wilson perumal operating model design
TRANSCRIPT
Managing Complexity in your Operating Model
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
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
Wilson Perumal & Company, Inc. 4
As a result, many firms struggle through the challenges of misaligned or inconsistent operating model
Operating Model
ExecutionMarket 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 progressor 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
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…
Wilson Perumal & Company, Inc. 6
An organization’s aligned, ‘best fit’ operating model depends on both internal and external factors
INDUSTRY DYNAMICThe nature of the industry and
competitive landscape in which your company operates
TARGET PERFORMANCEYour company’s desired
results—profitability, growth, safety, efficiency, quality, etc
BUSINESS STRATEGYStrategic decisions on where to play and how to win—the value you offer your customers
CURRENT CAPABILITIESThe current-state operating model and existing staff, assets, facilities, and resources
ABILITY TO CHANGE & SUSTAINThe organizational tools, culture, and
discipline to get from the current to the desired model
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
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 ProviderProviding customers products at the lowest cost—focus on high-volume, efficiency & repeatable processes
Technology LeaderProviding customers cutting edge, advanced products—focus on research & customer-driven product updates
Customer Service FocusProviding customers personalized service —focus on meeting the individual needs of your customers
Inte
rnal
Exte
rnal
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:
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?
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
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 1Define baseline &
future state requirements
Phase 2Assess the gaps and
opportunity
Phase 3 Design target
operating model and delivery plan
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
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 Scope1 – 2 days
Approximate Scope 3 – 6 weeks
Approximate Scope 3 – 6 months
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)
Wilson Perumal & Company, Inc.
North America Europe
One Galleria Tower13355 Noel Road, Suite 1100
Dallas, TX 75240
+1 972-716-3930
Longcroft House2/8 Victoria AvenueLondon, EC2M 4NS
+44 (0)203 206 1496
Contact Us:
www.wilsonperumal.com
Business Simplification Leads
David Toth+1 330-256-0175
Steve Liguori+1 401-207-9506
16