5 Benefits of an architected Target Operating Model

Every single organisation, whether a commercial, non-profit or government body, has an operating model. For as long as there is purpose for an organisation to exist and deliver results, it will be organised in some shape or form around structures, procedures, processes and similar. The operating model concept is not limited to organisations of, or above, certain size. Even if a company consists of just one single person, it already has an operating model in place with certain way things are done and results delivered by that organisation. Another single-person organisation will have a different operating model, because its raison d’être and objectives will be different, and even if not, the person in charge will have a different view on how they should be achieved.

An operating model, in other words, is the cornerstone organisational tool for a company, or indeed any  organisation, to realise its purpose and deliver results (whether financial or not).  As any knife cuts cleaner when it is sharp, so do results delivered by any organisation are better when its operating model is thought through, or architected.

An operating model is a bridge between strategy and results
An operating model is a bridge between strategy and results

Most organisations’ operating models today have evolved as the result of organic evolution of their respective organisations, with all inconsistencies and idiosyncrasies that it entails. Organisational resistance to change is the subject of many scientific reports and empirical observations, and abilities of many current operating models to deliver maximal results are thus negatively affected by redundant processes, accountability ambiguity and/or turf wars, to mention but a few. This baggage is rapidly becoming an unbearable deadweight given today’s dynamic market environment.

In contrast, an architected operating model – that is, a model that has been especially developed and fine-tuned for an organisation in line with its strategic priorities – will have two distinguishing features:

  • It will have a clear target state when the results expected by its strategic direction are at at their maximum. This is when the operating model will be most lean and efficient in delivering organisational purpose and objectives. Naturally, a plan of getting from a present state to the future target state is part of the model’s architecting process.

  • It will be optimised for the organisation in question. Operating models are not directly transplantable as no two organisations are the same due to their values, culture and shared experience. Effectiveness of the target operating model will be enhanced immeasurably by this optimisation.

Such architected operating model will be the sharpest tool fit to deliver on organisational strategy and its purpose. It will contain a number of clearly defined and described elements – organisational makeup, supplier relationships, location mapping, information flows, decision grids and management systems – for all to follow in a transparent, open manner.

Hand on heart, does your organisation today have such an operating model in place? Does it realise the best result it could? If not, it is high time to take action and pull your strategy and operational model together. Dynamics of the today’s market are such that speed is of the essence.

Experience shows that architecting your organisation’s operating model can bring a number of significant benefits. Some of these will be lower hanging fruit such as immediate savings from rationalisation. Others will be longer-term, enhancing organisational culture and accountability. All these benefits can be grouped as follows:

  1. Improved business performance and cost reduction. Clarity of who does what and where leads to dramatic reduction in duplication of efforts, faster dissemination of available knowledge and more efficient resource allocation globally and locally. Better coordination based on clear procedures and authority grids makes for faster decision making.  Transparent delegations of authority decrease likelihood and severity of risk and make its management more effective.

  2. Better connection with customers/clients and/or beneficiaries. An organisation with clear internal organisational structure, procedures and decision making transparency is less focused on resolution internal conflicts and more on its clients and/or beneficiaries. In an architected operating model oriented on service provision, metrics such as client retention and offer cross-/up-sell invariably improve.

  3. Ability to adapt to dynamic market. A lean organisation in tune with market changes and unencumbered by ‘the way it has always been done’ mentality is better able to see available opportunities, innovate and react on them in real time.  In addition, such company can scale its operations and support functions up or down much faster, thus increasing its reach or saving precious resources as and where needed.

  4. Responsive connection with suppliers and supplier rationalisation. A major part of an optimal operating model is focused on supplier optimisation, whether consolidating purchasing power, streamlining catalogue or entering outsourcing arrangements.

  5. Increased employee engagement and trust in their leadership. A well communicated operating model puts everyone on the same page and clearly connects strategy with expected results in a way that makes every team member understand his or her role in achieving desired objectives. People connect with organisations much better when they understand their contribution and the damaging effect of power hoarding is removed.

According to Jack Welch, “an organisation’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage”. An architected target operating model is the backbone of this ability.

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Does this article resonate with you? I would like to hear what you think – you are welcome to leave a comment or send me a message from my Contact page.

This article also appeared on the www.architectureofbusiness.com.

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