Business structures need to adapt to transformational technologies to derive benefits from low-code and automation.

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Disclaimer: this blog post is based on the session CIO Talks: Leading An Operating Model Change. For the full conversation, jump to the webinar.

The failure of famous businesses, some of which have become common parlance, is often attributed to technology. Blockbuster and Kodak are now the poster children of digital disruption, but it was more than the invention of the digital camera and streaming that led to the demise of these businesses. Within these businesses, the operating model was unable to allow adaptation to a new market force.

Creating a new operating model to reflect the digitization of society and vertical markets is something CIOs regularly find themselves involved in. The reason being an operating model change in the 2020s involves the three staples of business technology leadership: people, process and technology.

“There are significant risks if organizations fail to adapt to the macroeconomic situation that is out there; somebody else will come along and eat their lunch,” says Adrian Wakefield, founder of Transforming IT and a CIO from the manufacturing sector.

Carolyn Lees, CIO for the British Medical Association (BMA), adds that all vertical markets only have to look at the transformation that has taken place in financial services to see why a change in the operating model is vital. “The incredible flexibility and pace, versus the structure of the traditional banks,” she says of improved customer services that challenger banks offer.

The digitization that has been taking place, and was vastly accelerated by the pandemic, means operating models that, until now, have stood the test of time are no longer fit for purpose in the digital age.

“Those structures were based on what groups and teams could reasonably cope with and manage. Those constraints are not as significant in the digital world,” Wakefield says of how technologies such as automation and low-code have stripped away repetitive tasks or integrated parts of business processes to make organizations more streamlined.

“In a consumer-driven market, the access to a lot of choices will force businesses to be more competitive, and that is the point where the business will question its operating model,” Lees says of how the new landscape is changing outlooks.

“No matter how you operate, you have to be responsive to a very changed environment in terms of your customer base,” she says. “Fundamentally, if you are standing still, then you are going backwards. Change is triggered with an inflexion point, whether a merger, acquisition or customer demand. The key thing is to be responsive to what is changing across the organization,” Wakefield adds.

Adrian Wakefield quote 

TOMs, DOMs and to Infinity

Lees describes operating models as: “the organization saying this is what we need to do in order to function. The struggle for many organizations is that the functional needs are changing as a result of digitization - Blockbuster customers no longer needed a video store, and Kodak witnessed falling photography film sales.

This is why organizations are developing new operating models. Lees adds that a target operating model (TOM) implies that the target moves. Wakefield says that digitization means that operating models now need a large focus on experience, whereas, in the past, they were about business processes.

“If you are not focusing on experience, then people will go to where there is a better experience. So a new operating model must include experience, resilience and flexibility. He adds that changing the operating model of an organization is not a one off, it is a constant for organizations today.

“There has to be a recognition that the way of working we have for today is not suitable, so something has to change. The target of a TOM comes from the change of moving from the current situation to the future situation.”

Lees reminds CIOs that the challenger businesses don’t have large operating models but a culture of iterative change that is always in play. “They are living in a DevOps model and refreshing and changing accordingly, but that is not so easy if you are an organization that is rigid.”

Delivering and Leading Operating Model Change

“The paperwork is only there to help people to understand the new operating model. It frames the conversation to allow people to talk around it,” Wakefield says of both the importance of an operating model document and avoiding it becoming just another strategy document sat in a drawer.

“You have a prime opportunity to engage, create and collaborate, so you can build bridges and break down silos,” adds Lees. “I encourage several of my team to reach out and engage with different parts of the organization. All of this helps build bridges,” she says.

Lees says that the delivery of a new operating model must be closely measured. “Operating means a transaction, with inputs and outputs and the only way you will know if you are succeeding is if you measure. The failure to measure adequately and to respond to measurements is what causes things to go wrong or not progress,” she says.

Carolyn Lees quote 

As leaders, Wakefield says it is vital that CIOs and CTOs set out clearly what the organization wants to achieve in an operating model change. Leading operating model changes often involve CIOs, Lees says this is due to CIOs having “a number of levers for change” across the organization, but both say it is vital change is delivered in cross-functional teams.

Lees says a key part of any change in leadership is to assess the capabilities of the organization, which Wakefield agrees with: “It removes some of the emotion”. Lees says: “If you don’t have the capability discussion, then you are setting yourself up to fail.”

Technology, in particular software applications, has changed the way we live and work and will continue to do so; therefore it is inevitable that the structures and processes of our organizations must continue to evolve.

If operating models don’t change, then businesses cannot reap the full benefits of transformational technologies such as automation, low-code, AI and ML.

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