Less than 48 hours after our first article in this series went out, we saw the loss of thousands of jobs. Airbnb, 25% of the workforce fired, Virgin Atlantic 3000 people, and Uber 3700.
Companies will accelerate their way down the leadership curve over the coming weeks as Governments take away emergency support mechanisms. More people will lose jobs, and consumers will adopt a safety-first spending approach as they innovate their lifestyles.
Apart from the traditional techniques of cost reduction and shrinking the business, what can be done to deploy your assets more effectively rather than just retiring them?
We have been developing tools specifically for this purpose. Working with executives to get focus on their needs and vision, we can get companies up and running with new strategic solutions within four weeks.
Issues for the Corporate Transformation Journey
The transformation was already necessary prior to COVID and most companies were engaged in it. Three things we have observed recently, though:
Calling out partial success prematurely. The first is that leaders are moving fast to close transformation programs down by calling them a success. COVID has, for example, accelerated the move online and that’s a success.
Nothing wrong with calling out a success, of course, and some quick wins under COVID have been good for leadership morale. However, that takes us to our second point.
Missing out on the new operating model. All transformations aim at improving the existing operating model or using the popular term, seeking a new Target Operating Model (TOM).
The operating model (OM) is the actual form of their company, how all the activities it engages in hang together in an efficient and yet creative way.
A lot of transformations, however, fail to bring these models into sufficient focus. Executives typically don’t know how to align new business opportunities and new operating designs.
This was supposed to be the endpoint of the transformation journey and leaders are opting not to complete it.
Finding the right Operating Model for the right opportunities. The third point is that during the period of transformation, companies have done agile transformation without doing new value discovery and that’s why they are flailing around now. They’ve focused on agile without thinking “agile for what”?
What Do We Mean by an Operating Model?
Before addressing these issues, let's look at what we mean by an operating model. Look back thirty years and you can see the beginning of a new operating model that put supply chain management at the heart of company operations.
Coupled to the supply chain were new software systems like ERP that enabled global supply procurement, tracking, and payments.
That’s what we mean by new operating models. They are the arrangements, systems, partners, and propositions that define the way a business executes its day-to-day activities.
Around 1996 the new online world changed business operating models by enabling online sales and purchases, growing the use of external delivery partners in place of wholesale and retail.
These operating model innovations were relatively straightforward. They came with a clear destination. You pointed the ship and sailed towards them.
Today’s operating model changes have a less clear destination. But if they are unclear they are no less vital.
Seeking Rapid New Mechanisms for Viability
The context for OM change now is that COVID has also called into question the viability of some business models.
A few days ago, we published a table that shows the industries that will be most badly hit including, as we said in Wednesday’s article, all those industries that rely on attendance in specific venues.
Reflecting on that table, it is clear that to be viable, if you are threatened by Post-COVID retrenchment, means looking for new sources of value. But that has to be in the context of an improved operating model.
At the very least that model will involve working remotely, seeking more agility and better ways to innovate, fast. But it may also embrace relocalization, diversification of supply, creative ways to serve new customers, and taking out unnecessary cost
Flow’s transformation tools offer solutions to value discovery and the operating model design, bringing you unique methods to balance operations and opportunity.
Pushing for real completion. A transformation is not complete until you can discover and deliver new sources of value.
On Wednesday, we looked at how to overcome the challenges of value discovery without getting bogged down in MVPs:
Typically we create these new propositions in a very short space of time as we have already developed market segmentation in key areas of the economy such as financial services.
Learning the remodeling skills. So how do you use tools like these to continue your journey to the best operating model for your context? How do you make that model part of your growth and diversification story?
One tool for this is the Lighthouse Project we mentioned earlier. We find the best companies will initiate projects that have multiple internal and external impacts. And they will be a way to grow into the next phase of the OM.
Take for example the rationalization of IT infrastructure at Amazon in the early 2000s. Amazon didn’t just embark on a refit of its IT systems. It set out to learn how to scale IT as its e-commerce business scaled exponentially.
In other words, a lighthouse project allowed it to radically improve scaling efficiency as well as build a new business (AWS).
We design these Lighthouse Projects for clients as a way of scaling down their transformation programs so that they can skill up their capabilities in a new area that will become central to their operating model. They are also an opportunity to experiment with new ways to work.
The Lighthouse is not a pilot and nor is it a scrum project, prototype or an MVP. It is highly strategic.
That’s a very important point to take on board. We have seen MVPs create mayhem inside companies. Different parts of the business mean different things by minimum. And anyway, dozens of new projects are overwhelming.
Finding the right OM for the right sources of value. The Lighthouse is a tool for creating what we call a generative operating model.
OMs in the current climate have no fixed destination. You can’t convert your company to the Spotify Model or the ING model. You need to find out what works for you are each stage of change.
In other words, you need to generate an operating model through your value discovery and delivery activities. The Lighthouse is an important tool in doing this. It is a strategic design that encompasses your internal operations and ways of working, as well as your external face to the market.
What Flow teaches you is how to build up your remodeling skills by taking small steps with no great risk of project failure.
Flow codifies remodeling skills. It gives you the power to remodel an OM while creating new value. And doing those things quickly.