I was looking at the Wilson Perumal website today. This consulting company has some useful blogs … and thirteen on operating models. I particularly liked one titled “Are you overlooking an essential part of your strategy”
The article states “When most people think of strategy, or the allocation of scarce resources, they focus on the external strategy—which customers to serve in what markets with what portfolio of products at what price points and with what supporting service levels. However, equally important, but often overlooked, is a company’s internal strategy or Operating Model—the coordinated collection of business & production capabilities, organization structure, assets, people, technology, partnerships and governance used to effectively deliver the market strategy.”
The article then includes an exhibit showing the role of an operating model in the journey from strategy to excellent outcomes.
This exhibit got me thinking. Is operational excellence all you need to turn “Sound Strategy” (a good market strategy and a good operating model) into “Leading performance”. My conclusion is no.
My reasoning is as follows. When you have a new strategy, you need to develop a new target operating model to deliver the strategy. I agree that both of these are needed for a “Sound Strategy”. I also agree that too little attention is given to the target operating model in most strategy processes. But even with a “Sound Strategy” you still only have a set of ideas and plans on paper. To create the target operating model, you need a transformation process, consisting of a set of projects that will convert your current operating model to the target.
Once you have implemented the new target design, you have not yet implemented the strategy. All you have done is set the organisation up so that it has the structure and capabilities and processes and …. that it needs to implement the strategy. You still need to run the organisation well (“Operational Excellence”) to deliver the strategy.
In other words, I don’t think Wilson Perumal have got this quite right. My equations would be
Market Strategy + Target Operating Model = Sound Strategy
Sound Strategy + Excellent Transformation = Sound Organisation
Sound Organisation + Operational Excellence = Excellent Performance
What do you think? Please comment.