How do you know when your Operating Model just isn’t working?

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Abz Adi

Managing Consultant

Picture of Alexandra Barbour

Alexandra Barbour

Managing Consultant

Redesigning the Operating Model of your company is frequently viewed as the “magic solution” to a wide range of issues. It’s likely that you’ve attempted several tactical interventions, but they haven’t had the desired effect, indicating a deeper issue that needs a more comprehensive solution. You might choose to go past the “as-is” assessment and begin working on the “to-be” design if you believe that an Operating Model Redesign will resolve these issues. Why waste time going over it again when you already know what the issue is? 

It may be appropriate to forego the “as-is” assessment, but doing so may also result in the loss of important data that would have helped with the creation of the new Operating Model. It is possible that redesign efforts may be prioritised ineffectively or will overlook the main problems you are trying to solve if you are unaware of the operating model’s present strengths and shortcomings. It’s possible that despite doing a tonne of work, it turns out to be just as ineffective as the other interventions you’ve attempted.  Spending some time defining the organisation’s core Value Chains, then assessing delivery against them, can be an effective way to understand the as-is without using up a lot of time. This provides you with some comfort that you’re concentrating on areas that require redesign without having to devote a large amount of time and money to a more involved project like an activity analysis or third-party spend review. (Both of which, given enough time, have a place!)  What is a Value Chain? A Value Chain is a collection of interconnected tasks that a business completes in order to provide goods or services. It is common for a company to have several value chains, including “enabling value chains” that are similar across industries for HR and finance, among other tasks.

It is best to concentrate on the core value chain, or chains, when utilising value chain analysis to quickly evaluate the organisation as it is, since these will be specific to the business model, value proposition, or functional output. These value chains ought to be the focus of the organisation’s main activities. If not, you’ve got a wonderful foundation for enhancing the operational model already! 

It should be simple to determine the core value chain: the majority of your work should be devoted to evaluating how well the organisation delivers the specified value. Important things to consider are:  

      • Which links in the value chain are functional, and which are not?  
      • What factors—process, organisation, people, information, and technology—combine to make some segments of the value chain successful and others less so?  
      • What operations exist that don’t advance the value chain?  
      • Can these activities be deprioritized, or are they essential but don’t bring value? 

This method of value chain assessment aids in identifying and prioritising the areas that require improvement through the creation of a new operating model. Additionally, it draws attention to organisational patterns that would go unnoticed if each function is evaluated independently.  

It’s important to keep in mind that applying merely value chains has certain restrictions:  

      • Frequently, tasks that are viewed as waste are in fact required by law or essential to another department of the company, therefore they must be taken into account as a component of the entire enterprise.  
      • Though you might be able to find some quick wins, it’s important to remember that creating and evaluating value chains still requires an initial time investment.  
      • There’s a chance you may overlook some more internally facing, but equally important company actions because you’re concentrating on the activities that benefit the eventual consumer. This implies that identifying the main problems or opportunities for improvement may require additional research. 
      • It’s often hard to adequately capture intangible factors such as organisational culture, employee morale, and external market influences, which can significantly impact operational performance. 
      • Finally, value chain analysis relies heavily on data availability and accuracy, which can be challenging to obtain in certain industries or within organisations with fragmented or outdated information systems.  

Value Chains are essential to the goal of the company that is being redesigned. Value chains serve as a framework for identifying areas in which an organisation performs well or could do better. This framework helps to quickly design better structures or methods of working while also helping to isolate the problem and determine whether it has to do with people, technology, process, or something else entirely. In order to lead to a more successful solution in the to-be, it provides a more detailed grasp of the constituent elements of the as-is.

Value chains and operating models are interlinked concepts that play crucial roles in assessing the current position and effectiveness of an organisation. A value chain represents the sequence of activities and processes through which a company delivers value to its customers. By understanding the value chain, organisations can identify opportunities for efficiency improvements, cost reductions, and differentiation. Operating models, on the other hand, define how these activities and processes are organized, managed, and executed within the organisation. They encompass the structure, capabilities, technology, and governance frameworks that enable the delivery of value. Assessing the as-is position of an organisation involves analysing its existing value chain and operating model to identify strengths, weaknesses, and areas for improvement. This assessment provides insights into the organisation’s current capabilities, performance, and alignment with strategic objectives, enabling informed decision-making and the development of strategies for future success. By linking value chains to operating models, organisations can optimise their operations, enhance their competitive advantage, and drive sustainable growth in an increasingly dynamic business environment. 

If you’re finding that your Operating Model isn’t delivering the results you need, it might be time to reach out to Finyx and seek expert assistance. Our expertise in Operating Models and Value Chains can help you to identify areas for improvement and implement solutions that will drive greater efficiency and success for your organisation. Don’t hesitate to reach out for support – it could make all the difference in transforming your operations for the better.  

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