Operating Model Canvas – The Management System.

In previous articles we have given attention to parts of the operating model that describe how value is created and delivered to customers. Most of the tools we propose have given focus to tracking value creation though breaking down value delivery chains into their components and rationale in order to challenge how we do things and ensure everything is exploited in the best way to delivery customer experience.

A strategy is a product of assessing and responding to the external business environment with its identified opportunities and constraining forces created by legal implementation of controls that a society places on business. The so called “PESTLE” [1]elements influence the strategy and therefore appear in the value propositions that drive the value delivery chains that we use to get to grips with designing our operating model. Compliance to legislation is inherent in the strategic choices made and we see it in the value delivery stages as the activities conform to various sets of regulation.

Whilst customer value focus is laudable in any organisation it has to be delivered within a controlled environment to avoid financial chaos, or brand failure within the wider society. Organisations need direction in terms of managing strategy, its deployment and its effectiveness. Value delivery chains [2]are what most people identify as day to day operations but keeping those “business as usual” flows of value running in a well-co-ordinated managed way is also required.  This is what the management system is all about; it is the glue that keeps the firm together in serving its goals, stakeholders and vision. One could argue that this is about forces that constrain the day to operation.  The external forces manifest in two ways in the operating model: firstly in the strategy itself and secondly in those specific activities for implementing specific responses to external forces.

In the Operating Model Canvas [3]we see PESTLE emerging through propositions in the central arrow and to specific responses in management system bar. To illustrate the difference we might see a value activity in the central arrow being – undertake money laundering checks – whilst we might see – manage money laundering risk – in the management system bar. The first is a day to day process in the “value delivery activity”, the second a specific “management activity” to ensure it happens and consequences of non-adherence are managed via risk management.

Constraining or moderating forces heavily influence the management system; one could even argue that these constraints are really what the management system section is all about. The management system balances the operating model allowing the firm to be correctly controlled and behave within its business environment and within greater society.

Depending on the organisation type and size the impact on the operating model may be significant both in cost and effort.

Constraining Forces:

  • Corporate Governance
  • Regulation
    • General
    • Sector Specific
  • Corporate Social Responsibility.

Corporate Governance

Corporate governance is the system of business rules, practices controls and processes by which a company is directed and controlled. Corporate governance involves balancing the interests of a company’s many stakeholders, such as: shareholders, management, employees, customers, suppliers, financiers, government and the community.

Corporate Governance has a greater or lesser impact on an organisation depending on its size and its legal status. A small company can manage itself quite well with informal management systems and common sense, but beyond a few employees the overhead of good governance gets proportionately bigger. Keeping the firm well managed has a significant impact on operating model activities, creating work that potentially detracts from our earlier goal of creating customer value.

People in “Lean” call this type of work essential non-value-added activity [4]i.e. it adds no value in the eyes of the customer, but has to be done. The management system bar in our operating model is full of “essential non value adding” activity and we have to be careful that in the zest for the elimination of waste we don’t jeopardise good corporate governance.

Size is not the only dictating factor on the impact of corporate governance. A small proprietor led company has limited requirements beyond basic company law requirements; decisions are made and carried out quickly and relatively effortlessly; the more public the organisation becomes the more challenging the management overhead becomes.

A Public Limited Company has to adhere to Corporate Governance requirements to protect the public, investors who buy shares in the market. Structures are in place to control the behaviour of management to create balance between the goals of management and the goals of other stakeholders. Here we see non-executive directors and committee structures to enforce the balance that being “public” requires.

Public bodies have to provide transparency to tax payers and ensure that everything is done correctly step-by-step to clearly state processes and controls. There is little room for pragmatic decision making and entrepreneurial risk taking. Their governance structure may well include boards of trustees and political stakeholders – often the structures are complex and the processes slow.

Regulation

Regulation forms the basic minimum of management system requirements on the basis that you have to comply or get fined or closed down.

In the last twenty years or so regulation has increased substantially as society seeks to enforce ethical behaviours in line with developing social norms.

There are two categories of regulation: firstly general regulatory requirements that all firms have to obey and specific sector regulation designed to control specific sector risks to society; the sector choice impacts on the level of constraint and by definition reduces the flexibility of how you trade and operate.

It may well limit your ability to differentiate value for clients affecting the value delivery chains and the operating model that supports them. In some cases is may well force a firm to take a “cost leadership strategy” giving focus to efficiency rather than offering different things to clients because regulation forces players to trade in a  similar or identical way.

Some argue that industries like financial services are defined by regulation and this opinion is held up by the fact that in recent years the majority of change initiatives in the sector are regulatory driven projects.

Corporate Social Responsibility

All organisations are part of a wider world – society. What the organisation does and how it affects the wider world in its activities has become increasingly important.

The changing face of (CSR) and business ethics, with the growth in social media with an increasingly “sensation” hungry journalistic environment has, in recent times, created social pariah status for some iconic brands.

“The bigger the organisation is and the bigger its scale of social impacts on society as a whole, the more scrutiny it faces”.

These CSR stances taken by firms are often above and in advance of regulation in pre-emptive defence; as regulation frequently follows behind proceedings fixing problems after the event.

So, the bigger you are and the more public facing you are, the heavier the overhead of management processes within your operating model becomes. The choices made within this aspect of the operating model are a firm’s appetite for strategic risk and its social conscience.

The ethical stance and corporate social responsibility approach that the firm decides to implement in protection of its position in the greater society adds to the activities in its management systems.

Conclusion

The operating model canvas has a separate block for the management systems and this provides adequate balance with activities that provide value to customers.

It places management activities like: strategy making, constraints, risks, controls and measurement in a specific visible area to ensure the operating model serves all stakeholders and demonstrates how the operation conforms to the norms of behaviour expected within a modern society.

By splitting out the value delivery activities from management activities it ensures that the right proportion in focus is given to activities that create value for clients and warrants that the management overhead are understood. Customer centricity and good governance are clearly seen and identified and not mixed together in a muddle.

In a further article we will explore how to populate the management system section and what some of the views and outputs will be to describe this key section of the operating model canvas.

Authored by David Winders and Kiill Derevenski

[1] Political Economic Social Legal Environmental PESTLE

[2] Value Delivery Chains A composite term combining Value Chains and Value Streams see previous articles.

[3] A. Cambell et al 2017, The Operating Model Canvas, vanHaren, Netherlands.

[4] Synonyms: Sustainable Non Value Added Activity (SNVA) Business Non Value Added (BNVA)

Heat Mapping Value: identifying where to invest effort for Operating Model Design

Heat Mapping Value: identifying where to invest effort for Operating Model Design:

Kirill Derevenski and David Winders March 2018 operatingmodelpartners.com

In an earlier article we spoke about placing value delivery chains at the heart of a Target Operating Model.  We continue in this post with clear identification of necessary prerequisites for subsequent detailed operating model design using the Operating Model Canvas methodology.

What creates value?

For teams working on operating model design, identification of value delivery chains looks to be one of the easier tasks. From our experience, a much bigger thinking piece then becomes the understanding of what makes those chains actually deliver that value, and then what needs to be tweaked to ensure a delighted beneficiary. In other words, we need to build up a set of prerequisites that, once put in place, will assist the process of ensuring that the value is delivered efficiently and effectively.

The dry language of economics calls these prerequisites ‘inputs’. Contemporary business language is good at dressing things up in plethora of terms, but in the end we all know that the process of value creation works through a conversion of inputs into outputs. The inputs may be tangible as well as intangible, financial as well as non-financial, and conceptual as well as practical.

Value delivery chains used in Operating Model design contain six prerequisite groups or categories of inputs.  They cover the traditional economic factors of production whilst including new emergent value creation drivers. The six groups are (not in any prescribed order as this may well be different from organisation to an organisation):

  • People… This input group covers the: headcount, skills, experience, motivation, behaviours and job families available within organisational; human capital to help deliver value to the beneficiaries, as well as the organisation itself.
  • Physical assets… This input group includes material things such as: buildings, machines and resources that the organisation needs to create value.
  • Knowledge… This is one of the newer groups that emerged over the last few years, especially with the nascent shift to “Big Data Analytics” and the better management of dispersed knowledge inside organisations. This input group also includes intellectual property, research & development expertise as well as special differentiating abilities such as innovation or speed to market.
  • Technology… Another newer group has been made more important by the continuing focus on digital transformation. This input group covers a full spectrum of technologies from the back of the office applications such as ERP and accounting tools, to customer-facing apps and websites; with Cloud and the Internet in between.
  • Capital… This input group is for money. This input group may appear overly important for “bootstrapped” startups as opposed to established organisations. Whatever its apparent importance is, it is nevertheless paramount to keep an eye on capital prerequisites during operating model design in order to avoid negative impact on financial stability. An additional focus is that of cash flow because an operating model change can drastically affect working capital requirements and in turn financial survival.
  • Management/Processes… This is the most recent prerequisite group identified in contemporary management thinking. It stems from the fact that there may exist (or be needed) within an organisation a unique management process that would create a sustainable advantage when servicing customers. For example, if there is an organisation that after much effort managed to instigate a truly integrated CRM process across all of its business units, the place to boast about it is here. In recent years the recognition of the importance of corporate governance, transparency and a focus on the social responsibilities of business through heightened Corporate Social Responsibility (CSR) has led to a greater emphasis in management processes.

Let us have a look at a real life example of how understanding these prerequisites can be harnessed to drive value for beneficiaries (and organisations themselves). We will use the example of a premium bicycle shop called “Mes Ten Speeds”.

Mes Ten Speeds.

The shop is dealing in expensive machines priced over $1,000 to demanding customers, who are not always bicycle pros and so often need help when choosing a suitable bike.

The shop’s value delivery chain to new customers is straightforward. They sell bicycles in person through the showroom, or through their online shop. Some bicycles are held in stock, others need to be ordered. All bikes need preparation through tuning and accessories added prior to final delivery to the customer.

On the picture below, we map out the complete shop’s Value Delivery Chain covering all prerequisites for successful client engagement.

The value map for Mes Ten Speeds has four value stages in its value delivery chain. Each value stage is examined to see what things are needed to make the value happen using the pre-requisite group headings:  People, Physical Assets, Knowledge, Technology, Capital and Management. Taking each value stage step by step we can start to appreciate how value is created in this small business.

Sell

As the firm has both a web channel and a shop the people skills are varied needing both face to face selling attributes as well as roles with focus to procedures and logic for web offering design.

In the shop people who have an affinity with cycling and have people orientated personalities to engage with customer’s needs are really important. Open questioning and the ability to establish needs and match those to the products are essential in order to sell the right package to the customer. Often this results in up selling to ensure the customer’s real expectations are fulfilled and also the selling of accessories – cross selling- to ensure a fulfilled client experience.

Coupled with the correct personality traits is the product and sector knowledge that sales staff needs to be effective.

To undertake face to face selling and to present the bikes in a pleasant environment the physical asset of a spacious and well fitted showroom is required. The showroom has to have appropriate POS equipment technology and access to cycling databases to assist customers with making their choices. In the e-channel an appropriate e-commerce website has to be made available and maintained with payment facilities and customer service interfaces.

These physical assets need capital investment to put in place as well as working capital to pay sales staff, maintain stock levels   and income in cash to serve the interest on the investment capital.

Behind the scenes the management of stock, the purchasing of product and compliance with the usual regulatory constraints around data, finance, and health and safety of the showroom is needed. Integrating sales with ordering, preparing and delivering requires an integrated approach to make the customer experience successful.

Order

This value stage is about administering the sales and making it happen. The people in the store need attention to detail and focus, which forms part of the employee profile the firm seeks to recruit. In the web team their people need to understand process design and how to operate e-commerce functionality. In the latter case we need to have access to I.T. hardware for the web-server and underlying data bases whether this is in house or outsourced is a decision for later.

The business has built well defined processes to support ordering and these form part of their knowledge in the form of process maps and documentation and automated workflow for the e-channel. Stock management and knowing what we have in stock is essential to an effective ordering process. Keeping the appropriate inventory, whilst managing down working capital requirements, is a constant challenge for this business and through combining knowledge with capital management is a principle integrated management monitoring and control process.

Prepare

Preparing bikes correctly post sale is about setting up bikes for individual customers. In a specialist shop like this correct set up is what makes the reputation and is perceived by customers as a differentiating value item.

In order to prepare bike correctly we need staff with deep cycling knowledge to ensure saddle heights etc. are correctly set up for each and every client. Mes Ten have to have people who have the patience, duty of care, to ensure clients leave the shop with bikes are well prepared. The staff members that undertake this task have to have the training and knowledge to prepare bikes in a “best practice” fashion supported by manuals online guides and quality control processes.

The preparation team has to have measurement devices and test equipment to fulfill the quality required and his requires investment and the cost of paying good people to do this role correctly. To ensure cost effective use of these key staff the firm needs to plan its preparation and this is supported by knowing when customers are due to collect bikes and how much activity is needed through a well measured integrated: sales, stock and ordering management regime.

Deliver

The final value stage in the chain is the delivery or collection of the bike by the customer. Here the firm has to have the client success with the product in mind all the time requiring core skills of: patience, calmness, attention to detail with a philosophy of interest and care to ensure the client is well prepared for the road. The “training” mentality is a core trait identified in delivering this value stage.

Mes Ten have a test track so that the customer can try out the product and “iron out” any minor issues before leaving the store.

The employees who carry out this aspect of the business have to have the knowledge of how to operate the various gear changing technologies and how to advise customers on maintenance of new technologies such as hydraulic brakes and suspension systems.

This value stage also requires the measuring technology to finally ensure the bike is set up and fitted correctly.

This level of customer care has capital costs in acquiring the test track measuring equipment and the running costs of employing skilled staff. The quality control processes and scheduling of deliveries allowing quality time to be spent with clients is provided by an integrated sales, stock and order system. The success of deliver is underpinned by the organisational wide quality assurance   management programme and compliance with health and safety legislation to protect both clients and staff.

Heat-mapping value

Once the prerequisites are identified, heat-mapping is a useful technique to identify areas of improvement. It is important is to single out those prerequisites that are imperative to effective and efficient operating model and those that will really “move the needle” on the value generating scale.

This bike shop identified that they needed to optimise their operating model to further delight new customers whilst making sure that their financial stability is not negatively impacted.

By mapping their value delivery chain to the prerequisite input groups, using the experience and customer feedback, the shop owners quickly realised that significant value for customers (and themselves) was being lost.

On the graph above, key prerequisites per value delivery block have been identified and heat-mapped based on their severity, with those in orange and red needing corrective work.

  • In the Sell block, a major up-/cross-sell skill deficiency was observed with shop’s Sales Assistants. Rather than discussing intelligently customer needs and expectations and pointing out readily available options from the existing inventory first (perhaps of a different brand or component setup), they would simply turn potential ready-to-buy-now customers away.  The clients did not feel they were taken care of by someone who actually could “talk bikes” (this is a very passionate subject and a key customer value perception).
  • In the Order block, the absence of integrated stock management between the website catalogue and physical inventory in the shop meant that some items marked ‘immediately available’ online were not in fact there. In some cases the site recommended some models in lieu of waiting for delivery on others, thus creating disappointment and dissatisfaction. Again a similar issue of unhappy customers and unsold inventory.
  • In the Deliver block, too many customers kept coming back in the first two weeks complaining about their bikes with unfulfilled expectations. This was either because ‘they were not what they expected performance-wise’ or because something was ‘defective’; gears being a classic example with ‘the gear change being broken after just three clicks’ was heard on many an occasion.

On questioning customers to explore quality issues it was found that many riders were unhappy because the bikes were poorly fitted (i.e. rider height, reach and pedal cleat alignment not being properly setup). Due to insufficient joint delivery testing with the client, the shop had no way of knowing whether the mechanical fault was a genuine manufacturing defect or was a result of mis-use by the client. On reflection, the inappropriate use was perhaps because there was no facility for riders to practically learn how to change gears under shop supervision. What are needed are good pre-delivery checks coupled with product training to ensure all is well before the consumer takes the bicycle away.

Now that the bicycle shop knows what the value prerequisites are from new customers, what can it do to its operating model to make it better?

We will explore how Operating Model Canvas makes it easy in subsequent articles.

 

 

 

 

 

 

Business Architecture Financial Services Capability Frameworks: “Architecting the Obvious or Adding Value”?

Earlier today I read with interest a post on LinkedIn promoting a standard capability framework for the financial services industry. It comes from IRIS business architect, a company that has its thinking very much in line with the Business Architecture Guild. The capability framework it promotes looks to be seemingly a comprehensive well-thought through output.  Job well done no doubt.

I have seen this sort of thing before, but mostly in process model terms from people like APQC and Leading Practice.

At first glance a standard model seems sensible; why invent your own when someone else has done the graft?

On reflection I started to question the value of this approach based on the underlying message that it was giving out; that message being “A sector has a standard model”. A standard model of capabilities therefore means standard outcomes

If you are all the same then why do you create a capability model in the first place?

In essence this type of work it is to identify how your value chains add value to the customer linking capabilities, via value stages back to customer value delivery. This informs where to invest and concentrate ones effort in what adds value to the customer – highly sensible.

However if the sector has the same model in what it delivers where is the differentiation? Conforming to the same model forces you into commoditisation and “rail roads” you into economies of scale and cost leadership. It all becomes price and cost based.

If the role of capabilities is to provide a central “Rosetta Stone” or lingua franca to pull together the business architecture then I suspect there is some value had in doing that and a pre-defined standard framework saves a fair bit of work but that as a primary purpose seems quite limiting.

The standard is maybe forcing your thinking into a preconceived mould, inhibiting innovation and creativity. Even if you do it yourself and come out with something similar to the standard model the process you went through to get there is telling you something – that “differentiation is difficult around here” – but having gone through the process you can at least say that “you explored the possibilities”. It has validity because you went through the pain. In many cases the process of doing the capability modelling delivers more value in terms of: learning, reflection and analysis that the final model or product. Just using a standard loses all that experiential learning benefit and I worry that it just ends up with lazy analysis and lazy architecture.

One of the issues justifying a standard model may well be that being “different” in certain sectors, like financial services, is a challenge due to the constraining regulation and external forces. The regulation potentially dictates the operating model to an extent where the whole sector becomes homogenous. Is this the case here and is this why we can have a standard financial services model?

I have argued for some time that many larger financial businesses differentiate themselves only by their brand, reputation and size. One only has to read the strategies of these organisations in their annual reports to realise there is a “cookie cutter” approach going on here. This is often sustained by internal myths and beliefs of being different when in reality each is as boring as the next. It is a bit like convergent evolution in that the same environment causes species to evolve from different physiological origins towards a common form.

By accepting that this standard model may represent the reality, in that differentiation is just not to be had, then why go about this type of value analysis at all?

In accepting this “template” possibility, there would be value in having this framework as a benchmark for some kind of maturity pegging. You could measure the effectiveness in terms of efficiency and quality. This as a baselining exercise provides a reference-point for improvement with measurement against those identified Key Performance indicators.

Just focus on doing the same as everyone else but with less cost. Cut some costs, do some lean process improvement or zero based costing exercises and “heh presto”   the new operating model appears. So in this case I can see benefit of a standard model but really a standard process model would do the job just as well as outcomes are pretty much homogeneous so why bother. This leads to a debate that high level process models look pretty much like capability models with the verb and noun switched round – especially in services – a topic for another day perhaps?

These standard models perhaps provide a check list, but apart from “architecting the obvious” I am not convinced there is enormous value to be had here. Some value, yes in the right circumstances, but if any model is too generic, and applies to anything or everything, then its value is not that great.

You can make the same types of comments for “Value chains”. There are plenty of cases of high level encompassing value chains  that are applied the same wherever you look – what is necessary is for them to be: specific, or low enough in focus  to a lower enough resolution to identify differences and opportunities.

I am sure these frameworks are not cheap either, but that is fair enough, you have to pay for the time someone spent doing your work for you – right? We must compliment the vendor for the effort applied – and yes this is a good piece of work.

From the perspective of a business architect practitioner if the business can adopt these standard frameworks as their business architecture then do they really need a business architect or the discipline at all? This could be a bit of an “own goal” for the profession; or perhaps it just means in certain sectors where it’s all standard and generic the value that business architecture can add is limited. I suspect that actually this isn’t the case and it is the striving towards templates and standards that is obscuring the potential value – but you would expect me to say that – wouldn’t you.

Digital Transformation is not a Strategy

Digital Transformation the Emperor’s New Clothes.

Is digital transformation a strategy? This seems to be the in thing at the moment. Is it I.T on a sales drive or does it represent a transformational shift in business?

On watching a short video by Michael Porter the other day he was quite clear what a strategy is and I’m sure he would agree that digital transformation is a means to a strategic end game  – not a strategy.

So is digital transformation “hype”, a distraction driven by consultancies and I.T. vendors? I think it probably is and it doesn’t do strategy as a concept any favours in the process either.

Any transformation led by technology is problematic it “shoe horns” the operating model into creating a destination according to the technology – this just has to be the wrong way round.

Offshoring and Outsourcing a lesson?

Ten or Fifteen years ago offshoring was the “method of the moment” and today many organisations are bringing operation back in house. Why is this?  It is because the business case was about cost reduction – not about serving customers.

The resulting brand damage and reduction in consumer confidence through this “race to the bottom”, in search of cost reduction, has “come home to roost”. I suspect digital transformation may well go the same way. Offshoring was not a strategy it was an enabler. An enabler that was poorly deployed as the herd mentality took hold- sound familiar?

Technology is only part of the Operating Model – keep things in balance.

Technology applied to solve problems, reduce costs and serve customers is fine. It should be deployed to deliver a declared intent; whether that intent is a: cost leadership ploy or a search differentiation. Just following the popular crowd in deploying digital technologies because it is the in thing at the moment is not sensible. I predict millions in I.T. projects will get “burned” on this band wagon – let us wait and see!

 

Value Delivery Chains and The Operating Model

An optimal Target Operating Model (TOM) is a representation – and a concrete realisation – of how an organisation is best structured to deliver maximal value to its beneficiaries. It contains a number of clearly defined and described elements – organisational makeup, supplier relationships, location mapping, information flows, decision grids and management systems – all composed in the best way to optimise value delivery chains to intended recipients.

Value delivery chains are quite simply the steps that need to be done by an organisation to deliver its intended proposition to each beneficiary group. This means that value delivery chains are often customer group specific, and therefore one company may have more than one value delivery chain each addressing its unique customer group. For example, a financial institution may have different value delivery chains for its high street and online businesses, and yet another one for serving its private equity clients.

To avoid terminological confusion – for the purposes of the operating model design, value delivery chains cover the meanings first expressed by both Porter (as part of the value system to maximise margins for the organisation) and Womack & Jones (as value streams in lean production that take a product or service from their initial inputs all the way to the customer). This understanding is important for optimal operating model development, since while it is true that organisations exist to deliver value to their customers, they must also deliver value to their ownership stakeholders to ensure existence. This value, of course, may not necessarily be financial, as seen in the case of government bodies, but the value must be clearly articulated to ensure continuing investment into the activities that create that value.

As an aside observation, just to prove that ‘there is no new thing under the sun’, the concept of the value delivery chains (as those of Porter and Womack & Jones before him) are not miles away from the idea of filiere – translated as ‘thread’ from French – developed back in the 1960’s to describe the flow of physical inputs and services in the production of a final product.

A value delivery chain today describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of associated services), sales, storage and delivery to the final beneficiaries. Depending on the industry, final disposal of the used product may also be included as a step (e.g. collection and disposal of radioactive components in medical devices).

When applied to an organisation, its value delivery chain (or chains, if it has more than one beneficiary) will differ depending on the industry, offer proposition and its desired outcome. Below are some examples; more are available in the recently published Operating Model Canvas.

Mapping value delivery chains for any organisation – existing or envisioned, for- or not-for-profit, government or private sector, does not have to be a rocket science project. It is mostly common sense. However, it does require a great deal of operational experience to understand what is involved and strategic vision to see things from a new angle.

We can offer three best practice hints from our experience of capturing value delivery chains in real world organisations:

  • Keep it really simple. Anything between 5 to 10 steps is sufficient in most instances to clearly understand how value is created and delivered. Do not give in to a temptation to add more steps, instead of combining them, the shorter your chain is, the more productive and focused subsequent operating model work is going to be.
  • Keep it real and consult with people who can add insight, even if you are a CEO and can do anything you want, or you are starting from scratch. It is a classic mistake to come up with an organisational value chain on one’s own and then start building more into it. The value delivery chain is the foundational stone for any organisation so do take care to solicit views of all critical stakeholders. Even if what you thought originally is spot on, by involving others you have successfully started an important change management journey.
  • Keep it pragmatic and focus on steps that are important to deliver maximal value to your beneficiaries and your organisation. The value delivery chain is a way of logically organising capabilities (existing and new), so it is best focus on the capabilities that you already have or can realistically acquire that will be critical to creating and/or sustaining your organisation’s competitive advantage.

Remember Peter Drucker’s ‘there is nothing worse than doing the wrong thing well’? Mapping out your organisational value delivery chain (or chains if it has more than one beneficiary) is a major part of doing the right thing very well indeed.

Deverenski,Winders 2018

New Training Plus Workshop format. Operating Model Canvas

The Book Operating Model Canvas

In 2017 Andrew Campbell, Mike Guttierrez and Mark Lancelott authored the book Operating Model Canvas. As an enhancement to the famous 2010 Business Model Canvas by Alex Osterwalder the book expands the operating model, or supporting side of the business model. The Operating Model Canvas is a colourful and graphically illustrated text providing  a set of tools and approaches for developing “high level” operating models.

This course is offered to groups in a combined training and workshop format to explore these tools and techniques in a practical way. Led by contributing authors, who provided working examples and advice to several chapters of the book, we take you through POLISM, a way of describing your operating model, and provide instruction on using the 13 supporting tools that underpin the communication of your operating model within your own organisation.

Presented in short sharp syndicate exercises, your team will learn how to communicate your operational strategy to the wider business in line with the tools used in the book.

All delegates are presented with a copy of the book “Operating Model Canvas”.

This is very different to our wider Target Operating Model course and this  workshop purely offered to support the book following its methods and deliverables.

Our main offering on the other hand looks at a wide variety of tools: compares and contrasts them and provides a good multi-disciplined tool set. It more academic being aimed at  professional designers and is a far  “deeper” course for a more comprehensive study of the development of operating models.

Business-Architecture Training – “Explore challenge and think deep”.

 

I took this photo in Wroclaw in Poland this summer. The city has over 300 bronze dwarfs representing different activities and this one was outside the university.

 

I like it because as an image it supports my goal of raising skills in business architecture and operating model design.

 

I know some people use academic as a negative word, but an academic approach looks at a wide range of techniques and critically evaluates them. My approach to people development present lots of tools and allows the learner to apply what tools and methods fit best in their own environment.

 

This is really different to the certification route which in contrast teaches a standard or method and tests knowledge of that standard.

 

When you look at certification training and look at applying nation qualification framework levels (NQF) to it you soon realise that, even for executive type topics, academically the level is really low. The “standards – certification” approach doesn’t compare, contrast and evaluate different ways of doing things. Would a senior person really join up to a level one or two course if it was labelled as such?

 

I think all business cultures are different and stakeholders are too. A one way approach with its: panacea claims, its own language and perhaps specialist notation, is not the best way to innovate, create and develop successful outcomes. I say “explore, challenge and think deep”.

Measures Create Behaviours in the News.

I was reading this morning in the Guardian  see article https://www.theguardian.com/education/2017/sep/10/schools-exclusion-sixth-formers-parents-complain

The article was about six form colleges asking students not to return this academic year due to poor AS level results. On legal challenge many institutions have reversed the requests, coupled with pillory from the press. This seems to be a classic example of “measures create behaviours”.

According to the DfE’s guidance, schools can only exclude a pupil for disciplinary reasons. The guidance clearly states that schools cannot exclude pupils for “a reason such as academic attainment/ability. Excluding pupils temporarily or permanently for non-disciplinary reasons is unlawful.” Guardian 11th September 2017.

You would think that educational establishments strive to enable their students and the legal decision confirms this understanding. So, why are six form colleges and schools going down this route that has now resulted in some pretty negative PR and perhaps potentially career threatening situations for those involved?

Colleges and schools are ranked on grade performance. So, if you remove or discourage students with poor potential grade achievement from enrolling you remove them from the statistical results and raise the outward impression of your success – a simple way to “cook the books”.

Government has to take some blame here as they create the measures and league tables that encourage the behaviour that drove this cynical response…

In learning from all of this the message is: beware of what behaviours result from service level agreements and their corresponding key performance indicators. Organisations need to think “like a cynic” and try to scenario plan the potential behaviours that might arise however negative and potentially unlikely it might seem that people might behave in a negative way.

This reminds me of a call centre that had call length targets with figures on electronic “Andon boards”;  one afternoon the performance was going the wrong way, with call duration exceeding targets and I saw call agents picking up calls and rapidly replacing the receiver. Within minutes the figures had returned to acceptable levels of call length and things were back on track. Was this the right behaviour? One would hope not.

A measure is an important component in a system or “architecture” and its linkage to behaviours, as these examples show, is important. What other architectural linkages might exist?

A measure is hopefully there for a reason   a “requirement” and that reason is driven by a component of a strategy. If a strategy as an example  is to be: “compliant to regulation” then a set of requirements have to have controls “service level agreements” and corresponding measures “key performance indicators” to ensure compliance is achieved.

The failure of the measure being achieved is clearly a risk; the risk being an unintended outcome, a financial or compliance consequence, or a failure in service.  Each part of the system affects the rest and unintended consequences are highly likely to arise in complex systems. Does this sound all a bit too complex? In reality an organisation is a complex system whether we like it or not.

The message of this article is that a “systems or architectural mind set” is needed to understand the relationships and cause and effects of different parts.

Organisations are made up of components – a specific measure being one of them. Business components have linkages and unless those linkages and cross connections are thought through carefully; clearly understood and challenged, then potentially serious consequences arise.

This type of thinking – business architecture thinking- is core to our training programmes in business architecture and “Target Operating Model” development. If this type of approach interests you then please get in touch to discuss this further, let us show you how we can develop architectural thinking in your organisation.

 

Business object modelling is more inspirational than I thought!

When you realise that something you think is obvious is really original it is important that you start to promote it!

The concept of component business modelling using objects is a classic example of this. In mentoring a student through the four modules on this topic recently I realised, all of a sudden, that this idea is not as universally recognised and used as I thought it might be. You tend to get caught up in your own “bubble” on some of these topics!

We won’t claim to be originators on this matter, as I think people like Marc Lankhorst, Tom Graves, Nick Malik and others have a better provenance on this; but in terms of component based modelling we certainly have developed good teaching methods and ways to apply it.

Some tool vendors, an example being iGrafx, promote the concept of nested components and modelling connections between the objects in their excellent software; but we have added guidence of -what to connect to what- and more importantly why; plus increasing the set of components beyond the often “process centric” subset; these include HR objects amongst others. Tools are OK but they often restrict you to what the vendor thinks you need and that is their shortcoming.

Ask us about the 45 object types and you will see our point!

So next time you talk about something that is really close to you and you think is obvious, well you may have missed the fact that that it might be fairly inspirational!

Shaping and doing the right projects!

Danube 2016 510

A lot of energy is placed on project work with the application of many techniques in the analysis phase. The writing of good requirements and the design of solutions is the focus for many, but less effort is placed on shaping and discovery.The levels of competency vary across organisations but, in the majority, this discipline is well understood, well documented and supported by business analysis as a profession. Business analysis has developed over many years and is relatively mature; improving on the way project work is delivered  is always possible and many companies repeatedly try to do better, gradually and continually improving – great.Whilst this is worthy, the biggest saving is by not doing some projects at all. Putting it another way – it is avoiding that  don’t contribute to the  delivery of the organisation’s strategy and goals.

” A bit obvious ” I hear the reader saying – but you would be surprised at the vast investments “thrown at the wall”  without true strategic pre-project assessment. Much waste is created by implementing the wrong solutions as a result of: strategic error, the poor articulation of strategy and the poor linkage of strategy to change decisions.

Contractors and consultants rub their hands in glee as they regularly get called in to implement this and that. Externals often realise quite quickly that the thinking is flawed but it is frequently too late “to rock the boat”, to be honest it is not in their financial interest either and in reality management won’t thank them for pointing out to them their own potential career limiting decisions.

 “Look I employed you to implement this; now can you please focus and do what the day rate is being paid for and stop being negative”.

Prince2 as a project management methodology starts well-down the strategy to execution pathway; business analysis as a function is often “given solutions” to implement in terms of: technological choices or vendor driven solutions.

What is missing is the strategic shaping pre-project work which is often missed through the making of  “knee jerk” decisions, or driven by following so-called “industry best practice” – whatever that really is.

The task of understanding the strategic drivers of the business and choosing where to spend you money is often forgotten. The business architecture phase should be given more focus with focus specifically on the design of  business and operating models. Perhaps then  the effort will be placed in delivering the right things. Ironically this is the area that many business analysts are the weakest in. Business Analysts historically have an implementation bias with their training and skills focussed in their core activities; business requirement writing and the “translation” from business to I.T.

So perhaps more focus on pre-project work will deliver greater benefit than squeezing a little bit more by being better in the business analysis and project management phase?

  • Bennis Warren and Burt Nanus (1985) Leaders: The Strategies for Taking Charge. Harper and Row. p. 21Peter Drucker, and Warren Bennis, as quoted in Seven Habits of Highly Effective People (1989) by Stephen R. Covey, p. 101

“Management is about doing things correctly and leadership is doing the right things”.

So, think about developing these pre-project analysis skills and you may save your organisation a fortune or perhaps even save its fundamental existence.