An agreed operating model can be the difference between an aligned leadership team and a fumbled execution of strategy.
When the chairperson of a respected enterprise asked me to lead what can only be called a ‘restructuring rescue’ it quickly became clear that the board and management were not aligned on strategy. I pointed out that a consultant could not ‘lead’ the fix but could help the leadership team get on the same page so that they might take the organisation to the next level.
This situation is not unusual.
It isn’t uncommon to find that the apparent accord around a strategy is but a thin veneer, and below the surface there is a virtual maelstrom of conflicting assumptions. Yet there are real ways to deal with this issue, not least of which is the development of an agreed business model and getting the leaders aligned on an operating model.
Execution of a strategy
The real execution of a strategy must address the strategy itself, which outlines where to compete and how to win; and the business model, which addresses the basic building blocks of how the strategy is delivered. Osterwalder and Pigneur (2010) describe the business model as a blueprint for strategy, which means, at a minimum, describing your intentions around:
- Which customer segments you will target;
- What value propositions will attract those customers;
- Through which channels you will make your offer and service those customers;
- How the customer relationships will be maintained (e.g. through great products, great service, low cost);
- What resources are required to deliver on your promises;
- What activities will these resources, at a very high level, perform; and
- Which partnerships are needed.
It might all sound like common sense so far, yet frequently leaders don’t have a consistent view of these critical elements. Furthermore, most of the time the business model is still very conceptual and it is hard to execute on all the elements.
Agreeing to the operating model
While the business model stage is essential, it is not sufficient. Leaders can only truly be aligned when they have a common and agreed concept of the operating model. If the business model gives you the bricks to the house, then the operating model gives you the plumbing and electrical works. Without the operating model you can have an elegant-looking but non-functional home.
The operating model determines how you build real-value streams that practically deliver customer value. This means understanding:
- Which functions are necessary;
- Which parts of a value stream they deliver;
- Where the functions are located;
- How they are organised into structures;
- Which policy principles they should adhere to;
- What roles exist within those functions;
- Which processes go across functions;
- What technologies make it all work.
It is the operating model that staff really see and work with, for it defines the jobs they do, where they work, the technologies they use, and even to whom they report. The operating model takes strategy out of the cloud and brings it to life. The best way to get alignment is to be in a room together nutting it out with a skilled facilitator: start with strategy, move to the business model and finish on the operating model. An agreed operating model can be the difference between an aligned leadership team and a fumbled execution of strategy. Having a hypothetical operating model prepared in advance, which can be rejected or changed, can speed up the process. Leaders are busy, but they should never be too busy to work out where they are going.
By Roger Perry – CEO Bevington Group