Agile and Adaptive: Modern Operating Models for a Changing World

Join us for an exploration into the world of business operating models. Discover how leading companies organize and manage their resources, processes, and systems to consistently deliver exceptional value and achieve their strategic goals.

OVERVIEW:

Introduction to Effective Operating Models

This video provides an in-depth introduction to effective operating models, highlighting their importance in shaping organizational structures and strategies. Viewers will gain insights into various types of operating models, their impacts on business efficiency, and best practices for successful implementation. The video aims to educate on centralization vs. decentralization, Agile and hybrid operating models, and practical tools for creating robust operating models.

Key Points on Centralized and Decentralized Operating Models

The video thoroughly discusses the advantages and disadvantages of centralized and decentralized operating models. It highlights how these models influence decision-making processes, resource allocation, and overall business agility. The video also explains Agile operating models and hybrid operating models, detailing how methodologies like Waterfall and Scrum can be integrated. Additionally, it introduces the concepts of capabilities and value streams, showcasing examples from the finance and retail sectors, and emphasizes the importance of capabilities maps.

Expert Insights on Hybrid Operating Models and Future Trends

Tom, the expert featured in the video, provides valuable insights into hybrid operating models and future trends. He stresses the need for operating models to reflect actual business practices and advocates for the simplicity of hybrid models despite their inherent complexity. Tom uses real-world examples, such as IKEA’s capabilities map, to illustrate his points and references Frederick Leleu’s “Reinventing Organizations” to predict a shift towards decentralization and team-based structures in future operating models.

Practical Applications of Business Model Canvas and Operating Model Canvas

The video offers practical applications for developing and visualizing effective operating models using tools like the Business Model Canvas and the Operating Model Canvas. It suggests collaborative approaches to create detailed organizational structures and provides a set of validation questions to ensure the practical effectiveness of these models. These tools and frameworks help bridge the gap between theoretical concepts and real-world implementation, enhancing organizational efficiency.

Conclusion and Takeaways on Effective Operating Models

In conclusion, the video emphasizes the importance of aligning operating models with actual business practices, the benefits of using visual tools for model development, and the need for collaborative efforts in creating effective structures. Key takeaways include understanding the balance between centralization and decentralization, leveraging hybrid models, and utilizing practical tools like the Business Model Canvas and Operating Model Canvas. Viewers are encouraged to apply these insights to improve their organizational structures and drive business success. The video serves as a comprehensive guide for understanding and implementing effective operating models in any organization.

Video Transcript

Speaker 2
(0:12) I’m looking forward to getting everyone together every month to have these conversations.(0:16) So I’m Steve Glause, SVP of Business Transformation here at Hyperdrive, and if you’re not familiar with us, which I think most of you are, but we are a management consultancy based out of Silicon Valley, and we support our clients full stack on the business side. (0:32) Everything from mission, vision, values, strategy, creation, to OKRs, to LPM, and then down to whatever your product development engine looks like, whether it’s Agile or Waterfall or something else.
(0:46) And so we are full stack, we’re a full stack service provider these days. (0:51) And so that also includes what Tom Perry is going to talk about today, which is operating models. (0:59) So Tom Perry not only is my colleague, but he is a longtime friend. (1:06) When I entered the Agile world, Tom took a chance on me and took me under his wing and taught me everything I should know about Agile. (1:16) And I thank him for it. (1:18) He was my first manager when I joined my first Agile consultancy. (1:22) And so I was privileged to have a great mentor in Tom. (1:27) He is Hyperdrive’s lead trainer.(1:30) He’s one of our most senior enterprise Agile coaches. (1:34) And so I always learn something from Tom’s talk. (1:37) So with that, I will pass you over to my good friend, Tom Perry.
Speaker 1
(1:42) All righty. (1:43) And I think I need to turn on the sharing here for my stuff. (1:48) There we go. (1:49) Much better. (1:50) Hi, folks. (1:53) That’s a heck of a lead in. (1:55) And I want to start off by stepping back just a minute and saying this is a talk about operating models. (2:05) And boy, I’m so sorry. (2:08) I mean, wow. (2:10) You have joined for one of the most, I mean, when they rolled the dice and said, Tom, this is your topic, operating models, it has to be one of the driest, most uninteresting subjects I could possibly imagine. (2:26) And yet here you all are. (2:28) And so when I looked at it, I was like, boy, this is going to be a challenge. (2:33) And part of the reason it’s a challenge, and I’m just going to skip right past here. (2:38) We’ll go past the title slide. (2:40) There’s a picture of Dean Leffingwell. (2:42) What a handsome man. (2:44) And move on to the agenda here. (2:46) We’re going to talk about what is an operating model. (2:50) And that’s probably the best place to start because in the research that I’ve done, in my experience, everybody and their brother has a different idea of what an operating model truly is.(3:05) And so we need to check that out first. (3:08) And then if you’re still awake after that point, then we’re going to get into how we use operating models, how we could use them practically. (3:17) And being kind of a practical-oriented guy myself, we’re going to talk about how we could use these as consultants. (3:25) And then we’ll look at different types of operating models. (3:29) And then a little bit about how we build operating models. (3:34) And finally, I will give you some ideas about how you can use these or get started with your own. (3:40) First question for everybody before I put you to sleep. (3:45) Who here has seen or used an operating model before? (3:51) Hands, electronic hands. (3:53) I’m guessing that there might not be very many, actually.(3:58) Oh, Steve’s got all the thumbs. (4:00) Oh, my God. (4:03) So some of us, maybe in larger organizations especially, may have had quite a bit of experience with looking at different operating models. (4:13) Others may have not seen operating models at all, especially if you’re in a startup, for example. (4:21) I can see how an operating model might be a thing that’s actually kind of a mystery to you.(4:27) And so let’s dive into that first. (4:30) And so here’s my first definition. (4:33) If you go out and you ask chat GPT what an operating model is, this is the answer you’ll get.(4:41) A business operating model is a conceptual framework that describes how a company organizes and manages its resources, processes, and systems. (4:55) Now if that isn’t a recipe for snore pie with yawn sauce, I don’t know what is. (5:00) I mean, we’re starting off with the really boring stuff right off the bat. (5:06) But the idea here, and I’ve highlighted it, is the resources, processes, and systems. (5:12) We’re looking for some sort of summary in this definition, and how we deliver value to our customers, what our strategic objectives are. (5:21) Good stuff, dry, but good stuff. (5:25) Structure, governance, there’s a lot of stuff when you look at this. (5:30) When you look at this definition, that’s like everything an organization does. (5:36) That’s huge. (5:38) Let’s look at another definition. (5:40) This one I got from indeed.com, and I liked it a little bit better. (5:47) It’s an operating model is a visualization of how a company plans to execute its strategy. (5:56) It uses elements such as charts, graphics, tables, and maps.(6:01) Well, that’s kind of cool. (6:03) So that suggests it’s kind of a, it’s a visualization of how the organization operates. (6:10) That resonates for me a little bit better. (6:14) I don’t want to be committed to some sort of all-encompassing, I’m going to describe every single way the organization functions, but I would like a clear picture. (6:24) I would like a high-level picture, a map of where I am, and where I need to go to get help in the organization. (6:33) So maybe this is a useful starting point. (6:36) And then I came across another definition. (6:41) An organization is a complex system for delivering value, and an operating model breaks this system into components, namely people, process, and technology, showing how it all works.(6:59) And this one seems to be the most generic, seems to be the most widely shared. (7:05) Most of the time when you look at different models for organizations, they’re going to tell you how the people are organized, what processes they use, and what technologies or tools they’re using. (7:21) So all of this is to say that there are a lot of different definitions for what an organizational model should be or an operational model should be. (7:33) And looking at this, I was like, oh boy, this is going to be hard. (7:38) This one, of course, this definition came from Wikipedia. (7:42) So looking at this, we also can kind of step back and ask, well, where does it fit in the big picture? (7:51) And it turns out that the operating model is kind of our bridge, our conceptual bridge between the strategy, the organization’s strategy, and execution. (8:05) So it is the thing that connects strategy to execution. (8:10) Now, strategy is usually some sort of description of who we’re competing with, what our ambitions are, where we’re headed. (8:22) And then usually we have a description, the highest level description of the business is our business model. (8:30) And of course, you may be familiar with things like the business model Canvas that describes how we create value, how we fund that value, how we deliver on that value. (8:44) And in a way, the operating model is kind of a subset of the business model. (8:51) And so you could say that you have your strategy, you have your business model, and you have your execution. (8:59) Within the business model, there is a description of how we deliver that stuff. (9:04) And that is the operating model. (9:07) That might be one way of thinking of it. (9:09) Now, this particular model or this particular description of where it fits comes from Bain & Company. (9:19) And you’ll notice that the operating model describes structure, accountabilities, governance, ways of working. (9:28) And then those capabilities that I described earlier, people, process, and technology. (9:35) Again, my initial reaction when I look at this is, oh my God, that’s a lot of stuff. (9:42) I mean, that’s really huge. (9:46) And so when I think about that, I think to myself, well, for some organizations, these things are going to be critical. (9:54) If you work in healthcare, governance, for example, big deal. (9:59) Well, if you work at a startup, governance may not even exist, right? (10:07) Governance may not even be a thing for you. (10:10) So some of these topics are only going to be relevant for certain kinds of organizations. (10:17) And that, to me, is actually a bit of a relief. (10:22) Because it means that I can look at this and pick and choose what’s most relevant to my company, to my organization, and I don’t have to do all of it. (10:32) So I want you to look, I want you, when you see operating models and definitions of operating models, not to feel overwhelmed by them and not to feel like you are committed to the whole bloody thing. (10:46) You’re not. (10:47) There are pieces of it that may be relevant to you and useful to you.(10:51) And as such, we’re going to use those things. (10:54) And there are other pieces that may make no sense whatsoever. (10:58) And that’s fine.(11:00) We drop those like a hot rock, and we’re not going to deal with them. (11:04) And so we’ll get a little bit more specific about that. (11:08) I kind of have a conceptual model of how all this fits together in that I look at the organization, and I think at the highest level, we have our vision, and that and our strategy sort of describe where we’re going, what our ambitions are. (11:26) And then the next step is the operating model or the business model and our portfolio or how we organize and structure our work. (11:37) And so those two things hand in hand describe a lot of the how, the mechanisms we’re going to use to deliver on this stuff. (11:47) And then the what is going to be the products and the teams that do the delivering. (11:54) And so as I looked at this, I realized that I was looking at the why, the how, the what sort of in sequence here. (12:04) And I realized that I’d seen that before. (12:07) I had seen that very same sort of structure in another place. (12:13) How many folks are familiar with Simon Sinek? (12:17) Right? (12:19) Right? (12:19) Great speaker, and he has that start with why thing. (12:24) Turns out, boom, we’ve got the why, the how, and the what. (12:29) Now, we can map those things also to our model here, and we can see that the why encompasses strategy and vision, and that’s our ambitions and what competitive markets we’re in. (12:43) The operating model is the how. (12:46) The operating model, how do we make money, who our customers are, how do we structure ourselves? (12:53) And then there’s the execution or the what, right? (12:57) And that’s the structure and how we deliver value. (13:01) And so I found this interesting because this allows me to think about where the operating model is and how we’re going to use it to describe the organization. (13:12) So let’s look at some of the uses here of operating models. (13:17) First one is alignment. (13:20) So we’re using it to look at the organization, ask ourselves, are we in alignment with the way we have things structured? (13:30) And I took some notes because this was from a previous engagement. (13:36) This was straight out of my notebook, and I had been working with this organization, and they had these different silos. (13:44) And these silos, three of the silos were all under one sort of strategy arm, and they had to do all of their strategy together. (13:55) And then there was this fourth silo that was this one called Pop Health over here, where they did their own thing, and they didn’t have to align with anybody else. (14:07) And I did this, I looked at this early on because I was trying to understand the organization. (14:15) And I used this model to validate with the client the way they were structured and what some of the issues were. (14:24) So very early on, what we found out was that the organizations that were trying to share their strategy across their groups suffered from a lot of duplication, suffered from a lot of struggles to prioritize, and their reporting was a nightmare. (14:43) Whereas that fourth group over there, that Pop Health group, they were rock stars. (14:50) And so looking at this, there were some interesting dynamics going on, and they had some issues with how they were aligning with each other. (14:58) So simply by trying to describe the structure of the silos or the divisions in the organization, and how they aligned strategy across those different groups, started to highlight some issues or problems. (15:16) The next thing that we saw were things like, you can use this to look for efficiencies. (15:21) So it’s not uncommon for organizations to have some duplication across silos. (15:29) And we saw a lot of it in this particular organization. (15:32) Again, this is from another area in my notes, same organization, noticing lots of duplication. (15:40) Simply by diagramming out the structures, the responsibilities, I was able to highlight those duplications and look for areas of opportunity or efficiency. (15:53) And then as I was starting to model different ways of resolving those issues, one of the things that became clear was that I was starting to come up with something that looked like a repeatable pattern. (16:08) And when we see those repeatable patterns in our designs, those repeatable patterns are opportunities for scaling. (16:17) Anytime we can find a repeatable pattern where maybe we’re putting together the same structure or the same type of structure over and over again, that’s an opportunity for us when we start to think about repeating this, replicating this, scaling it up. (16:37) And finally, we want to build organizations that are resilient, that are capable of reacting and dealing with change. (16:48) This particular organization had significant issues with that because they had all of these silos. (16:58) And if you were a product manager and you were trying to develop one of their products, you literally had to go from silo to silo to silo and discover who the teams were that could help you out and work on the features that you were trying to develop. (17:17) This led to a very brittle organization that internally was very hard to work with because you literally had to try and find the resources you needed every single time that you wanted to get something done. (17:34) So, it led to an organization that was not very resilient. (17:39) So, this leads me to where I start to use these kinds of models. (17:44) And I didn’t even call them organizational models, but they really, I see a couple of use cases here. (17:52) And I’m curious if you see similar use cases. (18:00) When I look at it, number one is how do things work here? (18:06) And we can use that for things like just introducing people to our organization. (18:13) So, here’s what we do and here’s how we do it. (18:16) We also can use it when we’re working with our partners. (18:21) So, we may have partners that we’re working closely with. (18:23) And when we’re working with those partners, we want to share how we work together, how we’re structured, how we’re organized. (18:31) I realized, and this is very selfish on my part, that for discovery, when I go in as a consultant and I am doing that work to understand the organization, very quickly I have to know what the products are, what the organization structure is like and where the people are at. (18:53) And if I can’t, and what tools they’re using. (18:57) And if I can’t describe those elements, then I can’t do my job effectively as a consultant. (19:03) So, one of my goals when I go in to do discovery, to start up a new consulting engagement, is work to try and understand what the processes are, what the people are, what the tools are, what the products are. (19:20) And I have to be able to articulate those very quickly if I’m going to be able to be useful for that organization. (19:28) And I see value stream mapping as another example of that. (19:32) And I couldn’t agree more. (19:34) I think that makes a whole lot of sense. (19:37) So, it’s tools like that that help us gather that information so that we can be effective advisors to the organization. (19:49) Now, that leads me, of course, to the other use for an operating model. (19:56) One is to reflect the current state, really, right? (19:59) Where are we now? (20:00) But then the other question is, what do we want to change? (20:04) And this is kind of the target state. (20:07) And so, how are things going to change? (20:09) What’s the future state? (20:11) And so, in that case, again, as a consultant, I’m going to use an operating model as a future state description. (20:20) This is how I see you being structured in the future. (20:25) These are the changes that you need to implement if you’re going to adopt agility, for example. (20:31) If you’re going to adopt, if we’re going to implement release trains across your organization, if we’re going to try and introduce the concept of lean flow, then we’re going to need to modify certain structures in your organization. (20:50) And really, I would argue that for any meaningful transformation, there must be a change to the operational model. (21:00) I can’t think of any kind of meaningful agile transformation that doesn’t mean a significant change to your operating model. (21:12) And I’d be willing to argue that one pretty strong. (21:16) You know, the idea here that we can go into an organization and introduce agility without changing the operating model is really hard to conceive of, to be honest. (21:28) And of course, this is all part of a tool that we can use for our business evolution. (21:35) And what I mean by that is, there are going to be times when the market changes. (21:40) There are going to be times when the market gets tight, when the market, you know, when we’re looking at significant changes in the marketplace. (21:51) Changes to the operating model describe what we’re doing to react to that. (21:57) They describe how we’re modifying our business, updating our business, reacting to the marketplace.(22:05) And it could be changes in how we’re structured. (22:10) It could be changes in the tools we use. (22:13) It could be changes in how we deliver things. (22:16) But something must change if we’re making a meaningful change. (22:22) So there are a few different types of operating models out there. (22:30) And these are just sort of common examples. (22:32) One is kind of a centralized operating model. (22:35) This is your top-down structure, talking about structures here. (22:40) And those can be a variety of different, a few different variations here. (22:45) One is it could be functional. (22:48) And so you have your functional areas like testing and development and maybe database or data and so on and so forth. (23:01) Each functional area reporting up to a functional manager.(23:04) That functional manager reporting up to another manager, ultimately to the leader of the organization. (23:11) Or it could be divisional. (23:13) What I had been showing you earlier, some of those examples from organizations I had worked at were very much divisional, where you have duplication, where you have development in this division and you have development in this division. (23:29) But each is dedicated to the products that that division produces. (23:34) And then, of course, you have the classic matrixed organization, where you may have people like project managers. (23:43) And project managers, of course, may have dotted line responsibility or accountability for people in other parts of the organization, so that you kind of mix and match folks as necessary. (23:56) So these are very common, very standard sort of centralized models, largely responsibility is aggregated towards the top. (24:07) They’re characterized by being a little bit slower to respond. (24:12) But they are also characterized by having very clear roles, responsibilities, and that sort of thing. (24:22) If we look at decentralized structures, this is where you start to see things like the flatter organizations. (24:31) So you see organizations where we’ve eliminated the middle management. (24:35) So we have independent units where people have very, very flat hierarchies. (24:41) You have teams of teams or different structures where it is groups of teams working together. (24:50) They might be organized in a hierarchy like this, or there can be a variety of other structures. (24:56) But basically, it is a team-based set of cooperating teams. (25:04) And then finally, there is what I would describe as a hybrid structure, which is where you might have teams and also a functional hierarchy. (25:16) And this is probably the default for a lot of folks, especially if you’re adopting Agile. (25:23) It’s very likely that you’re going to have a traditional organization at the leadership level. (25:31) And down at the working level, you’re likely to have something that looks a lot like Agile teams. (25:39) Broadly speaking, again, there’s a lot of nuance here, but we’re talking about either centralized or decentralized models. (25:50) Another way of breaking up these structures is by products. (25:54) And so you can have structure that is defined by the number of products you have. (26:04) And this tends to go hand in hand with Agile organizations, right? (26:09) Agile organizations or organizations that have been doing Agile for a while tend to lean into the product-oriented. (26:17) Also, I would describe this as value stream-oriented sort of workflow. (26:24) And so there are a lot of different ways of describing this, but the idea here is that we’re basically describing the company in terms of what products we produce or services. (26:37) So this could also apply to services. (26:42) Then there’s the customer-centric descriptions. (26:46) And so you would describe the way we’re broken down by the customers we serve. (26:52) You might have small and medium business customers. (26:56) You might have enterprise customers. (26:59) You might have lots of different categories of customers. (27:03) Another way of describing the customers is in terms of the customer journey. (27:09) We can use customer journeys to describe how our customers interact with us, what systems they interact with, and their experience of the interaction along the way. (27:21) So this is where we are categorizing our operations around the customers and their needs.(27:30) And finally, there are some industry standard operating models. (27:35) And this was new to me. (27:36) This was a bit of a revelation. (27:38) I am not an ITIL guy, but some of you may know quite a bit more about this than I do, to be perfectly frank. (27:48) But ITIL apparently is an industry standard operating model. (27:54) COBIT, same thing. (27:57) And then ETOM. (28:00) And I like ETOM because any framework that’s named TOM has got to be good. (28:05) But in all seriousness, I think what this offers is kind of a default sort of fill in the blanks sort of operating model for you to work with, if necessary. (28:20) But I don’t have a lot of experience with it. (28:22) Anyone here have experience working with, say, ITIL or COBIT?
Speaker 3
(28:28) Yeah, people all here.
Speaker 1
(28:30) Yeah.
Speaker 3
(28:36) Where, you know, they’ve got processes and stuff and direction.
Speaker 1
(28:47) Cool, cool. (28:48) Yeah. (28:51) So the next piece I’d like to share with you guys. (28:57) So again, I don’t have a lot to share here other than to suggest that if you’re using these frameworks, that this is probably something that can be useful for you. (29:10) So as I was saying before, that one of the key things that I think is really intriguing is using the operating model to describe how things are now. (29:25) And that has the simple value of bringing everyone together to understand and agree on kind of how we’re structured, how we’re organized, how we do our work. (29:37) And I don’t think it has to be over formalized. (29:40) I think it’s the kind of thing that, you know, this is, I mean, I’m a little embarrassed to share this, but this is kind of back of the napkin sketches that suggest my understanding of this organization, for example. (29:55) And so I think there’s a lot of power in describing how we work together and how we organize ourselves and coming to an agreement on that. (30:08) And then, of course, we have our target operating model. (30:11) And the target operating model is to envision what we’d like our business to look like in the future. (30:20) If our business is changing, if we’re moving from being a certain kind of organization today, and we’ve decided that we want to be a different kind of organization tomorrow, what are the changes that are necessary? (30:35) What do we need to see? (30:36) What does the target look like? (30:38) And I think without describing it in some sort of picture where we can say these things are the things that are going to change, we run the risk of being stuck with the status quo, right? (30:56) So I think the ability to, you know, we talk about changing our organizations a lot, but the ability to draw a diagram that says, this is how it’s going to be different is really important. (31:11) Because if there is so much organizational resistance to change, they’re not going to do it unless you really spell it out. (31:21) And I think this really helps push us in that direction. (31:26) A little bit more about structure. (31:28) I came across the idea here of an accountabilities diagram and that one kind of mystified me. (31:35) And the idea with accountabilities is that it’s like an org chart, right, who reports to who, but instead it’s who does what. (31:48) And the idea with an accountabilities diagram is that a single person might be reflected on here in a lot of different places, right? (31:58) So if you’re like me, kind of a jack of all trades, Tom might be on this diagram in a lot of different places because I do training. (32:09) And so you would see in the training part of the diagram where we provide training services, you would see Tom’s name. (32:16) But then you’d look over at the coaching services we provide and oh my God, there’s Tom again. (32:22) And so Tom has accountabilities or responsibilities for both training and coaching.(32:31) So in an accountabilities diagram, you see people who have the same people have accountabilities or responsibilities in a lot of different places. (32:42) That’s very common. (32:43) And I thought about this and I was like, you know what, I need this at home too to show my wife, but that’s a different story. (32:50) So anyway, the other piece that I found interesting was of course governance. (32:57) Now I have not been a governance guy and I’m not here to lecture anyone on governance, but what this basically does is give us a picture of who is going to be on the committee or who is responsible for certain kinds of governance. (33:20) And so it’s a pretty simple map of who the different committees are and who’s responsible for these different activities. (33:30) It might be risk management, it might be audit, God only knows what it might be for your organization, but it’s basically a simple map of who’s doing what. (33:43) When we look at ways of working, this is where it starts to get fun. (33:48) And it also, I think it’s a little circular here because as soon as we talk about different ways of working, we need to kind of go back and look at some of the earlier things we described in terms of structure.(34:02) So Agile is a way of working, would you buy that? (34:06) And that has big impact on a lot of this stuff. (34:12) Now, how you describe agility, I’ll confess, I grabbed this diagram and said, ah, this says Agile to me, actually what it kind of says to me is Scrum, but it’s a way, it’s a picture that says, this is how we do our work, okay? (34:29) And I think that’s what we’re after. (34:32) I could also put a safe diagram in here and that might be adequate to, well, for some people, it would tell them how things work and for other people, they would be triggered. (34:45) But the idea is that we need to have a diagram that tells us what it means to start work on and deliver something from start to finish in terms of how we do that work. (35:01) So Agile, this is almost the style with which we do our work. (35:05) There’s Waterfall, that’s an option here too. (35:08) I would see this as a series of phase gates, very likely, right? (35:14) But it would not, it’s not a huge stretch to define what the different gates would be. (35:23) That’s, you know, those are fairly commonplace and I probably would grab a lot of my references from the PMBOK, honestly, and use those to define the different things that I’m gonna define here. (35:42) Lean and Lean Flow, that would be a good one. (35:46) That would have a very different way of, you know, that’s a style of working. (35:52) And I was tempted to say, well, you know, Agile and Scrum would be kind of, you know, lots of little mini releases and that would be a kind of, you know, two week cycles focusing on iteration.(36:06) Whereas with Lean Flow, I’d be looking at value streams. (36:09) I would be looking at things like flow metrics and I would be describing things in terms of, you know, the lead time that I’m able to sustain and those sorts of things. (36:24) I might even put a Kanban in here to describe the intake process, the refinement process, readiness, you know, work in progress and done, that sort of thing. (36:36) All of that would go into this description. (36:39) And to step back just a little bit, if I had, if I was using a lean way of working, then when I look back to structure, I’m probably looking at something that is organized in terms of value streams. (36:57) So this would have impact the kinds of structure that I’m using and the alternative is if I’m using, say, Agile, some form of scrum, for example, I might be looking at a product organization or I’d be oriented towards, I’d also be asking the question, should the organization be centralized or decentralized? (37:28) That also might play into this. (37:31) And that’s what I mean by this being a little bit circular. (37:34) The way of working has a profound impact, I think, on the decisions we make about the kind of structure we have, how, whether or not we’re centralized or decentralized, whether or not we’re organized in value streams or products or customer groups. (37:55) I think they might play into that. (37:59) And so this is where we kind of need to almost go back to the beginning again and say, assuming we’re a lean organization, assuming that we’re Agile, assuming that we’re Waterfall, how are we going to organize the rest of these pieces? (38:18) And of course, you can have a hybrid, which kind of makes me shudder, but it’s real.(38:27) There’s a lot of this out there. (38:30) And so if you’re using some sort of hybrid model where maybe you’re doing Waterfall up front for a big discovery phase, and then once you’ve done all your discovery, you switch into Scrum mode and do sprints. (38:44) And then once you’re done doing the implementation, you turn around and you do deployment in a more Waterfall fashion. (38:53) I’m quietly dying on the inside as I say this, but that’s also another model that you see frequently. (39:02) I think as someone’s already pointing out in large organizations. (39:06) And so I guess the thing to say here is that we want it to reflect what you’re actually using.(39:13) And so even if it depresses me a little bit, this might be the right answer. (39:19) And so I would rather have an honest portrayal of where we’re at than something that makes Tom happy. (39:30) Another topic that comes up here is what’s called capabilities, which is kind of a description of what sort of you’re able to do. (39:39) So this is capabilities as described for a finance organization. (39:45) And so it’s a breakdown of all of these, all of the different things that your different departments or different areas can accomplish. (39:56) And so it has the stuff that is typical for most organizations. (40:03) Strategic management is a capability we all need to have. (40:07) Customer relationships, got to have it. (40:10) So all of that is sort of standard. (40:12) And then the stuff on the right is specific to financial services. (40:19) So retail banking, investment banking, and the capabilities associated with those things. (40:26) This is an example of another capabilities map, and it was done for IKEA. (40:31) And it’s kind of fun because it describes… (40:35) I like this one better because it describes management capabilities, operating capabilities, and assets. (40:42) And then it puts them on this spectrum from the back office to customer facing. (40:49) And I find this much more useful. (40:52) This description I look at, and I’m like, this makes sense to me. (40:58) So it’s another way of describing what the essential capabilities of your organization are.(41:06) And I think another thing to highlight here is that you’re not necessarily going to be good at all of these things. (41:14) So what do we do if we want to start doing this? (41:20) If you want to build your own operating model for your organization? (41:25) And I decided to do this for HyperDrive. (41:29) I got it totally wrong. (41:33) And I’m sure the HyperDrive guys are going to kill me one day, but I’ve already started doodling this. (41:39) And it’s fun. (41:39) I have to tell you, you can put yourself at the top. (41:43) So Tom is at the very top. (41:44) It’s super cool. (41:45) So don’t forget to do that. (41:48) But before I go crazy, let’s look at this. (41:51) First thing I might start with is a business model canvas. (41:55) Business model canvas will have you basically pulling together a lot of the information you need to get started. (42:06) So this is not a bad place to go if you are looking for the inputs, all of the different pieces.(42:14) What is your business? (42:16) Who are your partners? (42:17) What are the value propositions, cost structures, revenue streams? (42:22) You need to know these things. (42:24) But then I found the operating model canvas. (42:27) And that was kind of cool. (42:29) And the thing I like about the operating model canvas is it’s simple. (42:34) And at the heart of it is a, what I think looks like a value stream, right? (42:41) And I tend to think as an Agile guy, I tend to think in terms of value streams and in terms of products. (42:48) And so I liked this as a simple mechanism. (42:52) I’m attracted to simplicity. (42:55) So I thought this was a nice way to start. (42:58) Who are our suppliers? (43:00) Where are our locations? (43:02) What are our products or value streams? (43:05) How are we organized? (43:07) What data do we need? (43:08) And how do we manage it? (43:10) And here’s an example of one that was filled out for McKinsey. (43:16) And so what this reminded me was that this is a collaborative activity. (43:23) I tend to forget that. (43:24) I’m very selfish. (43:25) I like to do all of this myself. (43:27) And so, because that way I can put myself at the top. (43:31) But realistically, all silliness aside, this I think is best if you can do, if you can put the operating model canvas into Miro or Mural or your tool of choice and then get your colleagues together and work with them with sticky notes in these different areas to figure out what these things are collectively. (43:57) I think there’s huge value in that. (43:59) And it’s probably not all that hard to do to get a first rough draft. (44:04) And you might uncover some very interesting insights. (44:08) And so this is the kind of thing that I think, and this came from a guy named Andrew Campbell. (44:16) So you can pull this down off of Google and other places. (44:20) And I think this would be a wonderful starting point for just a collaborative conversation. (44:25) Or if you’re a consultant and you’re doing discovery, well, golly, you could bring this up with the customer. (44:32) You could sit down with your customers and have them fill it out for you. (44:36) Because here’s the thing. (44:37) Most of the customers that I work with do not have a operating model spelled out. (44:44) Right? (44:45) The reason they hired me is because they’re a mess. (44:48) Right? (44:48) And so they typically don’t have everything all thought out here. (44:52) And so one of the early pieces of value we might be able to bring as consultants is to sit down with them and work through this together. (45:07) So make sure you outline the basics. (45:09) Who are the people? (45:11) What are the processes? (45:12) What are the tools and technology you’re using? (45:14) That’s a good starting point. (45:16) Keep it visual. (45:17) That may be my bias. (45:20) I’m very much a visually oriented kind of fella. (45:24) So I like to see it in a canvas. (45:28) I like to see it in a diagram. (45:30) I don’t like lots of text and you’ll lose me. (45:34) And make sure that everybody understands what the context is. (45:38) And what I mean by that is very simple. (45:41) Is this the current state? (45:43) Or is this the future state? (45:45) What are we describing? (45:48) And then I started to think about it and ask myself, how am I going to know if we did this right? (45:55) How am I going to test this and know that it’s a good operating model? (46:02) And so I made this up. (46:03) These questions here are Tom’s questions. (46:06) You may have better ones. (46:09) But I thought to myself, if I look at this operating model, can I tell who owns who to go to if I need help? (46:17) Where to go? (46:19) Can I tell what the products and services of this company are? (46:24) Can I tell how they’re delivered? (46:29) Am I able to identify what happens next at any given step in the process? (46:37) And do I have at least a high level picture of the kinds of tools and technologies that are in play? (46:48) So I offer you this completely in humility because, again, I’m sure there are lots of good questions that we could ask here. (46:57) But I thought, I need to know. (46:59) I need a way of validating this. (47:02) And so these questions were my attempt at that start. (47:10) So what’s the future hold for us? (47:13) I wanted to pause just a minute because I’m a geek. (47:16) And I read Frederick Leleu’s book, Reinventing Organizations. (47:21) And if you’ve read this book, he starts with the idea that organizational systems, organizations have been evolving for thousands of years. (47:35) And early organizations were led by basically brute strength and power. (47:42) And over time, as they became larger and more complex, you saw brute power turn into hierarchies and formalized hierarchies and divisions of labor, which turned into structures that looked a lot more like maybe family organizations. (48:01) And when I say family, I mean the mafia. (48:04) And then we get into the modern era where we have Taylorism and focusing on this sort of machine-like efficiency of the factory.(48:23) And ultimately, Leleu says, we’re evolving towards a more decentralized, team-based, sort of self-led organization, which he called the Teal Organization. (48:39) And this conversation is fascinating. (48:42) And it made me wonder if we could see a similar sort of evolution of operating models. (48:50) If we could describe the operating model of the early caveman Thor with his club, operating model, meaning if somebody challenges me, I bop them over the head. (49:02) And then you see the operating model for the early Roman army. (49:05) And then you see the operating model for the mafia, the operating model for the Taylorist organization. (49:11) And the question becomes, what is the operating model for the highly evolved, agile Teal Organization? (49:23) Thank you for listening to my TED talk. (49:25) It’s been great. (49:28) I know that’s a little hippy-dippy, but it’s fascinating. (49:32) And I think it is interesting. (49:34) And so is business agility going to be the new operating model here? (49:39) Are we going to be evolving from sort of these early forms of operating to something that looks like what we think of as business agility these days? (49:50) I’ll leave you that as a question. (49:53) And I think I’m out of time. (49:55) So thank you very much guys. (49:59) And you can wake up.
Speaker 2
(50:00) Great job. (50:01) Thank you. (50:05) Questions for Tom. (50:08) Thank you, Tom. (50:09) That was awesome.
Speaker 3
(50:14) And can we get a, I think someone mentioned how we get a copy of the presentation, please?
Speaker 2
(50:21) Yes, sir. (50:22) So Sherry Ann will be posting the video for sure on our website. (50:26) Sherry, how did the slides part work?
Speaker 4
(50:30) Yeah, I’ll be sending out an email probably in a couple of days with the PDF.
Speaker 2
(50:35) Thank you very much. (50:37) Other questions?
Speaker 1
(50:44) You know what? (50:44) This is kind of an operating model for HyperDrive right here.
Speaker 3
(50:48) There you go. (50:49) Love it. (50:53) Capabilities matrix, the capabilities. (50:55) Yeah, exactly.
Speaker 2
(50:59) And a lot of you probably didn’t know that we have these capabilities.
Speaker 1
(51:07) And here are some of the courses.
Speaker 2
(51:08) Yeah.
Speaker 1
(51:12) Well, thank you guys. (51:13) That was one of the more challenging talks I’ve ever had to do.(51:18) And thank you for staying awake. (51:19) I appreciate it and really enjoyed it.
Speaker 2
(51:22) So thanks everyone. (51:23) Appreciate you. (51:24) And we will see you next month. (51:28) Sherry, what’s our topic for next month? (51:30) I know I’m in September doing metrics.(51:32) Who’s going in August?
Speaker 4
(51:34) We have Stacey Louie speaking on budgeting.
Speaker 2
(51:39) Look at that. (51:42) Budgeting as a capability. (51:44) As a capability. (51:49) It’s hard to keep people hooked and enthralled in an operating model talk. (51:55) Stacey’s going to have to do it with budgeting. (51:57) But you know what? (51:58) I’ve seen him give other talks that should have been snoozers and they were amazing.(52:02) So Stacey, I know you’re going to do a great job. (52:04) It’ll be a lot of fun. (52:06) And then you’ll all see me in September where we’re going to talk about metrics. (52:10) So stay tuned. (52:11) We really appreciate y’all. (52:13) And we love hanging out with you. (52:14) So we’ll catch you next month.