When organisations embark on an operating model transformation as part of their data strategy, they often make a crucial misstep: they focus too much on mapping out their current (AS-IS) state and envisioning their future (TO-BE) state without understanding the context that led to their current operating model in the first place. While it’s important to know where you are and where you want to go, skipping over the organisation’s journey to the present can lead to repeating old mistakes or overlooking what’s already working well.
Many organisations dive into operating model assessments with enthusiasm, aiming to design something new and more effective. However, few take the time to ask a critical question: How did we get here, and what specific problems was the current model originally designed to solve?
Understanding this backstory is essential. Without it, many transformations are destined to fall into the same traps that derailed previous efforts. To truly transform your organisation, you need to revisit the intent and outcomes of the prior operating model. This provides the necessary insight to anchor the new design in a way that builds on existing strengths while addressing areas that need improvement.
The Star Model: Aligning Key Components for Success
In navigating this terrain, Jay Galbraith’s Star Model provides a valuable framework for understanding how an organisation’s key elements work together. The Star Model emphasises five critical components that must be aligned to create an effective operating model:
- Strategy: The direction and goals of the organisation
- Structure: The roles, responsibilities, and hierarchy that support the strategy
- Processes: The flow of information and resources throughout the organisation
- Rewards: The incentives and motivations that drive behaviour
- People: The skills, mindset, and culture of the workforce
Each of these elements must complement one another. For example, it’s not enough to have a clear strategy if the organisational structure doesn’t support it. Likewise, processes must efficiently support the movement of information and resources, while rewards must reinforce the behaviours that drive success. And of course, people—at the core of any business—must be equipped with the right skills and mindset to thrive within the operating model.
What I particularly appreciate about the Star Model is how it highlights the importance of understanding why previous configurations existed. It invites organisations to consider the historical factors that shaped current structures and processes, as well as the goals they were meant to achieve. Were changes made to improve efficiency, cut costs, or drive innovation? Did those changes achieve their intended results, or did they introduce new challenges that need to be addressed in the next iteration?
A Musical Analogy for Organisational Design
To better illustrate this concept, think of an organisation as an orchestra. Each musician plays a vital role, but the music only comes together when everyone is in sync. The conductor leads the tempo and coordinates the musicians, but their success depends on understanding the strengths of the players, the history of the piece, and the desired outcome of the performance.
In much the same way, organisational design isn’t just about who plays what role (structure) or following a rigid set of instructions (process). It’s about understanding why certain arrangements were made in the first place and whether they still serve the organisation’s current needs.
For example, were structural changes made to address a particular problem, such as speeding up decision-making or reducing costs? If so, did those changes work, or did they inadvertently create new bottlenecks? By asking these questions, organisations can gain a deeper understanding of what’s working in their current model and what isn’t. This insight is essential to avoid repeating past mistakes and to ensure that the new model is designed to meet today’s challenges.
EOS and Alternative Approaches
In exploring operating model design, it’s worth mentioning the Entrepreneurial Operating System (EOS), a popular framework used by many businesses to streamline their operations. EOS focuses on six key components—vision, people, data, issues, processes, and traction—helping businesses create a strong foundation for growth by aligning these areas.
While EOS is effective, it’s not the only approach. Alternatives like the McKinsey 7S Framework or the Balanced Scorecard can also be useful, depending on the organisation’s specific needs and goals. The key is to choose an approach that aligns with the organisation’s strategic objectives and provides a holistic view of the factors influencing performance.
Conclusion: Learn from the Past to Design for the Future
The real magic in operating model design lies in understanding the backstory of how the organisation arrived at its current state. This is where models like Galbraith’s Star Model shine, providing a framework for analysing past decisions and their outcomes. By understanding the historical context and the specific problems the current operating model was designed to solve, organisations can design a future model that builds on success and avoids repeating mistakes.
So, next time you’re assessing your operating model, don’t just focus on the present or the future. Ask yourself: What problem were we trying to solve with our last design, and did we solve it? By answering this question, you’ll be better equipped to design an operating model that truly aligns with your strategy and drives lasting success.
