have you got what it takes to redesign your operating model?

Interview with Andrew Campbell

Why did you decide to write ‘Operating Model Canvas’?

Exploring, teaching and writing about operating models was an obvious journey on from the work I had been doing on organisation design. A lot of what I taught as organisation design included topics that are typically part of operating model design. Also, ‘Target Operating Model’ was starting to make its appearance as a fashionable new term. This caused me to launch a course on Operating Model Design. Writing the book was the obvious next step. I wanted it to be practical, similar in format to ‘Business Model Generation.’

Before reviewing and potentially redesigning an operating model, what needs to be in place?

A clear strategy, or in other words, the business model. You need to know who your target customers are, what services you want to offer them and what your owner requirements are. These form the basic building blocks of your strategy and the input to the operating model. The operating model describes how you are going to deliver your strategy.

What do you think the biggest challenges are in implementing a new operating model?

There are different challenges at the three different stages. The stages are: design, transform and run.

At the design stage, you need to get the strategy clear. What are you going to do better than others? What are you going to say no to? What is going to be your stable core offer and what are you going to experiment with? What specialist input do you need from other functions?

Then, I’d say don’t get lost in the detail. My book is deliberately designed around creating a high-level operating model: the canvas. Start by turning strategy into design principles, then create the canvas and then after that, you can add more detail, but get the overall canvas right first.

During the transformation stage, the biggest challenge is in changing behaviour and having the courage to change people. Project management is always a challenge. Knowing what changes to sequence when is tough, especially because you will want to experiment early on to check that you are on the right track. There will also always be political forces trying to stop you.

During the run stage, it’s important to realise that nothing is ever static: your customers and their needs will change; the technology will change. You will have to be prepared to be flexible.

Is an operating model ever done?

Nothing’s ever done, but there can be periods of calm. For a lot of companies, they’ll regularly tweak their operating models, but 80% will be the same for 20 years. It’s good to think creatively about your strategy and your operating model, but it’s also good to provide some certainty; let things settle and find their rhythm before moving on.

We’ve seen a lot of interest from clients recently asking for operating model help. Have you seen a similar rise in interest?

Yes, and I think that’s largely down to two reasons. Firstly, the rapid advances in technology meaning that people are being forced to think differently about how they get stuff done and secondly, the increasing pressure to reduce costs in a competitive world: managers are looking for new solutions and seeing a closer link between strategy and operations than before.

Who do you think owns the operating model?

I don’t think anyone does and that’s a problem. At the high level, strategy does, but the different boxes on the canvas are owned by different people. The Chief Operating Officer would be an obvious candidate for the job, but a bit like organisation design, it falls between two houses. In the case of organisation design, those two houses are strategy and HR and for operating model, it’s strategy and operations. Quite a few companies now have a Head of Transformation, who is another possible owner of the operating model.

What do you think people find most difficult to get right in an operating model?

I would say linking processes to the organisation structure. How do you take all that good lean process work and then make the link to how the organisation subsequently needs to be structured and what capabilities it needs? Often, this is an issue of ownership and goes back to the question of who owns the overall operating model. Processes are often treated in isolation, the HR focus is often on implementing a design rather than figuring out what that design should be.

So people aren’t seeing the organisation as a system?

No. And I’d add that the other principal issue is linking processes to information systems. I wonder whether that’s partly due to the detail mindset within enterprise architecture: it can be hard to get enterprise architects to produce a high-level picture of what’s needed. The Canvas is a tool that should help them a lot.

What happens when functions design their own operating models?

Well, it can be a good idea to apply an operating model to an internal function, it doesn’t have to be organisation wide. For example, you can ask HR what their value proposition is, who their customers are and how they are going to deliver. And actually, that’s how it informally works: a CEO will expect each function head to devise their own operating model to deliver their part of the strategy. The trouble is that by developing functional operating models in isolation, the organisation doesn’t pull together, it starts to pull apart. You need an overall common framework, a shared blueprint – the organisation operating model. And beyond that, you need a leadership team with the capability to have healthy, visible debate and align themselves behind the common framework.

What’s your next book going to be?

Depending on the sales of this one, I might consider a similar style one on organisation design.

Andrew Campbell is Director of Ashridge Strategic Management Centre part of Hult International Business School. He does research, leads executive courses, such as Advanced Organisation Design and Designing Operating Models, and advises companies. He has authored more than ten books, the most recent being “Operating Model Canvas”.

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