Next Generation Operating Models
Over the second half of 2020, LEF set out to understand how organizations were revisiting their operating models in the wake of COVID-19. The pandemic has punctuated the transformation to the digital era, providing a before-and-after marker along the digital journey that organizations are undertaking, though in most cases reluctantly.
We undertook this research on Next Generation Operating Models (NGOMs) with the goal of contributing something new to this domain. As any ten-second Internet search will attest, there is no shortage of opinion, fact, myths and misinformation on the topic of operating models available to you: Googler beware! Our goal was to identify the gaps in this prolific coverage, and to fill those gaps with the best-available and most-timely feedback from your peers who to are struggling with this very topic at this very moment.
With this in mind, LEF interviewed dozens of CxOs across a wide range of industries and geographies to answer a compelling question: Are you rethinking your existing operating model, and if so, why? The results of this research may be surprising to some, expected by others, but likely useful to all.
Six compelling themes emerged from the research:
- Shift from atoms to bits. Digital transformation is not as mysterious and unobtainable as some may believe. Rather, it is a shift away from using atoms to deliver atoms, and towards using bits to deliver bits.
- Structure is largely irrelevant. How you organize your people is less important than what you have them do and how they do it. However, Conway’s Law suggests that simpler is almost always better.
- Know your goals. Are you trying to be more efficient, more effective, or more explosive? It’s difficult to be more than one at any one time – and critically important to know which one you are seeking.
- Right people, right roles. As we grow increasingly digital, leveraging human abilities as an input to production is increasingly critical, and challenging. This means understanding both what roles need to be played and who best can play them. Get this right and you’ll find success; get this wrong and no amount of technology or investment will prevent the ensuing distress.
- Time is the new denominator of value. While Return on Investment (ROI) remains important, Return on Time (ROT) is a far greater determinant of value delivery.
- Flank your competition. The ubiquitous availability of customer and competitor data means fighting your competitors head-on is an increasingly futile task. Instead, use this information to go where your competitors won’t, and capture those customers that your competitors can't.
While these six principles are fundamental to creating an effective NGOM, we recognize that what you really want to know is what do I do about them? To this end, we set out the simple model of the Four Ds of proactive transformation, or Four Ds for short:
Provide constant, consistent, comprehensive communication of your organization’s goals, including the benefits from changing and the consequences of not changing
Ensure that your organization is funding the outcomes, metrics and behaviours that lead to your true end goal
Use disruptive metrics to achieve the disruptive results that you desire
Do it (action)
Focus on doing, rather than planning or analyzing
Using these levers effectively is the key to achieving actual organization change.
Using these levers effectively is the key to achieving actual organization change, rather than the mere appearance of it. This may seem empirically obvious, but it is not. As the data consistently shows, the perilous gap between those companies that are objectively achieving transformation and those that are not, grow deeper and wider by the day, and the window of opportunity for crossing that yawning chasm is closing fast.
Many thanks to those who participated in this research, as well as to my LEF colleagues who contributed so much insight, content and research into supporting its definition and development.