Bangkok Post

When Weak Operating Models Happen to Good Strategy

When there’s a persistent gap between strategy and execution, the culprit is usually an obsolete or misaligned operating model.

Par Marcia Blenko, James Root and Nader Elkhweet

First published on avril 02, 2015
min


This article originally appeared in the Bangkok Post. Great strategy with poor execution often leads nowhere. A company may lack certain key capabilities to execute the strategy. A constant swirl of revision may hold back decision making. Product or geographical complexity may have outrun the organisation's ability to keep pace. So how do you jump-start stalled execution? When there's a persistent gap between strategy and execution, the culprit is usually an obsolete or misaligned operating model. Individual changes such as adjusting spans and layers may help, but an integrated solution will provide deep-seated, enduring change. Redesigning the operating model may be one of the smartest investments an executive can make. Our analysis of companies in eight industries and 21 countries finds companies with top-quartile operating model indicators — those with clear, robust operating models—have five-year compound average revenue growth that is 120 basis points faster and operating margins that are 260 basis points higher than for those in the bottom quartile. These high-performing companies have set up their operating models so that the main elements of the model—organisational structure, accountability, governance and ways of working, along with the right capabilities (people, processes and technology)—all work together to support the strategic priorities. Consider the remarkable turnaround at Ford. In 2006, new chief executive Alan Mulally not only set a new strategic path, he and his senior team also overhauled Ford's operating model. Ford moved from regional business units to a global functional model, setting the stage for more efficient and effective operations such as reducing the number of vehicle platforms. Governance and behaviour changed too as Mr Mulally pushed for more open debate and honesty about where problems were cropping up. He encouraged his team to simplify the way they worked, eliminating ineffective meetings and liberating thousands of unproductive hours. Thanks to a new strategy and an operating model redesign, Ford returned to profitability without a bailout from the American taxpayer. Many companies with superior execution have followed four practices that allow their operating models to adapt to rapid change in their markets... Read the full article at the Bangkok Post.

This article originally appeared in the Bangkok Post.

Great strategy with poor execution often leads nowhere. A company may lack certain key capabilities to execute the strategy. A constant swirl of revision may hold back decision making. Product or geographical complexity may have outrun the organisation's ability to keep pace.

So how do you jump-start stalled execution? When there's a persistent gap between strategy and execution, the culprit is usually an obsolete or misaligned operating model. Individual changes such as adjusting spans and layers may help, but an integrated solution will provide deep-seated, enduring change.

Redesigning the operating model may be one of the smartest investments an executive can make. Our analysis of companies in eight industries and 21 countries finds companies with top-quartile operating model indicators — those with clear, robust operating models—have five-year compound average revenue growth that is 120 basis points faster and operating margins that are 260 basis points higher than for those in the bottom quartile.

These high-performing companies have set up their operating models so that the main elements of the model—organisational structure, accountability, governance and ways of working, along with the right capabilities (people, processes and technology)—all work together to support the strategic priorities.

Consider the remarkable turnaround at Ford. In 2006, new chief executive Alan Mulally not only set a new strategic path, he and his senior team also overhauled Ford's operating model. Ford moved from regional business units to a global functional model, setting the stage for more efficient and effective operations such as reducing the number of vehicle platforms.

Governance and behaviour changed too as Mr Mulally pushed for more open debate and honesty about where problems were cropping up. He encouraged his team to simplify the way they worked, eliminating ineffective meetings and liberating thousands of unproductive hours. Thanks to a new strategy and an operating model redesign, Ford returned to profitability without a bailout from the American taxpayer.

Many companies with superior execution have followed four practices that allow their operating models to adapt to rapid change in their markets...

Read the full article at the Bangkok Post.