Partner & cofounder at Kuroshio Consulting, advising clients on strategy, transformations and leadership.
Since watching my first episode of Star Trek, I have been fascinated watching the crew work seamlessly together as they follow their mission “to explore strange new worlds, to seek out new life and new civilizations, to boldly go where no one has gone before.” You often see teams working together across engineering, security, sciences (Mr. Spock’s department), and, of course, the senior officers (or command). I think it is a model of how corporate departments should work together to solve a problem.
If this were true in our non-fictionalized world, organizations would not undergo operating model redesigns so frequently. The triggers for the redesign vary: a new strategy focused on customer or operational excellence, a change in leadership, centralization of federated functions, an agile way of working to increase speed to market for products, or a new technology platform that dramatically changes the way operational tasks are done.
What is an operating model? It is the way an organization delivers value to the customer and runs itself. It typically includes aspects of people (structure, roles and responsibilities, culture), processes (the blueprint of how to do something), governance (decision making), technology, and measures at its core. When undergoing an operating model transformation, what are some key elements to keep in mind?
Structure
There are a few fundamental ways to organize a department or the entire company depending on the outcomes you are looking for and your organization’s driver. Are you operating in a market where customers’ needs are complex and customer intimacy (i.e., constant adaptation of your product to their needs) is key? Is cross-functional collaboration crucial? Or are you operating in a highly regulated environment with complex products?
The answers to these types of questions based on the market you operate in and your internal needs define the primary alignment of your organization. If you are leading a highly innovative organization requiring customer focus and frequent cross-functional collaboration, product is probably your primary orientation. The key to your primary orientation is to focus on generating the most value for your customer.
That being said, no model is perfect, and with the right accountability, governance and culture, most organizational models—functional, product, geographic or channel—can work for your organization. Apple is a classic example of a highly successful, customer-oriented product company organized in a functional structure. Every structure has strengths and limitations. Before undergoing a reorganization, consider whether setting the right expectations and incentivizing the right behaviors could get you the outcomes you need; being aware of the barriers that your new structure creates is key to putting the right mechanisms in place to minimize its impact.
Clients often want to know how others in their industry or global leaders organize themselves. While benchmarking offers an interesting data point, I’ve found it does not always provide the right level of insight into the cultural norms and practices that an organization puts in place to achieve its goals.
Accountability
When designing operating models, leaders often get anchored in roles and responsibilities and who does a role in the current construct. Instead, think about what the ideal state is and making changes to get there. Roles and responsibilities are important to understand, but an organization relying solely on a RACI (responsible, accountable, consulted, informed) matrix as a Band-Aid to avoid addressing design can be a sure sign of dysfunction.
I worked with a client a few years ago that had co-leads over testing. Their team culture, behaviors and leadership incentives were divergent and they co-created a RACI to help them navigate the complexity. While this was a temporary solution, the differences in their team norms were evident at every testing event with different report outs and a lack of accountability.
Measurement
A few key measures should be put in place to evaluate the success of the operating model redesign. To establish the right measures, start with the objective of the redesign. For example, if you are transitioning into a product-oriented operating model to strive for quicker return on investment by reducing time to market (TTM), measure TTM both before and after the transformation to ensure your objectives are met, and if not, modify elements to drive the desired outcomes.
Many of the ultimate measures of the success of an operating model may be lagging indicators, so use leading indicators such as cycle time for a specific step and/or productivity to see early signs of improvement or failure.
Culture
Many organizations today must work in a fast-paced environment with interdependent teams. I’ve found that no matter how theoretically perfect the structure and measures are, it is the ecosystem of connections within the organization, with partners and with vendors, that drive value to the customer.
What are your cultural norms? Do you expect your managers to be immersed in details or expect them to be excellent coaches while the individual contributors own the details? If it is the former, are your cross-functional leaders able to make decisions? If it is the latter, do your managers prioritize this and spend time with each of their direct reports weekly for feedback and coaching?
Culture is an often-under-examined aspect of an operating model that has the potential to drive value-creating connections.
An operating model transformation is undertaken to successfully execute the strategy. It should consider additional elements such as talent, enablers such as talent management and performance management, processes, governance, and systems and tools. Often organizations spend a vast majority of the time on the structure and assume the rest will follow. A key to success is focusing on the elements that are most crucial to changing behaviors and norms—and maybe we will all behave like the fictional crews in Star Trek.
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