The success of every business and your business, comes down to its Operating Model.
Get it wrong and you’ll go out of business.
Get it right like Amazon, Apple and some of the latest innovators… and you’ll reap the rewards!
So how do you build a Business Operating Model to achieve this success?
The answer lies in having a Resilient Agile Operating Model for transformation success.
And you must make it your mission and vision to achieve this as your Target Operating Model (TOM) to drive your business forward.
BUT Don’t we need a solid Business Model first?
The problem with relying on Business Models is that they don’t last…
The COVID-19 Pandemic has showed us how stupid this question really is. Business Models are of course important to have… as they are the means by which the business survives commercially to gain an income and revenue. This revenue is fuel for growth.
Unfortunately, Business Models aren’t resilient or agile… to weather the storms from the continuous disruption that businesses and our careers face in the digital economy.
The commerce of a specific business model can disappear overnight if there are no customers to buy the business’s products and services.
We have seen how some businesses have lost all their commerce overnight during the COVID-19 pandemic and today they seize to exist – with many closures and shutdowns.
This includes one’s career as a business. If you no longer have relevant skills needed by enterprises, then you’ll be made redundant.
Similarly, pre-pandemic… many jobs have already become redundant from the wave of automation and new technologies that have rolled out over the past 2 decades in the digital economy – with manual jobs being replaced by machines, most of which don’t even have artificial intelligence (AI).
Many companies, also sort the use of low cost operations as a method to reduced costs by moving jobs and roles from more expensive labour markets to cheaper lower cost locations… and in doing so they have already sort to change their Operating Models. This was particularly popular amongst many banks for over a decade between 2008 post the Global Financial Crisis (GFC) and 2018… with much of this activity still continuing today.
In the banking industry, we have witnessed how these poor methods of Operating Model transformation are neither agile or do they make a company resilient, since existing problems and inefficiencies that have been hidden or mitigated by a skilled labour force are no longer masked, while new problems and inefficiencies also emerge in the new low cost centers where the cheaper labour force may not even have been trained properly. The end result is a lowering in customer service, while customers also face higher fees for financial services. This kind of Operating Model transformation, was the opportunity that the Fintech startups needed to enter the market and disrupt the banking and financial services industry.
With Business Models disrupted from all angles, can you even make a Business Model solid, and robust? Especially, if the means to survival is in how the business is able to pivot to operate with a new Business Model, based on changing customer expectations from their changing customer journeys, where they have to undergo new journeys to solve problems with new needs and wants – with and without a global pandemic at play.
What about new Platform Business Models, like the ones served by Amazon, Google, Apple…? These Platform Business Models are also disrupting traditional pipe business models… that follow the traditional sales funnel.
Doesn’t it take many years and decades to amass the scale in the Operating Model that is then capable of supporting a Platform Business Model?
This is why, it’s necessary to build a Resilient Agile Operating Model and to ‘start’ immediately, whether you’re an existing larger business or even a conglomerate of multiple business lines, where is possibly a lot of complexity in your Operating Model that could do with simplification to make it more effective and agile, to operate with Business Agility…
Or you’re a fresh startup, about to raise your Series A or B and/or ready to spend your Series A or B funding as the business model scales and diversifies.
Why build a Resilient Agile Operating Model?
A Resilient Agile Operating Model is what gives an enterprise this ability to PIVOT its business models to not only survive disruptive market forces… but to achieve business growth.
It’s about playing the ‘long game’ as Google did when it first entered the market in 1998 as a startup to usurp the mighty Yahoo, our market leader in the 1990s. Google focused its efforts between 2004 and 2007 and invested heavily to build a resilient Agile Operating Model that will allow it to continuously offer new innovative services… or in some cases catch up with competitors quickly, while also working through product flops quickly as well. It was building out the infrastructure and internal capabilities that would support the delivery of many services, including new ones, end-to-end and for many possible customer and user journeys, and not just ‘Search Engine’ services.
During this time… Yahoo invested heavily in capabilities and partnerships to increase sales hiring many people to manually expand its ‘Search Engine’ service… to build a library of results, which is but one front-end capability only in its value chain and on one value stream… It did not invest in other capabilities in its Operating Model that would give it a robust, resilient and agile set of value streams and hence internal business services that would support its overall end-to-end Operating Model. This lack of attention and investment in other important business services that makeup a resilient Agile Operating Model, was probably why they had the biggest security breach ever recorded in 2013 with over 3 billion accounts affected – as the company underinvested in its security services value stream.
Some Case Studies you can learn from…
A full breakdown of the Google vs Yahoo strategy journey comparison can be found in
THE STRATEGY JOURNEY (2020) book.
Other Agile Operating Model related journey examples in the book include:
→ The journey taken by Apple when Tim Cook took over as Head of Operations and then COO under Steve Jobs is also covered in detailed in the book.
→ The Operating Model of Amazon and all the services in this Omnichannel Marketplace business model and the role of its Alexa Voice Assistant Service in Amazon’s business agility
And there are many more case studies including Tesla, Vitality Healthcare, Harvard Business School, Udacity, Commonwealth Bank of Australia (CBA), DBS bank, the SMART CITY project by the Singapore Government… covering other aspects of the business lifecycle… as described by the end-to-end process that is THE STRATEGY JOURNEY process.
Before getting into the 5 actionable tips to get you started on building the foundations for a resilient Agile Operating Model, it’s important to clarify and define…
What is the OPERATING MODEL? What is the TARGET OPERATING MODEL?
The Operating Model is what runs your business comprising:
- WHO drives it and keeps things going, and who is it supporting or serving, so who are the customers, users, partners, staff, any connected parties…
- WHAT assets & activities including systems and infrastructure makeup this business, what projects does it contain, what things, solutions and outcomes is it creating, producing and delivering…
- HOW the business functions or performs… is it effective, agile, resourceful, resilient, efficient, costly…?
- WHERE & WHEN do things happen… which location or geographic, is it virtual or physical or digital? How does it all join up and work together?
This definition of the Operating Model, as outlined in THE STRATEGY JOURNEY (2020) book tells us what actually needs to be build or nurtured in the enterprise, and hence what the enterprise should be investing in… in order to build its Resilient Agile Operating Model.
If any of these people, processes, data, technology systems in the Operating Model in different locations, are just not right, sub-optimal or breaking down, this is clearly why the business and its performance might suffer.
When the Operating Model is working at its best, that’s when you’ll create, produce and delivery the most value to stimulate growth.
The Operating Model is like the engine that keeps everything running and the heart of the business, so it makes sense to invest in it if you want the business to flourish now and in the future.Julie Choo – THE STRATEGY JOURNEY (2020)
This is what makes it a science… the transformation of the Operating Model of a business.
Business and digital transformation is all about changing the Operating Model of a business from how it operates and runs itself today… in the CURRENT STATE with it Current Operating Model (COM) to how it needs to operate and run itself at a point in time in the future in the TARGET STATE with its Target Operating Model (TOM).
The Target Operating Model (TOM) is how the business should operate at a future point in time, that could be 2 years or 5 years or more. eg. THE STRATEGY JOURNEY (2020) book, highlights Telsa’s journey and its TOM devised from Elon Musk’s Part Deux strategy.
What is a Resilient Agile Operating Model?
Having a resilient Agile Operating Model means having an Operating Model that is capable of transforming itself effectively and continuously as part of its DNA.
This resilient Agile Operating Model has the maturity in its capabilities to support this ongoing continuously self-transformation… where its people, processes, data and technology systems across all locations are actively making changes and adjusting either subtly or more drastically how they operate in order to solve problems, serve customers, users and stakeholders, while adding value.
When supported by the latest digital technologies including strong data science and Artificial Intelligence capabilities… this Digital Operating Model will have the intelligence to keep self-transforming, to supporting all the necessary business models that the enterprise and its innovators might like to PIVOT into.
How to build a Resilient Agile Operating Model?
This Level 5 maturity state that makes an Operating Model resilient and agile… will take time to build and implement depending on where the point of departure is… in the maturity state of the Current Operating Model (COM). Many interim Target Operating Models (TOMS) with improvements in the maturity state of specific Operating Model capabilities across people, processes, data, technology systems… as well as the enterprises ability to co-create with its customers, users and partners may be required. The bigger the gap, the more challenging and expensive the cost of the transformation journey.
No matter the size of the effort, time is of the essence and it really is never too late to get started and to build momentum… This first step is part of every transformation journey to build a resilient Agile Operating Model… that will stand the test of times.
Here are 5 Actionable Tips we’ve compiled at the Stratability Academy, taught in detailed and practically through case studies in our training and coaching programs, that will help you get started on building a resilient Agile Operating Model:
✅ Operating Model Top Tip #1: Invest in your people, people are assets…
The loss of important key personnel and great people who are responsible for much of an enterprise’s intellectual property (IP)… all that knowledge about how things work, what works and what doesn’t, what customers need and want…and how best to serve them… that is, all that makes it unique or special, can heavily impact its Operations and even its share price.
When creative director of Mulberry Emma Hill announced her departure in 2013, the company’s share price dropped immediate by 8% (a lost of $40million) and the new direction that Mulberry took in its product development and branding in the following years, as the company tried to change from a young luxury brand to a high-end luxury brand to compete with the likes of Hermes, only served to alienate its once loyal but younger customers and fans… with Mulberry’s products priced out of their reach.
The cost of attrition when good people who provide invaluable services in an organization is often much higher than their salary would indicate, as the IP and skills in execution held within this person’s role and the activities they perform is also loss, and often difficult to replace or improved upon, without a lot of time in training and coaching the new recruit and replacement.
People are key assets in an enterprise… with both a cost as well as opportunity cost… so it makes sense to account for people, especially good people, by understanding what their roles are… what value they provide or capture and produce for the organization… and support them where necessary through training and coaching, to keep them motivated, as well as to produce even more value through their IP.
In THE STRATEGY JOURNEY (2020) book, we highlight how to use S.M.A.R.T. objectives to direct the activities of an enterprise and this applies to the directives that are given to its people assets too… as this is what helps them to perform at their best.. when they have clarity on the valued contributions that they make in their specific roles. Whenever a manager comes up with a new KPI or SLA, they should also provide a support package with the relevant investment, that will empower the employee or sub-ordinate to achieve that target.
An increase in salary isn’t what keeps an employee in a job. A increase in value to an asset, with employees and staff being this asset, is what makes this asset capable of producing more value in the future. So it’s important to workout what value the enterprise can bring to the asset, and then make that investment in the asset… so that it can multiply in the value that it creates and produces for the company.
✅ Operating Model Top Tip #2: Create an open mindset culture first…
I have worked in several organizations when an incumbent colleague who has been there for circa 5 to 10 years, would start by telling me “This is how we do things here at COMPANY X.”
If you’ve watched THE STRATEGY JOURNEY Process video tutorial then you’ll know that I am speaking from my experience having managed transformation budgets for Operating Model changes in the many 10s or 100s of millions and more…
This type of comment or engagement tells us what to expect in the company’s culture… In most cases, such a statement is often a sign of a closed culture, based on a fixed mindset, and indicates an organization that is struggling to transform its Operating Model despite what others might consider to be humongous transformation budgets in the many 10s or 100s of millions.
Where there are colleagues who still have this fixed mindset… the challenges lies in how to change this to a growth mindset where they are open to learning new things and new ways of working, including how to innovate new services for customers and users in an ever changing environment that is the new digital economy. If people are naturally resistant to change… then there is no way they will be listening to customers and users, and adapt the company’s operations to support these changing needs of the customers and users, thus potentially rendering the organization’s service offerings possibly irrelevant for the buying or purchasing customer and consumer of the product or service.
When an organization is dominated by a fixed mindset culture, then many of these symptoms of poor transformation (see image of Pages 43-44 of THE STRATEGY JOURNEY book below) manifest, to challenge even the best transformation agents including designer and consultant.
There is no getting around the fact that change is disruptive and jobs will be loss. This is part of every company and organizations evolution and growth as described by THE STRATEGY JOURNEY process. Resistance to change, by its staff and employees can set an organization back many decades in the transformation journey, when there are competitors who can operate at the highest level of maturity in their Digital Operating Models that change every day, every hour, every second… to continuously innovate new services for customers as part of its Operating Model and why of being.
This is why a change in culture is actually the first and most important step to the future success of an enterprise’s transformation efforts and in helping it to build a resilient Agile Operating Model. Resilience lies in the enterprise’s overall ability to adapt how it operates to disruptive forces, while agility is how quickly an enterprise can change.
A growth mindset is necessary to foster a growth culture and so an organization must look within and develop a plan to change its culture. This plan should include specific training and coaching of key personnel to foster their personal career growth alongside the growth journey of the enterprise, as well as bringing in new assets with that growth mindset and that ‘fresh perspective’ to direct new operational activities, while replacing and making redundant those who are unable to embrace the change or who are clearly working against it.
✅ Operating Model Top Tip #3:
Optimise your value streams first. Not process re-engineering…
In a world where change is happening so fast, it’s important to be practical when applying changes to business operations, that is changes to processes in the Operating Model. Obviously changes to processes have dependencies with the data that needs to be managed by the process and the people and systems responsible for executing the process, and all along the value streams which the process might be supporting.
There is simply no time to waste if the most value from making changes to specific processes comes from the speed of execution and speed to market, for if changes take too long to implement because there is analysis paralysis, then the opportunities to capture the value, such as increase in revenue from an increase in market share are lost. This is why spending time documenting and mapping current processes can often be a waste of time for the purpose of finding small gains through process reengineering. Current processes should only be outlined for training purposes and to instil quality in the execution of the process, via a Service Operating Procedure (SOP), including presentation to clients of the service or when conducting gap analysis.
When it comes to achieving fast effective transformation, analysis time is better spent on defining a target service via its value stream. This means outlining what capabilities and high level processes are required to deliver the value proposition in the new or improved service, including defining the necessary inputs and outputs of the value stream.
The Service Design process should be conducted to develop a new and improved sticky Value Stream for a target service. A target service is an end-to-end service that delivers a specific value proposition to the customer or user, including any physical products. For example, products like the iPhone are only successful when backed by associated end-to-end services such as customer care after sales, but also the software that works with the new iPhone from the IOS app marketplace.
As highlight through the iPhone example, this service needs to be informed by all necessary data possible from the customer and/or user journey about how the customer and user will think, act or behave when they are solving their personal lifestyle or business problem. It is this data which should be captured through co-creation that should inform the design of the new target services such as new features and apps in the next IOS release. The new service features then inform the organization with Apple being our example, of what changes need to be made in the Target Operating Model (TOM) in order to support the service delivery.
In THE STRATEGY JOURNEY (2020) book, there are several customer journey examples using a Customer Journey Map canvas, including the customer journey associated with the Amazon Alexa Virtual Assistant service… to showcase what data is being captured on how potential customers may think, act and behave. More detailed and step by step analysis techniques on Service Design for the purpose of Operating Model transformation are taught in Stratability Academy’s Data-Driven Transformation Service Design course, which covers how you would design of a new and improved service via its value stream and the customer and user journeys through the bundling of services in a 5 stage stage process.
✅ Operating Model Top Tip #4:
Take an MVP approach with co-creation to transform…
There is simply no point spending valuable resources, in a world where good resources in people and systems (i.e. the enterprises assets) are scarce and expensive… to build a product and/or service that customers and users might not need or want and hence adopt into their customer and user journeys, where they experience their problems.
In recent conversation with an Innovation Lead at the World Bank, I was told that the organization had a lot of projects where the solutions they have built through MVP were not being used or adopted by its intended customers or users. They had product owners who where struggling to sell their solutions or embed these innovated services ‘into the wild’. What I struggled to understand when having this conversation, was their concept of what is an MVP… and how this MVP was not co-created with users ‘in the wild’. There are of course many similar projects and innovations that expensive the same or similar strategy journey.
All new and improved products and services are best delivered through co-creation using Human-Centered Design, from MVP to ongoing upgrades in the Innovation Adoption Lifecycle.
This engagement where the customers and users as well as the staff and stakeholders are working together to solve the problem is what delivers the most value, as there is ownership of the problem and the solution provided by the product or service. This is how products and services meet and even exceed expectations as well as becoming an embedded through adoption.
An MVP approach means iterative development of the product or service, through co-creation. Co-creation must be part of the innovation process, if the new innovation is to become successful in ‘crossing the chasm’ in the Innovation Adoption Lifecycle to stick with customers and users and extend Customer Lifetime Value (CLV).
Of course, this MVP approach may not work in all situations such as big movie or series productions, and we see this in the many big flops like Kevin Costner’s Waterworld. In the development of services such as TikTok, in its evolution and growth, you can clearly see co-creation in play.
✅ Operating Model Top Tip #5: Have a Target Operating Model (TOM) future plan and vision to bring it all together…
Following the design of a new Target Service, the next stage is to define the new Target Operating Model (TOM) to support this service, that is, the Service Operating Model (SOM).
Analysis of the Service Operating Model (SOM) can be conducted along with co-creation of the new target service to deliver the most value-add from the Transformation Design process. With a baseline Target State of the Service Operating Model (SOM) outlining all the key component resources, in people, process, data, systems by location plus new digital dimensions such as Networks and Regulations, as well as interdependent services, all the players required and involved in delivering the value stream are identified, allowing for gap analysis against the Current Operating Model (COM). It is during this gap analysis when it makes sense to revisit existing processes, and to document them should they not already exist amongst the organizations repository of Service Operating Procedures (SOPs) as we outlined in Top Tip #3.
The gap analysis should focus on exploring the difference in maturity states of specific capabilities across their resource components, including any missing capabilities and components and this is what gives the requirement for transformation execution to achieve the Target Operating Model (TOM).
The bigger or wider the gaps through the difference in maturity stages, such as moving from operating with ‘silos’ into operating as an ‘intelligent and predictive’ Digital Operating Model, then the more complex the transformation project or program, with more transition stages or more interim Target Operating Models (TOMS) required to achieve the ultimate Target Service state. As the organization improves the maturity states of its capabilities, then it also improves its level of business agility, that is its own ability to transform and changing, as it transitions closer to being able to operate with a Digital Operating Model.
Of course, when conducting Operating Model Transformation Design, a strong relationship is required with stakeholders and especially the Product or Service designer through the end-to-end co-creation process as all parties navigate the 5 stages of THE STRATEGY JOURNEY (ie. buiness lifecycle) together to deliver the transformation. This is how you apply Human-centered Design, through identifying a problem-solving sweetspot, between the value proposition or service, the customers and users of the service and the staff and systems responsible for delivering the service – is part of the Operating Model Transformation Design process.
In THE STRATEGY JOURNEY (2020) book, we introduce a Service Operating Model canvas for you to conduct this Target Operating Model (TOM) design and gap analysis using design thinking combined with operational excellence, to help you save time. A more detailed process with step by step analysis techniques is taught in Stratability Academy’s Operating Model Transformation Design course, which follows the design of a new and improved service via its value stream from an MVP as well as subsequent service upgrades. Both the book and the course also cover what is as well as what it takes to run a Digital Operating Model.
Conclusion & Summary
Through application of the 5 Actionable Tips recommend above, you will kickstart the journey to building a Resilient Agile Target Operating Model for any business… be it the company that you serve, a client organization that you support, and even yourself and your career, in your business, whether you see yourself as an entrepreneur or not.
While a fully fledge Digital Operating Model may be in the future for this enterprise or business that you’re leading given the time and effort involved… the important thing is to get started, as there no time to waste…
With many competitors already undergoing their transformation journeys… its best not to be left behind and out of touch for that is the beginning of the end, as that is how you can guarantee disruption to your business.