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Managing Complexity in your Operating Model
Wilson Perumal & Company, Inc.
Operating models are the link between strategy and
execution – they define “how” a strategy...
Wilson Perumal & Company, Inc.
As companies have evolved to compete, operating
models that worked in the past become misal...
Wilson Perumal & Company, Inc. 4
As a result, many firms struggle through the challenges
of misaligned or inconsistent ope...
Wilson Perumal & Company, Inc. 5
Misaligned operating models drive complexity, higher
costs, lower performance, and the in...
Wilson Perumal & Company, Inc. 6
An organization’s aligned, ‘best fit’ operating model
depends on both internal and extern...
Wilson Perumal & Company, Inc. 7
Current capabilities and performance objectives
will drive operating model design choices...
Wilson Perumal & Company, Inc. 8
Industry Characterization Strategic Orientation
RegulatedUnregulated
ExpandingShrinking
H...
Wilson Perumal & Company, Inc. 9
Choices made across design elements will
determine ultimate operating model effectiveness...
Wilson Perumal & Company, Inc. 10
‘Best fit’ design is only realistic if there are
resources, capabilities, and willingnes...
Wilson Perumal & Company, Inc. 11
Done correctly, operating model redesign can be
transformational for a business
Our clie...
Wilson Perumal & Company, Inc. 12
WP&C leverages a 3 step process to diagnose and
attack operating model issues
• Which ar...
Wilson Perumal & Company, Inc. 13
Our methodology is proven
Source: Case example of operating model redesign at global sat...
Wilson Perumal & Company, Inc. 14
We offer multiple ways to engage
As leaders in operating model design and implementation...
Wilson Perumal & Company, Inc. 15
Operating Model Professionals
Scott Stallbaum
• Expertise in Operational Excellence Mana...
Wilson Perumal & Company, Inc.
North America Europe
One Galleria Tower
13355 Noel Road, Suite 1100
Dallas, TX 75240
+1 972...
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Designing the 'best fit' operating model to help your company execute its strategy

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Wilson perumal operating model design

  1. 1. Managing Complexity in your Operating Model
  2. 2. Wilson Perumal & Company, Inc. Operating models are the link between strategy and execution – they define “how” a strategy is realized An operating model is the coordinated collection of business & production capabilities, organization structure, assets, people, technology, partnerships, and governance a company uses to deliver its strategy Assets & Capabilities Governance Vendors & Partners Process Design Technology Enablers Operating Model ExecutionMarket Strategy Defining where to play and how to win – understanding your competitive advantage and how to apply The execution of the business strategy more consistently and reliably than the competition Align with Strategy Enable Execution Organizational Structure 2
  3. 3. Wilson Perumal & Company, Inc. As companies have evolved to compete, operating models that worked in the past become misaligned Organic Growth Inorganic Growth through Acquisition Operating model has failed to keep up with the changing marketplace and is no longer fit for purpose Operating model has evolved over time without an overarching plan, creating execution gaps and overlap New Ways to Deliver Value Changing Customers / Markets Evolving Supply Chains External Factors: Industry & Competitive Landscape Internal Factors: Organic & Inorganic Growth • New products, segments, channels, line extensions, etc. are introduced • Operating model does not evolve with the business needs • Unique cultures, processes, technology, systems of governance, etc. are merged • Incomplete integration results in inconsistency and misalignment • Increasing diversity of customers, markets, geographies, and the offering to serve • Increasing scope of suppliers, products & components to source and plan • New channels, product flow alternatives, and technologies to deliver value 3
  4. 4. Wilson Perumal & Company, Inc. 4 As a result, many firms struggle through the challenges of misaligned or inconsistent operating model Operating Model Execution Market Strategy 4 ‒ Inconsistent performance between business units ‒ Business results are routinely lagging despite good execution ‒ Competition is pulling ahead in market share, efficiency, and profitability ‒ Underutilized assets ‒ Inability to quickly & effectively react to changing market conditions ‒ Lack of visibility to company performance ‒ Reliance on contractors/suppliers for core capabilities ‒ Lots of work being done, but no progress or improvement made ‒ Market Strategy not being executed as intended ‒ Confusion and lack of communication ‒ Frequent deviations from standard processes; consistent rework ‒ Unclear and/or overlap of accountabilities within organization; too many org. layers ‒ Ineffective/inefficient operating & management processes ‒ Out-of-control IT spending; systems create more complexity & work than benefit
  5. 5. Wilson Perumal & Company, Inc. 5 Misaligned operating models drive complexity, higher costs, lower performance, and the inability to grow Level of complexity you can support Complexity, already growing in your business, is compounded by a misaligned operating model— increasing costs and risks Returns Cost (and Risk)$ Complexity An increasing number of companies Any additional, unmanaged complexity impedes performance and amplifies the continuing impact of the Vicious Complexity Cycle Complexity increases Poor execution Loss of process control Poor business results More people and processes • Shortages • Breakdowns • Missed deliveries • Accidents $ Complexity is the most important issue facing most companies and poor/misaligned operating models only increase non-value-add complexity Increasing or misaligned SKUs, facilities, processes…
  6. 6. Wilson Perumal & Company, Inc. 6 An organization’s aligned, ‘best fit’ operating model depends on both internal and external factors INDUSTRY DYNAMIC The nature of the industry and competitive landscape in which your company operates TARGET PERFORMANCE Your company’s desired results—profitability, growth, safety, efficiency, quality, etc BUSINESS STRATEGY Strategic decisions on where to play and how to win—the value you offer your customers CURRENT CAPABILITIES The current-state operating model and existing staff, assets, facilities, and resources ABILITY TO CHANGE & SUSTAIN The organizational tools, culture, and discipline to get from the current to the desired model
  7. 7. Wilson Perumal & Company, Inc. 7 Current capabilities and performance objectives will drive operating model design choices  Your ‘best fit’ operating model will be optimized specifically around strategic imperatives and the capabilities required to deliver them Financial Targets Strategic Initiatives Required Capabilities Core End-to-End Processes 5% Annual Revenue Growth New products Effective product development Concept-to-Launch Operational metrics Time to Market / % Rev. new products ExampleConvert strategy to capabilities Expected targets Six months / 20% Clear definitions of success
  8. 8. Wilson Perumal & Company, Inc. 8 Industry Characterization Strategic Orientation RegulatedUnregulated ExpandingShrinking High BarriersLow Barriers Innovation-drivenStable Technology Capital IntensiveLabor Intensive Many Customers & Channels Few Customers & Channels Product HeterogeneityProduct Homogeny Regulation Overall Market Entry Innovation Assets Markets Variety Your ‘best fit’ operating model is specific to your industry and chosen strategy to compete By taking into consideration the industry in which you compete and the competitive landscape… …along with your company’s strategic orientation has chosen to compete in that industry… …You can develop your organization’s unique, ‘best fit’ operating model. Low-cost Provider Providing customers products at the lowest cost—focus on high-volume, efficiency & repeatable processes Technology Leader Providing customers cutting edge, advanced products—focus on research & customer-driven product updates Customer Service Focus Providing customers personalized service —focus on meeting the individual needs of your customers InternalExternal
  9. 9. Wilson Perumal & Company, Inc. 9 Choices made across design elements will determine ultimate operating model effectiveness A baseline assessment across design elements provides context for the range of potential changes to develop your ‘best fit’ operating model Process Design Process Design Accountability Process Execution Measurement & Control Organization Structure Organization Size Organization Structure Roles & Responsibilities Skillsets Technology Enablers Capability Reliability Sustainability Scalability Governance Corporate Governance Business Unit Governance Value-Stream Governance Assets & Capabilities Vendors & Partners External Capabilities Supply Chain Partners Contractor Usage Facilities Intellectual Property Core Capabilities Operating Model Evaluation Criteria Criteria: Elements: Criteria: Elements:
  10. 10. Wilson Perumal & Company, Inc. 10 ‘Best fit’ design is only realistic if there are resources, capabilities, and willingness to execute Operating Model Transformation Success Considerations Leadership Advocacy Does leadership believe a change is needed? Are they engaged and acting as champions for change? Company Culture Magnitude of Change Available Resources Required Timing Is the workforce focused on continuous improvement and open to change? How much change is needed across the 6-Facets of Operating Model Design? How much capital, effort, and energy can be dedicated to developing & implementing change? Are there any external timing requirements (gov’t, investor/creditor, market) on the change?
  11. 11. Wilson Perumal & Company, Inc. 11 Done correctly, operating model redesign can be transformational for a business Our clients typically realize >25% EBITDA improvement Common Operating Model Alignment Benefits  Clarity of roles and responsibilities, with accountability measures  Streamlined communication and handoffs across functional units  Significant reduction in rework and non-value-added effort  Prioritized strategic capabilities and roadmap to target performance  Scalable operations to allow for new, profitable growth initiatives  Improved visibility between voice of the customer and value delivery  Increased capacity for value-adding capabilities, such as innovation  Improve pricing and lifecycle management Frequent Operational Benefits Frequent Growth Benefits
  12. 12. Wilson Perumal & Company, Inc. 12 WP&C leverages a 3 step process to diagnose and attack operating model issues • Which areas of the current operating model can or cannot support future state capabilities and targets? • Are identified gaps a result of structure, execution, and/or governance? • Are there opportunities for consolidation or shared services? For customer design approach? • What are the key capabilities needed to deliver differentiated value over strategic horizon? • What are the consumer and business-related operational performance targets we need to achieve? • What are the design principles against which we will assess alternatives? • How does the “what”, “who”, and “where” need to change by organization? • How do we evolve to the target operating model over time so that we realize value and mitigate risk along the way? • What do we need to do to start and sustain the journey? Phase 1 Define baseline & future state requirements Phase 2 Assess the gaps and opportunity Phase 3 Design target operating model and delivery plan
  13. 13. Wilson Perumal & Company, Inc. 13 Our methodology is proven Source: Case example of operating model redesign at global satellite communications company • Operating model misalignment developed as legacy structures endured, despite changing marketplace needs • Understanding the baseline, including capability gaps/overlaps, was first step to sizing opportunity Functional Overlap Assessment Case Example • New operating model elements developed to fit with business strategy and core capabilities • Fundamental design principles created with leadership to establish operating requirements Design Principle Creation Operating Model Alignment Project resulted in significant reduction in overlapping roles, a redesigned innovation capability, and $15-20M in cost reduction opportunity
  14. 14. Wilson Perumal & Company, Inc. 14 We offer multiple ways to engage As leaders in operating model design and implementation, WP&C is uniquely equipped to help your company develop an attainable operating model & improve performance Workshop Diagnostic Optimization/Redesign Interactive half or full day workshop for executive leadership to align on operating model issues and paths forward Focused diagnostic to specifically diagnose operating model misalignment, and quantify the size of the prize to address Full operating model assessment, deep dive into key issues, and redesign of target opportunities with implementation plan Summary report of the core issues identified by leadership, and prioritization of next steps Detailed report on health of operating model, and expected benefit of prioritized redesign Redesign, implementation plan, and tracking metrics for agreed operating model improvements Approximate Scope 1 – 2 days Approximate Scope 3 – 6 weeks Approximate Scope 3 – 6 months
  15. 15. Wilson Perumal & Company, Inc. 15 Operating Model Professionals Scott Stallbaum • Expertise in Operational Excellence Management System design & implementation, culture definition & change, business simplification, and operating model design • Significant oil & gas, food & beverage, and financial services experience including projects in operations- strategy alignment, operational efficiency & safety improvement, and growth strategy development • Former operations manager in the medical device & automotive industries • MBA from Harvard Business School; BS in Mechanical Engineering from Bucknell University • Over 20 years of experience in Supply Chain and Logistics via consulting and industry operations roles • Specific experience in inventory management, distribution operations, transportation management (incl. fleet), reverse logistics and logistics network planning & design across multiple industries • Specific retail experience from Lowes, Michaels, and Kmart with projects from enterprise transformation programs to distribution center slotting improvements • Former director of global logistics with responsibility for NA and European transportation and distribution including international ocean and air from Asia • BSIE and MSIE from Purdue University David Toth Steve Liguori • Expertise in business simplification, operating model design, process optimization, and growth strategy • Significant retail and consumer goods experience, including projects in portfolio optimization, process design, promotional effectiveness, out-of-stock reduction, and distribution effectiveness • Worked with retail clients from a $1B grocery retailer to an £8B European electronics retailer • Former Manager, Analytical Research & Development, Pfizer • MBA from Emory University; BA in Physics from College of the Holy Cross (National Physics Honor Society)
  16. 16. Wilson Perumal & Company, Inc. North America Europe One Galleria Tower 13355 Noel Road, Suite 1100 Dallas, TX 75240 +1 972-716-3930 Longcroft House 2/8 Victoria Avenue London, EC2M 4NS +44 (0)203 206 1496 Contact Us: www.wilsonperumal.com Business Simplification Leads David Toth +1 330-256-0175 dtoth@wilsonperumal.com Steve Liguori +1 401-207-9506 sliguori@wilsonperumal.com 16
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Designing the 'best fit' operating model to help your company execute its strategy

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