An Operating Model that Delivers

Every organisation that I have worked with around the world, whether it is in London, Johannesburg, Sydney, Singapore, Dallas, Kuala Lumpir, Las-Vegas, Nairobi or New York, there was always reference to a Target Operating Model (TOM) when business leaders spoke about business strategy and performance. Yes, the TOM – the ever eluding state of euphoria when all business operations work together in harmony to deliver the business vision… Sometime in the never reaching future.

Most business transformation programmes are focussed to deliver a target operating model – transforming the business by introducing a new way of working that better aligns the business offering with it’s customer’s changing expectation. Millions in business change budgets have been invested in TOM design projects and 1000s of people have worked in these TOM projects of which some have delivered against the promise.

With the TOM as the defined deliverable, the targeted operational state and the outcome of the business transformation programme, it is very important that the designed TOM are actually fit for purpose. The TOM also has to lend itself to be easily adjustable in order to contribute to the agility of an organisation. The way the business is operating must be able to adapt to an ever changing technology driven world. The quick evolving digital world is probably the main catalyst for transformation in organisations today – read “The Digital Transformation Necessity” for further insights…

Operating Model (OM)

The Operating Model uses key inputs from the Business Model and Strategy.

The Business Model focuses on the business’ customers, the associated product and service offerings – how the organisation creates value for it’s cliental – and the commercial proposition. Within the business model the business’s revenue streams and how those are contributing to the business value chain to generate profits, are decried. In other words, the Business Model envisages the What within the organisation.

Within the Business Strategy the plan to achieve specific goals are defined, as well as the metrics required to measure how successfully these are achieved. The business goals are achieved through the daily actions as defined within the Operating Model.

Typically an Operating Model takes the What from the Business Model in conjunction with the business strategy, and defines the Why, What, How, Who and With. It is the way in which the business model and strategy is executed by conducting the day to day business operations. Execution is key as no business can be successful by just having a business strategy, the execution of the operating model delivering the business strategy is the operative ingredient of success.

In order to document and describe how an organisation functions, the Operating model usually includes business capabilities and associated processes, the products and/or services being delivered, the roles and responsibilities of people within the business and how these are organised and governed within the business, the metrics defined to manage, monitor and control the performance of the organisation and then the underpinning Technology, Information Systems and Tools the business uses in delivering it’s services and/or products.

Analogy: A good analogy to describe the Operating Model is to compare it to the engine of F1 car. In 2016 the Mercedes Silver Arrow (the fastest car, driven by Lewis Hamilton (arguably the fastest driver), did not win because of engine and reliability problems. Instead the World Championship was won by Nico Rosberg, who had a better performing engine over the whole season. Nico benefited from a better operating model – he had the processes, data, systems and the people (including himself) to win. The mechanical failures that Lewis suffered, mostly not through fault of his own, were a result of failures somewhere within his operating model.

Target Operating Model (TOM)

The Target Operating Model (TOM) is a future state version of the Operating Model. To derive the TOM, the existing Operating Model is compared with the desired future state keeping the key aspects of an operating model in mind: Why, What, How, Where, Who and With. The TOM also cover two additional key aspects: the When & Where defined within the transformation programme to evolve from current to future states.

The difference between the “as is” Operating Model and the “to be” Target Operating Model, indicates the gap that the business must bridge in the execution of its Transformation Model/Strategy – the When and Where. To achieve the Target Operating Model usually require large transformation effort, executed as change & transformation programmes and projects.

ToBe (TOM) – AsIs (OM) = Transformation Model (TM)

Why >> Business Vision & Mission

What >> Business Model (Revenue channels through Products and Services – the Value Chain)

How >> Business Values & Processes & Metrics

Who >> Roles & Responsibilities (RACI)

With >> Tools, Technology and Information

Where & When >> Transformation Model/Strategy

Defining the TOM

A methodology to compile the Target Operating Model (TOM) is summarised by the three steps shown in the diagram below:

TOM Methodology
Inputs to the methodology:

  • Business Model
  • Business Strategy
  • Current Operating Model
  • Formaly documented information, processes, resource models, strategies, statistics, metrics…
  • Information gathered through interviews, meetings, workshops…

Methodology produces TOM Outputs:

  • Business capabilities and associated processes
  • Clearly defined and monetised catalogue of the products and/or services being delivered
  • Organisation structure indicating roles and responsibilities of people within the business and how these are organised and governed
  • Metrics specifically defined to manage, monitor and control the performance of the organisation
  • Underpinning Technology, Information Systems and Tools the business uses in delivering it’s services and/or products

The outputs from this methodology covers each key aspect needed for a TOM that will deliver on the desired business outcomes. Understanding these desired outcomes and the associated goals and milestones to achieve them, is hence a fundamental prerequisite in compiling a TOM.

To Conclude

An achievable Target Operating Model, that delivers, is dependant on the execution of an overall business transformation strategy that aligns the business’ vision, mission and strategy with a future desired state in which the business should function.

Part of the TOM is this Business Transformation Model that outlines the transformation programme plan, which functionally syncs the current with the future operating states. It also outlines the execution phases required to deliver the desired outcomes, in the right place at the right time, while having the agility to continuously adapt to changes.

Only if an organisation has a strategically aligned and agile Target Operating Model in place that can achieve this, is the business in a position to successfully navigate its journey to the benefits and value growth it desires.

renierbotha Ltd has a demonstrable track record of compiling and delivering visionary Target Operating Models.

If you know that your business has to transform to stay relevant – Get in touch!

Originally written by Renier Botha in 2016 when, as Managing Director, he was pivotal in delivering the TOM for Systems Powering Healthcare Ltd.

How to Innovate to stay Relevant

Staying relevant! The biggest challenge we all face – staying relevant within our market. Relevance to your customers is what keeps you in business.

With the world changing as rapidly as it does today, mainly due to the profound influence of technology on our lives, the expectations of the consumer is changing at pace. They have access to an increasing array of choice, not just in how they spend their money but also in how they are communicating and interacting – change fueled by a digital revolution. The last thing that anyone can afford, in this fast paced race, is losing relevance – that will cost us customers or worse…

Is what you are selling today, adaptable to the continuous changing ecosystems? Does your strategy reflect that agility? How can you ensure that your business stays relevant in the digital age? We have all heard about digital transformation as a necessity, but even then, how can you ensure that you are evolving as fast as your customers and stay relevant within your market?

Business, who has a culture of continuous evolvement, aligning their products and services with the digital driven customer, is the business that stays relevant. This is the kind of business that does not require a digital transformation to realign with customer’s demand to secure their future. A customer centric focus and a culture of continuous evolution within the business, throughout the business value chain, is what assure relevance. Looking at these businesses, their ability/agility to get innovation into production, rapidly, is a core success criterion.

Not having a strategy to stay relevant is a very high and real risk to business. Traditionally we deal with risk by asking “Why?”. For continuous improvement/evolution and agility, we should instead be asking “Why not?” and by that, introduce opportunities for pilots, prototypes, experimentation and proof of concepts. Use your people as an incubator for innovation.

Sure, you have a R&D team and you are continuously finding new ways to deliver your value proposition – but getting your innovative ideas into production is cumbersome, just to discover that it is already aged and possibly absolute in a year a two. R&D is expensive and time consuming and there are no guarantees that your effort will result in a working product or desired service. Just because you have the ability to build something, does not mean that you have to build something. Focusing the scares and expensive resources on the right initiatives makes sense, right! This is why many firms are shifting from a project-minded (short term) approach to a longer-term product-minded investment and management approach.

So, how do you remain customer centric, use your staff as incubators of innovation, select the ideas that will improve your market relevance and then rapidly develop those ideas into revenue earners while shifting to a product-minded investment approach?

You could combine Design Thinking with Lean Startup and Agile Delivery…

In 2016, I was attending the Gartner Symposium where Gartner brought these concepts together very well in this illustration:

Gartner - Design-Lean-Agile 2

Instead of selecting and religiously follow one specific delivery methodology, use the best of multiple worlds to get the optimum output through the innovation lifecycle.

Design-Lean-Agile 1

Using Design Thinking (Empathise >> Define >> Ideate >> Prototype) puts the customer at the core of customer centric innovation and product/service development. Starting by empathising with the customers and defining their most pressing issues and problems, before coming up with a variety of ideas to potentially solve the problems. Each idea is considered before developing a prototype. This dramatically reduces the risk of innovation initiatives, by engaging with what people (the customer) really need and want before actually investing further in development.

Lean Startup focuses on getting a product-market fit by moving a Prototype or MVP (minimum viable product) through a cycle of Build >> Measure >> Learn. This ensures a thorough knowledge of the user of the product/service is gained through an active and measureable engagement with the customer. Customer experience and feedback is captured and used to learn and adapt resulting in an improved MVP, better aligned to the target market, after every cycle.

Finally Agile Scrum, continuing the customer centric theme, involves multiple stakeholders, especially users (customers), in every step in maturing the MVP to a product they will be happy to use. This engagement enhances transparency, which in turn grow the trust between the business (Development Team) and the customer (user) who are vested in the product’s/service’s success. Through an iterative approach, new features and changes can be delivered in an accurate and predictable timeline quickly and according to stakeholder’s priorities. This continuous product/service evolvement, with full stakeholder engagement, builds brand loyalty and ensures market relevance.

Looking at a typical innovation lifecycle you could identify three distinct stages: Idea, Prototype/MVP (Minimal Viable Product) and Product. Each of these innovation stages are complimented by some key value, gained from one of the three delivery methodologies:

Design-Lean-Agile 2

All of these methodologies, engage the stakeholders (especially the customer & user) in continuous feedback loops, measuring progress and capturing feedback to adapt and continuously improve, so maximum value creation is achieved.

No one wants to spend a lot of resource and time delivering something that adds little value and create no impact. Using this innovation methodology and associated tools, you will be building better products and service, in the eye of the user – and that’s what matters. You’ll be actively building and unlocking the potential of you’re A-team, to be involved in creating impact and value while cultivating a culture of continuous improvement.

The same methodology works very well for digital transformation programmes.

At the very least, you should be experimenting with these delivery approaches to find the sweat spot methodology for you.

Experiment to stay relevant!

Let’s Talk – renierbotha.com – Are you looking to develop an innovation strategy to be more agile and stay relevant? Do you want to achieve your goals faster? Create better business value? Build strategies to improve growth?

We can help – make contact!

Read similar articles for further insight in our Blog.

Bimodal Organisations

The continuous push towards business improvement combined with the digital revolution, that has changed the way the customer is engaging with business through the use of technology, have introduced the need for an agility in the delivery of IT services. This speed and agility in IT delivery, for the business to keep abreast of a fast evolving and innovative technology landscape and to gain an competitive advantage are not just required in the development and/or introduction of new technology into the business, but in the way “keep the lights on” IT operations are reliably delivered through stable platforms and processes enabling business growth as well.

IT Bimodal

We can agree that once systems and solutions are adopted and integrated into business operations, the business requirement for IT delivery changes with IT stability, reliability, availability and quality as key enablers to business performance optimisation. There are thus two very distinct and equally important ways or modes of delivering IT services that should seamlessly combine into the overall IT Service Operations contributing to business growth.

Gartner minted in 2016 the concept of IT Bimodal – the practise to manage two separate coherent modes of IT delivery.

Mode 1: Focussed on Stability Mode 2: Focussed on Agility
Traditional Exploratory
Sequential Non-linear
Emphasis on: Safety & Accuracy Emphasis on: Agility and Speed

Each of the delivery modes has their own set of benefits and flaws depending on the business context – ultimately the best of both worlds must be adapted as the new way in which technology delivers into business value. Businesses require agility in change without compromising the stability of operations. Change to this new way and associated new Target Operating Model (TOM) is required.

Bimodal Organisation

This transformation is not just applicable to IT but the entire organisation. IT and “the business” are the two parts of the modern digital business. “The Business” needs to adapt and change their work style (operating model) towards digital as well. This transformation by both IT and “the business”, branded by Gartner as Bimodal, is the transformation towards a new business operating model (a new way of working) embracing a common goal of strategic alignment. Full integration of IT and business are the core of a successful digital organisation competing in the digital era.

The introduction of Agile development methodologies and DevOps, led to a transformation in how technology is being delivered into business operations. IT Service Management (ITSM) and the ITIL framework have matured the operational delivery of IT services, as a business (#ITaaBusiness) or within a business while Lean Six Sigma enables business process optimisation to ultimate quality delivery excellence. But these new “agile” ways of working, today mainly applied within IT, is not enough for the full bimodal transformation. Other aspects involving the overall organisation such as business governance and strategy, management structures and organisational architecture, people (Human Capital Management – HCM), skills, competencies, culture, change management, leadership and performance management as well as the formal management of business and technology innovation and integration, form additional service areas that have to be established or transformed.

How do organisations go about defining this new Bimodal TOM? – In come Bimodal Enablement Consulting Services in short BECS.

BECS – Bimodal Enablement Consulting Services

Gartner’s definition: “An emerging market that leverages a composite set of business and technology consulting services and IP assets to achieve faster more reliable and secure, as well as business aligned, solutions in support of strategic business initiatives.”

To establish a Bimodal enabled TOM, organisations need to architect/design the organisation to be customer centric, focussing on the value adding service delivered to the client/customer – a Service Oriented Organisation (SOO) designed using a Service Oriented Architecture (SOA). This set of customer services (external facing) should relay back to a comprehensive and integrated set of supporting and enabling business services (internal facing) that can quickly and effectively enable the business to innovate and rapidly adapt and deliver to changing customer needs and the use of technology within the digital era. This journey of change, that businesses needs to undergo, is exactly what digital transformation is about – not just focused on the technology, processes, quality and customer service, but on the business holistically, starting with the people working within the business and how they add value through the development and use of the right skills and tools, learning an applying it rapidly throughout the business value chain.

A customer centric delivery approach requires the development and adoption of new ways in which work are conducted – new management structures, building and enhancing A-teams (high performing individuals and teams, getting the job done), optimised processes and the right tool sets.

BECS must address the top bimodal drivers or goals, as identified by Gartner research:

  • Deliver greater IT value to the business
  • Shorten the time to deliver solutions
  • Enable digital business strategies
  • Accelerate IT innovation
  • Transform IT talent/culture/operations
  • Increase the interaction between business and IT
  • Embrace leading-edge technologies, tools and/or practices
  • Reduce IT costs (always a favourite)
  • Change the organisation’s culture

Take Action

Are you ready, aligned and actively engaging in the digital world?

Can you accelerate change and enable revenue growth with rock-solid service and business operations?

Are you actively practicing bimodal, continuously adapting to the changing digitally empowered customer demand?

The ultimate test to determine if you are bimodal: Every business process and every enterprise system needs to work without a blip, even as more innovation and disruptors are introduced to make the business more efficient and responsive.

It is time to be a bimodal organisation!

___________Renier Botha specialises in helping organisation to optimise their ability to better integrate technology and change into their main revenue channels – make contact today.

Related post: Success – People First; Performance ImprovementAGILE – What business executives need to know #1; AGILE – What business executives need to know #2; Lean Six Sigma; The Digital Transformation Necessity; Structure Tech for Success

The Digital Transformation Necessity

Listening to every keynote, panel discussion or reading articles relating to business sustainability through technology, one message is repeated over and over again – Digital Transformation is imperative for all businesses!

Although this message is coming through loudly, is it not always clear to business leaders and the workforce, exactly what digital transformation really is and what it means for their organisation.

In explaining digital transformation as the benefit and value that technology can enable within the business through technology innovation including IT buzz words like: Cloud, Automation, Dev-Ops, Artificial Intelligence (AI), Machine Learning, Internet of Things (IoT), Single Sign-On, Data Mining & Big Data, Bit Chain – does not really make the need for digital transformation any clearer.

One thing is clear though – we are living in a hyper-connected world where technology and more specifically, digital devices, are the glue linking together people and information in new ways we can hardly comprehend. In this statement, is the clue of what digital transformation entails…

What is digital transformation?

We can define digital transformation as the fundamental changes in the manner in which business and organisational operations are conducted, to adapt to the changes and to leverage the opportunities, caused by the use of digital devices and their accelerated impact on the way we live.

Digital devices, operate on digital signals running through electronic circuits to collect, store, manipulate, interpret and display information. These digital electronic integrated circuits (ICs) evolved since 1947, when the functional transistor was invented, into what we know today as computers. All digital devices are, at its core, a computer of some sorts used by humans to interact with information.

Transformation on the other hand implies a fundamental change in the way things used to be (converting something from one state to another) – it enables new creativity and innovation inspired by technology evolution, bringing change that introduces a new way, a different way to do things, rather than just enhancing or improving an old or current way.

To simplify it, you could say that digital transformation is the profound changes in the way business is conducted, to adapt to the changes in society caused by the continuous evolvement of computers.

A typical example of digital transformation is the “paperless office” – fundamentally changing the way we preserve information by storing it in digital format rather than writing it down on paper. This concept has profound implications in our commerce interaction expectations if you are comparing the speed in which information can be recalled and processed through digital means vs paper files, archives and libraries…

Who should lead the Digital Transformation?

Computers are hardly breaking news anymore as it is widely used within business where technology has become an integral enabling part of any organisation. Modern digital devices i.e. tablets, smart phones, the IoT, smart watches and other smart wearable devices, are changing the way we live and interact in commerce and hence the way we, as the consumer society, expect business to be conducted. Digital transformation is thus more about the change in business operations – processes and systems – than just the adoption of new technologies. Due to the importance of technology in organisations and the key role IT plays in the organisation’s ability to adapt to the society’s changing needs, it is the role of the CIO to lead the Digitial Transformation initiatives.

Digital Transformation matters because…

Any business change is costly and businesses might avoid change, for that very reason. Howard King of The Guardian, (Nov’13) puts it this way: “Businesses don’t transform by choice because it is expensive and risky. Businesses go through transformation when they have failed to evolve.” He continues in saying that evolving businesses never necessarily need to transform as they are continually focussed on their clients. This evolution ensures the key drivers of transformation namely: changing customer demand, changing technology and changing competition, never coincide in such a way that the business operating model can no longer service it’s customers. When it does, the business reaches a tipping point that requires transformation within the business, to adapt and re-align or tip over the edge.

The pace, at which digital devices have evolved, changed the way we interact with information and has become an intrinsic and material part of daily live. This has left organisations, which did not evolve with the technology, at a tipping point. For businesses approaching or reaching this tipping point it might be too late to evolve and hence Digital Transformation becomes a necessity for survival.

Emerging, disruptive technology driven, companies are changing industries leaving competitor companies with one choice – adapt, through digital transformation, or face the consequences of slowly loosing market share and eventually…

What does a typical Digital Transformation strategy involve?

As every organisation delivers their products and services (the value proposition to it’s clients and customers) in a different way, so will the digital transformation within one company differ from the other.

To define a transformation strategy and the associate change programme, one must look at the value chain of the organisation. Each element within the value chain can, and in most cases must, contribute to the scope:

  • Infrastructure
  • People – Leadership and the overall Workforce
  • Technology
  • Supply Chain
  • Procurement
  • Operations
  • Manufacturing (Engineering)
  • Fulfillment
  • Marketing
  • Sales
  • Service Delivery
  • Business Market (Client’s & Customers)

For each of the business value chain components, one must question the impact of the key transformation drivers:

  • Change in Customer Demand
  • Change in Technology
  • Change in Competition

Understanding these impacts will outline what needs to change, which generally comes down to:

  • Transform the Customer Experience
  • Transform the Operational Processes
  • Transform the Business Model

Note that IT is not singled out in the above – this is because IT is the catalyst that should overall enable these transformation initiatives.

The following examples of Digital Transformation Frameworks can also be helpful in defining the strategy:

Change brings uncertainty… Address it!

Transformation, by definition, brings change and a typical digital transformation programme will dramatically change the organisation. This change will especially affect a key business asset within the value chain – the people working within the business – “Success?.. People come First!”.

It will also dramatically effect, if not completely change, the organisation’s culture. Culture comes from the top – make sure that the board and executives are promoting the transformation and are willing to change themselves, as change is always desired until it is required of one-self.

Empower the workforce to understand the reasons why transformation is needed. Involve everyone to actively contribute to the innovative rethinking of their roles – how does digital technologies impact their daily work experience? Articulate the core business focus (what is the value proposition to the clients and customers) and ask, how can enabling digital technologies be used in support of achieving value excellence?

Find ways to make the necessity of the change a positive win for everyone, as supporting the people through the transformation is just as important as the digital technology you are trying to embrace.

To Conclude

Digital organisations outperform organisations doing digital – making Digital Transformation the last survival action for organisations that have not evolved with digital technology.

Transformation is a dramatic change and hence must the people aspect and business culture be treated with extreme care and sensitivity. A strong CIO is needed to drive the transformation programme with full buy-in from the rest of the executives and the whole workforce.

A well executed digital transformation strategy will re-align the business with the growing digital demands of it’s customers, by addressing the needed adoption of technology innovation across the business value chain resulting in an agile business ready for a fast evolving digital future.

Let’s Talk – Are you looking to achieve your goals faster? Create better business value? Build strategies to improve growth? We can help – make contact!