Start with the end in mind
Many years ago, I read Stephen Covey’s ‘The 7 habits of highly effective people’. Habit 2, to ‘Begin with the end in mind’ struck a cord with me. It makes perfect sense, why would anyone want to begin something without a clear view of what they want to achieve. For example, when most people extend their house, they are usually clear about why they need it (or want it !) and what it’s going to look like. For example, they may need to add further bedrooms for a growing family or to create extra living space to entertain friends and family. They would then commission a design to meet that objective with their available budget. The design would clearly lay out what the end result would look like in the form of floor plans and a drawing of how the extension would look from the outside.
I believe that the transformation of a business’s operating model should also begin with the end in mind. Why wouldn’t it be ? The transformation is likely to require a significant outlay of capital expenditure and if landed poorly would have a detrimental impact on the future operations of the business. So it stands to reason that the best possible groundwork should be laid to ensure success. I believe that involves defining a clear objective for the transformation, with the full backing of the leadership team, and underpin that objective with a robust design.
The objective should create the rationale or imperative for change. Without a clear and compelling objective, the transformation is doomed to fail. If you can’t explain to people why and what needs to be changed, how can it be possible for people to understand it, let alone get behind and support it. The objective then needs to be underpinned by a robust design which describes, in an appropriate amount of detail, how the business will operate going forward. Without it, it would be a bit like asking a builder to erect an extension to your house without any plans and expecting them to get it built to your satisfaction and within budget. It’s not impossible, but it’s a highly risky approach.
The design needs to be able to operate in its target environment. For a house located in an area that is prone to flooding, the extension must be capable of a higher level of flood resistance or resilience than one that is located in a reasonably dry area. In the similar way, the design of a future operating model needs to be able to respond to its competitive environment. So for a retail business where stock availability is crucial, it may need a more robust stock management capability to ensure that the right stock is available at the right quantity, at the right time and at the right place to provide availability without incurring high levels of wastage and inventory. Ultimately the level of capability needs to balance the need to respond to the environment and the amount of investment that’s available. An organisation will have a number of core capabilities and it is important that the level of proficiency of these should be enhanced to the level where it provides a competitive advantage. Not all capabilities will necessarily provide a competitive advantage, some may be commodity capabilities that may only need to operate at a basic level, where more investment would not be prudent. Much like having gold taps in your home. The decision on which capabilities to enhance through the transformation are the strategic choices that a business needs to make in order to get the best return on its investment and strengthen its competitive position.
The design should specify the features required to meet the objectives of the future operating model at the desired level of capability. For a house extension, in an area prone to flooding, a feature could be ‘a two-storey construction built on an elevation’. For a retail business, a feature might include ‘near real time stock visibility at all touch-points in the supply chain to inform stock management’. Each of these features would then be underpinned by a clear design outlining how that feature will be manifested, in terms of the underlying processes, and how those processes will be enabled, augmented or automated through technology and the role of people in their execution.
Embarking on a transformation without clear objectives and a robust design would be like building a house or extension by making it up as you go along. It's possible, but would you risk it ?
Ken Leung is a Co-founder of Outvie and an expert in business design and transformation.