and capabilities it needs to create value currently exist or need to be developed. This involves answering a few further questions:

  • Which functions and capabilities should reside within the corporate centre versus within the business units?
  • Who should be empowered to make key decisions and manage the budget or allocation of resources?
  • What are the most critical roles within the organization, and do we have the best people assigned to these roles?

As agile ways of working become a source of value, you may need to get better at identifying where the most desired capabilities already exist, both organizationally and geographically. It may be even more critical to map talent to value, putting people with the right skills and capabilities into the right jobs and the best people into the most critical roles. This will make it easier to adapt to operational and strategic changes and to address gaps between the current and desired future state.

What are the implications for our operating-model design?

Building a road map for operating-model design requires prioritizing existing strengths and rectifying strategic weaknesses. This can be done by reconfiguring, building, or acquiring new capabilities to ensure your company can deliver on its strategic goals. Before embarking on the full operating-model redesign process, your company should articulate any implications coming out of the above assessment and ensure that the new design reflects them.

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