If there’s one key trend in technology it’s that it is constantly forcing mid-market businesses to change and adapt. Yet to fully thrive in the increasing pace of change, organizations need a flexible operating model that can allow them to quickly adopt and implement new strategies.
Companies need to create a “next-generation operating model” that offers speed, precision and flexibility to continually reduce costs and quickly unlock new sources of value. This model of the future should combine digital technologies and process improvement capabilities in a sequenced and integrated way to improve internal processes and customer journeys.
Marcia Blenko, advisory partner with Bain & Company’s Organization practice, said the challenge of evolving has “become more complex” and organizations must now be designed to support more growth avenues, new products, new steps in the value chain and new customer segments. “Too often, companies make one of two missteps. Some fail to evolve their organization quickly enough to match a shift in strategy…The second mistake is to move full steam ahead with a new organization design that does not match how the business will actually create value,” said Blenko.
McKinsey suggests 4 building blocks companies can use to create their own next-generation operating model.
1. Reconfigure organizational boundaries and create autonomous and cross-functional teams. These teams should be nimble and empowered to own products and services and to run experiments.
2. Create a flexible and modular architecture, infrastructure and software delivery system to support a faster and more flexible deployment of products and services. “This approach both accelerates development and prioritizes the use of common components, which, in turn, leads to development efficiency and consistency,” said the partners.
3. Build a management system that cascades clear strategies and goals throughout the organization. These systems should be based on principles, tools and associate behaviors that drive a culture of continuous improvement.
4. Establish KPIs for employees at all levels while encouraging feedback and promoting the sharing of best practices. Another important element is to foster an agile, customer-centric culture at all levels that is modeled from the top.
“Successful companies prioritize speed and execution over perfection. That requires agility in delivering products to customers and quickly learning from them, as well as willingness to take appropriate risks,” said the partners.
Blenko said that strong and specific design principles create successful models that can help guide leaders on what choices matter the most. She says this can serve as a beacon for employees and also can preclude unnecessary debates from occurring. Companies should strive to define what matters, call out critical decisions, set scope of business boundaries, and then experiment to create a custom model that works for the individual organization.
EY adds that a well-defined and articulated operating model is the bridge between strategy and operations, and can serve a foundation for execution with a clear guide for an enterprise leadership team. The core elements of an operating model, EY said, are design principles, culture and values, governance and processes. Other leading practice elements can include IT, performance management, organizational design and structure, service delivery and risk management. Organizations without adequate operating models can face operational inefficiencies, ambiguity around accountabilities, low interaction and integration, and increased or sustained operating risks.
“Operating models need to evolved along with the business model and strategy to guide how people produce the right results,” said EY.
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