Under The Hood

Leading Continuous Digital Transformation

Continuous Business Transformation, Operating Model

Operating Model for Continuous Business Transformation

operating model for continuous business transformation

Around a two year ago, we began our journey to better understand:

  • Why organizations must constantly and quickly change
  • How organizations can successfully transform in a continuous manner

We quickly discovered that there are forerunner companies like Grundfos, the World’s leading pump manufacturer, that have transformed themselves many times over the years.

Read: Case Grundfos: No Separate Digital Strategy Needed

Marianne K. Knudsen, Senior Director and Head of Digital Commercial Offerings in Grundfos, reveals why it is necessary for the Grundfos organisation to transform itself from a conventional hardware giant into a company fully capable of delivering customised digital solutions alongside its world-renowned pumps.

While we were interviewing these successful companies, a striking fact surprised us in organizations which lagged behind.

There seemed to be a clear difference between the strategic goals of organisations that were being left behind and their organization’s capabilities. Although most of those organizations had developed targets such as customer focus or innovation in their strategy, their operating model didn’t support these new targets.

Similar results have been found in Accenture’s study. According to Accenture, 78% of executives think that their operating model is incapable of supporting their business strategy.

Operating Model and Strategy

Operating Model is a tricky term. It can mean both everything and nothing. Essentially:

An operating model is the bridge between strategy and day-to-day operations

In practise, an Operating Model is a high level presentation of how an organization can efficiently and effectively deliver its vision and strategy.

An operating model defines how People, Ways of Working, Data and Technology is used in daily operational situations.

Vision and Strategy steers the organisation in the selected direction. Vision and strategy answers the question WHY?

Business Model and Operations are what the organization does everyday to create and deliver value. Business model and operations answer the question WHAT?

Operating Model exists between strategy and business operations. Operating model answers the question HOW?

Operating Model for Continuous Business Transformation

Market and industry barriers have declined, primarily because of rapid technology development. The pace of decline is increasing and the operating landscape is evolving faster than businesses can naturally adapt.

This is why organizations must create an internal machine that not only constantly looks for new opportunities, but also quickly seizes upon opportunities.

C-suite and a top management team can create bold visions and then reorganize people based on the new direction. The sad fact is that around 84% of these kind of transformations fail (IBM 2017).

84 percentage of transformations fail

On the other hand, people doesn’t like these top-down changes and they have a demotivating effect at all levels of an organization.

A new kind of operating model tackles both of these challenges. First of all, the operating Model for Continuous Business Transformation frees up top management’s time so that they can concetrate on strategic work.

In addition, no top-down organizational change is needed. The organization makes the necessary changes inside out, making the likelihood of success much greater.

operating model for continuous business transformation

At the top of the operating model is the organization’s vision & strategy. People today expect organizations to communicate Purpose and Values .

Purpose is the greatest reason why the organization exists and why people are motivated to work. Like purpose, an organization’s Values guide people in their daily activities and decisions.

At the bottom of the operating model is the organization’s Business Model and Operation. As the business landscape changes more and more quickly, Business  must Continuous learn and improve, and also utilize Ecosystems.

Continuous learning means that a business needs to embrace new opportunities, every day. Continuous improvements modifies and rewrites business logic based on current understanding and knowledge.

Ecosystems is the new normal for every organization’s business operations. All organizations need to think about their position in new value chains and decide what ecosystems mean to them.

Feedback loop ensures that tacit and explicit knowledge is spread across the organization.

Between strategy and day-to-day operations are four layers of the Operating Model for Continuous Business Transformation: People, Ways of Working, Data and Technology. These layers ensure that the organization’s vision & strategy is delivered to the business model & operations and vise versa.

PEOPLE:

  • Talent Management
  • Roles and Responsibilities
  • Culture
  • Governance

WAYS OF WORKING:

  • Value Streams
  • Customer and Employee experience
  • Adopt, Adapt, Scale
  • Organisation

DATA:

  • Digital assets
  • Forecast and predictions
  • Trust
  • Security and privacy

TECHNOLOGY:

  • Business Technology
  • Ecosystems
  • Physical assets
  • Platforms

A new Strategy and Leadership Book including Operating Model for Continuous Business Transformation and much more will be published in 2020.  Stay tuned and subscibe to our newsletter for the latest insight!

This post is written by Timo Savolainen. You can contact him and follow: Linkedin or Twitter.

References:

Accenture, 2017, Four signs your operating model will fail, https://www.accenture.com/us-en/insight-outlook-four-signs-operating-model-will-fail

IBM, 2017, 84% of Companies Fail at Digital Transformation,
https://www.ibm.com/blogs/insights-on-business/oracle-consulting/84-of-companies-fail-at-digital-transformation/

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