The more work I do on operating models and organisation structures, the more I focus on creating good design principles. For example, at a recent workshop in Brisbane (just showing off that I have a global client base!), I spent a couple of hours with the group developing design principles towards the end of the first day of a two day workshop. Overnight I worked on the wording and edited down the list to 6 or 7. We then spent another hour, first thing, to get consensus and clarity …. before working on options.
So I was interested to come across an article by Marcia Blenko and colleagues from Bain & Co on design principles. They argue that there are two sources of design principles:
– Strategy: “Design principles must specify strategic requirements that the operating model must support”.
– Current operating model: “They also pinpoint aspects of the current organization that could hinder the future strategy and therefore must change, as well as organizational strengths that should be preserved”.
They provide a list of places to look for design principles. Under strategy, they suggest:
1. Ensure focus on …. areas of particular importance to the strategy such as growth areas or sources of advantage
2. Facilitate the making of ….. decisions that are important to the success of the strategy. They may be about new product choices or pricing or which contracts to bid on.
3. Enable important …. linkages across geographies or functions or lines of business. This could be about shared sales forces or coordinated product development or economies of scale in manufacturing.
4. They have a fourth item about capabilities, but, for me this is really a combination of the first three: a “capability” is normally a source of advantage that requires good decision making of a certain type and often involves complex links across the organisation.
Under operating model (they are a little biased towards organisation model), they suggest:
1. Reinforce ….. strengths such as “ability to get insights from being close to the customer” or “low cost from Asia sourcing”. As you spotted, there is again an overlap with the idea of capabilities and sources of advantage.
2. Reduce …. weaknesses such as “poor customer service from overloaded call centres” or “high costs due to complex organisation structure”.
3. Clarify the role of the centre …. in leveraging expertise and scale and …. in adding value. While I am a great enthusiast for “corporate centres that add value”, I am not sure why the corporate centre gets special attention in this list, especially given point three under strategy above. One of the outcomes of a good operating model is clarity about the role of all units in the structure.
Of course it is easy to critique the work of others, especially if one does not fully understand it! But, my critique is meant to be a compliment: it is one of the better articles on design principles that I have read.
They go on to list some features of good design principles
1. They are grounded in facts
2. They pass the “dog food” test: meaning that they are not so general that they could equally apply to a dog food company (unless of course you are a dog food company!)
3. They are brief not more than 6 or 7 …. well occasionally stretching to 10.
Here again, I like the thoughts but feel there is more to say. For example, design principles should constrain the design options: they should articulate a choice between alternatives that are reasonable. So the negative of the design principle should make sense as well. Let me illustrate this with an example from their text.
“ensure that how we go to market makes it easy for our distributors to do business with us”
The negative of this statement “ensure that how we go to market makes it difficult ….” makes no sense. So what is a better statement?
“ensure that it is easier for our distributors to do business with us than with our competitors even if we need to add cost and investment in this area”
The negative here is more complex. It could be “easier than we are now, but not as good as competitor A” or “.. only if it does not add cost or investment” or …. In other words, the negative has some meaning.
I am confident that this rewriting of the statement is what Bain consultants meant by the first statement … but it is always good to spell out the trade offs you are making and the level of ambition that you have.
Writing this blog makes me think that I should say more on design principles. You can access what I have already said by clicking on “design principles” in the category navigation on the right or by following these two links
– Understanding design principles
– Design Principles: How do you get good ones