A well-designed operating model should support your business operations, providing flex to quickly adapt to changing circumstances, and effortlessly delivering your service proposition.

This article, co-authored by Jonathan Tidd and Martin McCloskey, explores how thoughtful operating model design can deliver better customer experience and enhanced profits.

We are living in an era of sustained public budget cuts, economic and political uncertainty, and rapidly changing technology, which is driving innovation in both business models and funding models.

This cocktail of circumstance is creating an existential crisis in many organisations, with leaders forced to rethink how their businesses can remain both relevant and competitive.

There has been no shortage of bold new ideas and strategies. However, there has equally been no shortage of failure to deliver the promised benefits.

We work with many leadership teams who are concerned about ongoing strategic drift, when the organisation’s reality seems to diverge from the carefully crafted objectives. Furthermore, new services which promised to deliver great value, don’t create the desired outcomes – ensuring teams maintain quality at the right margin seems harder than ever imagined. The level of stress in the system rises and a return to the old ways of working creeps back in – again compounding the strategic drift.

How, then, can you configure your business to deliver a new way of working that sticks?

Our belief is that you can achieve this through a new approach to operating model design. A successful operating model makes it easy for a business to deliver its service proposition and business strategy. This leads to enhanced experience for both customers and employees with increased revenues and margins.

Six key elements of operating model design

Research indicates that there is a huge amount of information around the significance of different business elements when designing an operating model. However, much of this is based on individual project data, or even hearsay. Our extensive experience in the design and implementation of operating models demonstrates that there are six crucial elements to consider; the list below provides some questions for you to consider:

1. Customer experience
   What is the true journey our customers take, and how can we reduce customer effort?
   What does the customer expect of us, and how are we achieving this?
2. Journey and process
   How do we create value along the value stream in line with the service proposition?
   How do we build processes for effectiveness, efficiency, completeness, stability, simplicity and control?
3. Locations, functions and teams
   How do we distribute sites and the work organisation of teams at each location?
   How do we integrate and hand off between teams, partners and suppliers?
4. Technology and infrastructure
   How do our information technology and facilities support the creation of value?
5. People, culture and organisation
   What are our peoples’ capabilities to create value for our customers and teams consistently?
   How does our culture support our capability and performance?
   Is our organisation structured to deliver value and efficiency?
6. Management framework
   How are we led and motivated to drive value and improve?
   How effectively are decisions taken and how do we manage risks?
   Are the key areas of competitive capability being measured and managed?

A well designed operating model incorporating the above elements should make it much easier for the business to deliver the service proposition and the business strategy. The design should maintain competitive capabilities, whilst building flexibility into areas where future change is most likely.

The criticality of alignment

As important as the individual elements are, they are only effective if they align with the overall strategic intent, the proposition, and critically – each other. In fact, if they are opposed, this can be hugely destructive to your business.

Our conflict matrix assessment compares each element of operating model design against each other, running through a series of questions to reveal which areas are restricting your efforts.

In the example below, the red assessment highlights a serious conflict between people, culture and organisation and service proposition, which should be addressed in an immediate exceptional review. An amber flag indicates that a conflict between management framework and journey and process should be addressed at the next review.

We call this a “conflict matrix” rather than a “harmony matrix” because it identifies key conflicts in the way of providing effortless service proposition delivery. Businesses need to regularly adjust strategies and service propositions to deal with competitor or regulator activity – so a focus on perfect alignment can become a barrier to flexibility.

In the current climate, it is every leader’s dream to be able to point their organisation in the direction of their new strategy and to deliver rapidly on their objectives. We believe that our approach provides the solution to delivering your competitive advantage more effectively than ever before.