What should business leaders do when current ways of working no longer work? Massive shifts in technology and customer expectations have convinced many companies their business models will require a fundamental overhaul in the near-term, whether in the form of creating new products or services, or developing entirely
Extent to which an organization’s primary business activity will transform over next 3 years
When this level of change is required, piecemeal investments in new technology or talent won’t be enough. Organizations need to update their internal design, to enable the execution of new strategies centered on delivering customer value. Old operating models need to be upgraded so the enterprise can adapt, and thrive, in volatile digital conditions.
Perpetual motion: The digital operating model in action
Business strategy
Customer value is often framed as an end-goal. But in a digital-ready operating model, it’s the primary consideration and permeates every process, from technology to governance and portfolio management. Business leaders can set the tone by basing strategic priorities on the outcomes the enterprise is seeking to deliver for customers, rather than internal considerations like revenues or ROI. It’s also vital that those priorities are concrete, clear and broadly communicated.
“There are three big questions an operating model needs to solve or answer. How do we work? How do we invest? And how do we adapt fast enough?”
Jim Highsmith, Executive Consultant,
Portfolio management
In a customer value-aligned operating model, decisions on which products or solutions to invest in are based on what the enterprise hopes to help the customer achieve. The many possible paths to this outcome can be pursued as a series of portfolio ‘bets,’ each of which can be given to teams to carry out with clear measures of success. This requires a tolerance for risk and team autonomy, as well as a willingness to let go of traditional metrics. But the tradeoff is the ability to explore a range of potentially groundbreaking possibilities, and create a foundation for product innovation.
strategy in a lean enterprise
Product architecture and agile delivery
Modern digital businesses base product roadmaps on customer needs and pain points - not what’s dictated by the market. The operating model should be designed to ensure customer learning is a constant from the earliest stages of development, and factored seamlessly into future product iterations. For many enterprises this will necessitate a degree of technological change - as well as occasional discomfort when customer views are more transparent. Yet organizations will often perform better as a result.
Total return to shareholders for companies with above and below average customer satisfaction scores / %
New models of leadership
New operating models need to be supported by new forms of governance. Business leaders should grow comfortable with shifting more decision-making to customer-facing teams, and change their vocabulary to reflect the enterprise’s new focus on customer outcomes rather than traditional performance measures. Above all, leaders need to be storytellers - because people at all levels of the organization will need to be empathetic to customer concerns and inspired by the value they have a hand in creating.
“One skill that’s really under-invested in and under-recognized is the ability to tell stories. The art of storytelling can override innate resistance and get people excited, and that’s really needed for a lot of leaders that are trying to make this shift.”
Linda Luu, Product Strategy & Portfolio Management Principal,
Ensuring operating models evolve
A revitalized operating model can do much more than digitize existing workflows and product lines, or enhance the enterprise’s resilience. By establishing feedback loops that ensure knowledge of customers and the focus on value filters into strategic decision-making, it can create the capacity for continuous reinvention that the current business environment demands, by pointing the way to new opportunities and fostering deeper engagement with the customer base.
“The only competitive advantage any organization will ever have is their ability to learn a little bit faster than their competitors. In the future, that’s the secret weapon.”
David Robinson, Business Transformation Principal,
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