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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.

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.

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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.

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.