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The Three Legged Stool
First, simply, it is necessary for leadership and organizations to pay attention to
all three parts of the operating model equally. Each aspect of the operating model must be independently strong;
but it’s also a matter of balance. One short leg means the stool is unstable. Often
senior teams do not give equal weight to all three in practice; while the parts may not demand
equal time, they are of equal importance.
The CEO, or the leadership team as a whole, has typically developed a greater comfort and
expertise in one component compared to another. Comfort is often influenced by the
functional business area out of which they rose up through the organization. Executives
with operating management experience are much more likely to appreciate the subtleties
and importance of business process and organization design. Today it is becoming
painfully apparent that many executive teams have vastly undervalued the critical contribution
of talent enablement. The point is that, most typically, some part of
the operating model is getting the short leg at the senior team table, and this is a risk.
Situation: A well-established industry leader faced serious
threats from players outside traditional industry boundaries, disrupting
established distribution channels and dramatically challenging their basis
of competition. The strategic overhaul this forced resulted in deep
changes to their operating model from product to distribution, including
internal competition between new and old business lines.
One Leg Short: It quickly became apparent that this bold new
competitive positioning would require leadership attributes and alternative
market experience that the current senior management simply didn’t possess. The
past
formula for talent would no longer suffice – but the new talent profile
required was not to be found internally. Post strategic plan, this
industry leader was already 18 months behind in its own markets, scrambling
to run in place, and now lack of sufficient leadership talent would realistically
delay execution by at least another year. Resource talent is now an integrated
component of their strategic planning. |
Right for Each Other
Another big part of what we mean by alignment is that components of an operating model must be right
for each other. Far more frequently than might be suspected, we see companies with components
that are independently strong but unfortunately mismatched to each other.
For example, companies competing on the basis of operational excellence require highly efficient
end-to-end processes; waste and deviance from the standard are the enemy; decision
making is generally centralized; team (not individual) performance drives the reward system. But
these same structural and behavioral components, even though well designed and executed, can actually
impede success in organizations pursuing customer-centric solutions. There, decision making
is best decentralized, close to the customer, encouraging more autonomous behaviors; depth of relationship
management, creative problem solving and nonstandard solutions are desired; individual rewards
are linked to share of customers’ spend and less to expense savings.
It is not always obvious that operating model components are wrong for each other, especially
in complex businesses with matrixed product, service and distribution structures crossing over
multiple organizational lines. At times we hear, “We have a clear strategy in the market,
very smart people, efficient processes, our scorecards are on target. We are doing all the
right things. So why isn’t this working better?” In retrospect, once
the misalignment is realized, the reaction is often, “Of course! Why didn’t
we see it?”
One reason it is difficult to see is that alignment requires shifting one’s focus to a different
field – to the white space and network of relationships between the strategy, structure and
behavior, where all the intersections and connections meet. Like a connect-the-dots game,
the picture does not emerge from the individual dots, but from the correct interconnections of
each to the other. |
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Balance in Motion
Up to this point, alignment has been described as static: strong components, a three-legged
stool, being the right fit for each other. It’s been some years now since companies could get away with
thinking of their operating models with singularity and as relatively stable over time. A model
designed for success 30 years ago might come unglued at the seams trying to run at the speed of execution
required today. It is apparent that we must understand operating model alignment in terms that
reflect motion, speed, multiple innovation streams and the necessity of change: a company’s
ability to move quickly, change direction on a dime, anticipate the environment ahead, set
the right timing and pace, and gain on the competition.
Balance on a bicycle is only achieved when in motion; design, speed and balance are all interdependent
and can only really be tested in action. The same is true of an operating model. The
only way to really know if it works is to get on and ride it.
They say you never forget how to ride a bike. Our bodies remember the feel of balance
that kicks in at just the right speed, with just the right shift of body weight to take a
curve. Many
skilled executives have developed a similar sense of “knowing” when it comes
to leading organizations and driving business results. They can feel when the organization
is top heavy, or execution is not in gear to take a steep hill; or, conversely, when growing
free and fast is spinning the organization out of control. Maybe it’s intuition. Maybe
it’s the result of the accumulation of years of experience. Whatever the source,
however it happens, this is a form of knowledge that is very difficult to describe to others
(some call it tacit). Basically, you know it when you see it.
Situation: A
profitable industrial company was run like a well-oiled machine, with seasoned managers
in place, experienced in driving operating efficiencies and leveraging assets, throwing
off enviable margins along the way. In the midst of apparent operating success, the
CEO rattled strategic cages, sensing their very success might impede needed flexibility.
Sensing the Problem: There were no tangible indicators here, but
this CEO sensed things were running too smoothly, and that was a seductive competitive
trap. He deliberately pushed the executive team to find new growth at and beyond
the edges of their core competencies, stretching them out of their comfort zone.
Through his push for external market growth the company became much more aware of
both overlooked opportunities and their potential vulnerabilities in the face of
possible industry changes. |
That CEO sensed something out of whack without personally seeing any obvious symptoms. Others
recognize it if they are not achieving expected business results. When business performance
lags the results expected based on the strength of the components, e.g., compelling strategy
or talent of individual players, the problem may lie in how various components are working
together in the white space to create balance or momentum. Clues can be found in the
underlying business drivers (product development cycle, number of products to market, complexity
in supply chain management and manufacturing) that lead to efficiency, customer satisfaction
and financial results. Equally important are qualitative symptoms of misalignment:
things like unclear decision making, infighting over political turf, lack of clear brand identity, or
high employee turnover.
With or without an intuitive sense of balance, more analytic methodologies can
be followed to assess alignment. Certain frameworks can provide a structured, rational
thought process to find the necessary alignment. Just as the
designs for tour racing bikes are different from the designs for mountain bikes, so the best alignment
of an operating model differs according to any number of factors, for instance, the stage of
the life cycle a business is in. What works for an established, cash generating business
line is different than what works for emerging business ventures requiring experimentation
and risk tolerance.
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