Can your operating model drive more than one business model?

Customer expectations have fundamentally changed. Markets have been reshaped. Digital transformation has accelerated, and ways of working have been revolutionized. There is no doubt that the fallout from the COVID-19 pandemic has forced organizations to adapt at a pace they may never have previously imagined possible.

In this environment, organizational resilience and agility are more important than ever. Seventy-four percent of C-suite executives surveyed felt they needed to completely rethink their enterprise operating model. One lesson is clear: those armed with operating models that provide the agility to continuously adapt to changing customer habits are more likely to prosper.

But disruptive forces can also create unexpected opportunities. Pret A Manger, which previously relied on providing lunches to city workers, was hit hard by the sudden shift to working from home. In response, the company adjusted its business model by opening its first “dark kitchen”, developing a home delivery menu, and packaging its direct-to-consumer products for sale in grocery stores. Supporting this pivot required integrating delivery and retail partners, developing new product packaging, and strengthening their distribution capabilities. Pulling this off at speed relied on their inherent organizational agility.

Can you really serve multiple business models at once?

When done correctly, I believe the answer is yes. But the past year and a half has shown that pivots to new or multiple business models require the support of intelligent operating models. From the outset, intelligent organizations design their operating models with the agility to support multiple business models. Investing in the latest intelligent technologies and capabilities to improve efficiency and productivity; upskilling employees; and sharing data insights widely and empowering employees to act on them to enable rapid decision-making and streamline processes. These are the defining features of an intelligent organization.

An intelligent operating model not only helps organizations respond at speed to shifting strategic priorities; it can also reduce the need for disruptive and expensive enterprise-wide transformation programs.

Take sportswear giant Adidas, for example. The company’s ‘Own the Game’ strategy involves a major operating model redesign to support a shift towards a direct-to-consumer business model. This includes a major digital transformation to improve its e-commerce presence and significant investment in its own network of stores to provide a seamless customer experience across online and off-line channels. A new ERP system has been introduced to bolster its supply chain, and innovation and sustainability will be embedded across the organization from product design to delivery. This will be supported by a major investment in upskilling the workforce. By 2025, Adidas aims to drive 80% of new sales from a combination of its own digital channels and retail stores.

Let’s look at another example from the highly competitive food delivery space. Deliveroo’s agility enabled it to adjust its business model to find new sources of growth. It partnered with leading grocery retailer Morrisons to launch a rapid ’10-minute’ home delivery service. This required developing new inventory management, demand forecasting and warehouse management capabilities, while leveraging existing enterprise data and analytics to improve their supply chain.

Activating at speed

I recently worked with a B2B telecommunications company that was under pressure from new market entrants. In response, they expanded their offerings to include “as-a-service” and customized product solutions. This required implementing a new business model while maintaining their core products and services. The company’s intelligent operating model provided the flexibility to support both models while they made significant investments in their workforce, enhanced their digital capabilities, and modernized processes to develop, sell and deliver as-a-service products.

To reimagine your operating model to support multiple business models, I suggest focusing on these key areas:

• Ambition. Identify the necessary changes to the business model such as new products, services or go-to-market approach, and then design the operating model accordingly. Consider how to ideate, develop and execute at speed. This could include an “incubation engine”, for example.

• Capability. Assess what capabilities, including new product development, enterprise analytics and customer experience, are core to the organization today. Prioritize new investments that will create competitive advantage, but also leverage relevant existing enterprise capabilities when possible to scale and accelerate. Then determine which capabilities to deliver across business models versus being segment- or market-specific. Another option is to “buy” capabilities via ecosystem partners or M&A activity.

• Structure. Evaluate how to accelerate decision-making. Aim to reduce organizational complexity by simplifying processes and procedures to increase collaboration, reduce costs and increase speed-to-market. Democratizing decision-making can improve agility, but the right structure and practices are needed to ensure alignment with the company’s goals.

• People. Embed the company’s purpose and culture into how work is organized and measured. Incentivize people at all levels to demonstrate the right behaviors, including how they collaborate across functions and markets. Foster the skills required to bring the company’s vision to life.

What can we learn from these successes mentioned above? Assess, decide and go for it. Monolithic operating models that are cumbersome and slow to adapt to changed strategic priorities won’t deliver the growth today’s market demands, and may even threaten your organization’s future.

The past 18 months has shown that success demands speed, resilience and foresight. In this new global reality, the agility to swiftly enable multiple business models that can help overcome unexpected challenges and seize new opportunities has never been as crucial.

Special thanks to contributors Nick Bobich and Jesse Sands.