Network Operating Model: How To Design, Build & Embed An Agile Operating Platform Geared For Mounting Complexity & Rapid Change...

Setting The Scene

Perched in Starbucks, I was humming away reading a John Kotter book called XLR8. The thrust of the book focused on the creation of a Dual Operating System designed to handle today’s business-as-usual in a traditionally efficient (hierarchical) way, while at the same time operating a parallel highly agile and innovation-friendly structure wired to capitalise on tomorrows future opportunities.

Kotter, an internationally respected Harvard Business School Professor, goes on to explain the value of developing two parallel-interconnected systems that provide distinctly different operational characteristics: a traditional hierarchical system and a parallel network system. Kotter then continues to unpack the value of both systems alongside the importance of both systems working in parallel together: explaining that the traditional hierarchical system is necessary to make the trains run on time – and efficiently, while the network system focuses on staying ahead of the accelerating change threat.

While I agreed with much of Professor Kotter’s thinking; from a practitioner’s perspective, having collected many scars and the lessons that only failure can teach, there were some insights around the (practical) application and delivery of an agile operating system that I felt would be helpful to share.

When I overlaid my own strategic change experience and compared notes with the agile operating model approach that my team and I have developed at AllChange, I confess I struggled with some of the concepts within the book from a ‘how can it be practically applied’ point of view. Yes, my challenge in understanding may be related to limited intellectual capacity. However, when I also cast my mind back to when I led teams through complex change, I recall that I often had to make critical decisions in pressured environments where ambiguity, uncertainty and a lack of the big picture ruled the day. I recollect that when I read books on Strategy and Change back-then, I often found it a real challenge to translate the theoretical nuggets of wisdom into easily-applicable action that I could use back at work: this is why I feel there is value in sharing the following Network Operating Model know-how.

“It ain’t what you do it’s the way that you do it, that’s what gets results!”
Bananarama

The How Is Just As Important As The What

I have been privileged to work in complex and challenging change environments across a range of industry and consulting roles. As previously stated, during this time I have collected many scars and the lessons that only-failure can teach. Through repetition I have found a fundamental truth: ‘how’ you approach ‘change’ is just as important as ‘what‘ you do and ‘what‘ you think.

Throughout the following article, I will endeavour to build on the Next-Generation Operating Model ‘secret sauce’ formula published previously – all of the thinking applies. I will also do my level best to unpack the following Network Operating Model design thinking in a practical and accessible way.

“Its not the strongest species that survives, nor the most intelligent, but the most responsive to change.”
Charles Darwin

To Operate Differently, Leaders Have To Think Different

‘Strategy’ isn’t easy. Today, strategy is being viewed through a much more dynamic lens than in past years… alongside the annual strategy refresh, to keep pace with change, strategic planning is morphing into a continuous iterative process.

But, with business changing quickly and technology even faster, the traditional organisational structures and processes are no longer capable of responding to a world of mounting complexity, rapid change and ambiguity. To navigate the accelerating change threat successfully, the operating model needs to become agile.

It’s Not The Technology Holding Us Back

It’s not the technology holding us back; it’s the lack of clear (quality) upfront thinking – as well as the limitations of our imagination.

With the Fourth Industrial Revolution upon us (right now), entire systems of production, distribution and consumption are transforming people’s lives. To develop a business-ready next-generation (agile) Network Operating Model, we need to focus on answering the following question:

“How can technological progress drive enhanced value creation through game-changing technologies that ensure inclusivity, connectivity and responsiveness?”
AllChange Strategic Consulting

To ensure success in the midst of digital disruption, there will be a premium placed on innovation, a willingness of organisations to disrupt themselves, a quest for active collaboration and a commitment to advance comprehensive value creation strategies. In the context of this seismic change, we need to envision and shape a future where technology is firmly-embedded in people’s lives, making their daily experiences simpler, highly personal, more rewarding and on demand.

Envisioning The Future Organisation

A significant part of the operating model design process involves envisioning what the organisation will look and feel like in the future, including how technology will transform the workplace. As technology advances, with the tidal wave of new technology available, ‘people’ not technology will become the focus of the workplace. Employers will want creative people who can apply the technology in new innovative ways. The current ways-of-working will be transformed with different skills required alongside a premium placed on complex problem solving, creativity and innovation.

In an ideal world, everyone will be contributing their creativity, sharing ideas and linking-up their different knowledge-sets to help take the organisation where it is trying to go. In today’s challenging business environment, how organisations approach mobilising ‘high involvement innovation’ is increasingly becoming a critical element of agile operating model design.

New technology will require new delivery models and new styles of leadership. How we deliver change is being transformed from large complex waterfall projects, delivering large monolithic changes over long cycle times to smaller agile teams delivering smaller functional changes in shorter cycle times. IT Transformation is moving towards DevOps and agile structures and ways of working, to work more closely with the businesses we serve, and enable us to have a bigger positive impact at pace.

With respect to envisioning the future organisation and relating this back to agile operating model design, I have selected the most common topics that come up during my conversations with leaders:

Creating Value In your Ecosystem

Ecosystems are loose networks of interdependent organisations or people. If you follow the logic that not all the worlds’ best people work within your organisation, this creates the driver to tap into the outside world more proactively. Many leaders often exclude this thinking from the strategic planning process because they often don’t think this is possible – or lack the know-how – or fear being overwhelmed by too many interactions. But to develop an organisation and reduce its business risk, the leadership team needs to figure out the best way to leverage the ecosystem in which the organisation is a player.

“Harnessing the Collective Intelligence of our people and wider ecosystem is a crucial step to becoming more agile, accelerating our creativity, and solving problems at high speed.”
Colin Nelson, Hype Innovation

To build ecosystem advantage requires the creation of a network of relationships, interfaces and processes that can deliver value to the end customer more efficiently by connecting complementary participants to each other. These loose networks – of suppliers, distributors, outsourcing firms, academia, makers of related products or services, technology providers, and a host of other organisations – affect, and are affected by, the creation and delivery of an organisations own offering.

Visualising What Going Digital Looks & Feels Like

Those of you who are experienced with digital transformation understand that the ‘customer journey‘, ‘operating model‘ and ‘going digital’ share a common requirement. They all require you to understand how the people operate in the real world.

Digitalisation is fundamentally about ‘people’…

Getting your people, culture and the organisation mindset fully engaged and embracing the new digital way-of-working (and thinking) is critical for a successful digital transformation.

Understanding the difference digital makes to peoples lives and being able to visualise and articulate the experience in a way that design teams can unpack, increases the likelihood of building a digital experience the end-user needs – and when they need it.

Example techniques I regularly use to visualise what digital looks and feels like include strategic narrative, story-boarding and scenario visualisation. These techniques are incredibly collaborative and enable technical and non-technical stakeholders to engage in the design debate to co-create a better future together.

Taking A Customer Journey Approach To Operating Model Design

Taking an enterprise-wide focus on customer journeys is crucial because it allows the organisation to arrange itself around customer needs, which can provide distinctive sources of value at the core of the operating model. McKinsey suggest that the implementation of the new operating model can be accelerated by establishing great customer journeys through three actions that need to be carried out at the same time: continually improving end-to-end customer journeys with a clean-sheet approach (aka visualising the ideal organisation), integrating technology with operations by testing and learning, and establishing agile ways of working through teams focused on specific journeys.

The Innovation Dividend

The chance to work at scale, the embedding of a rigorous process model that provides a structured route for moving from idea to implementation and value creation, and knowledge management offer a powerful boost to the concept of high involvement innovation. There’s an evolutionary aspect to the way in which platforms have developed, moving from simple support for ideation to creating a robust innovation infrastructure within and even beyond the organisation. Next-generation operating models need to integrate innovation infrastructure that promotes, support and enable the innovation process from ideation to value creation.

Business Capability

Tasks performed by humans are increasingly becoming more complex, whether it’s accessing information in multiple formats from multiple sources or responding to changing market and customer dynamics at ever-increasing speeds. We are living through a fundamental transformation in the way we work. Automation and ‘thinking machines’ are replacing human tasks, changing the skills that organisations are looking for in their people. In order to succeed, organisations will need a system to continually monitor and synchronise their strategies, initiatives and performance.

Each organisations path to a new more agile operating model is unique. But successful transformations include a similar set of design considerations, these are:

A common team approach – including defining clear decision rights, roles, responsibilities, accountabilities and team ways-of-working; and
A common communications approach – in particular with document management. This specifically refers to ensuring relevant strategic intent/thinking is clearly referenced within all appropriate documented artifacts.
Autonomous and cross-functional teams anchored in customer journeys and value creation
Flexible and modular architecture, infrastructure, and software environment
A management approach that connects clear strategies to outcomes across the organisation, with tight feedback loops
Agile, customer-centric culture and way-of-working demonstrated at all levels and role modeled from the top

For organisation’s to compete, thrive and survive in the era of digitally driven, on-demand, mobile and customer driven markets, IT Transformation is moving towards DevOps, agile structures and agile ways of working.

High performing organisations built on agile technologies are revolutionising global industries, sweeping aside traditional industry leaders through their ability to innovate and interact ‘on-demand’ with customers through digital interfaces.

Technology teams are increasingly being organised for fast delivery of high quality software. Operations teams are working closely with development teams to meet the needs of the business in order to deploy software and services better, faster and cheaper.

Figure 2 illustrates how IT can be arranged to deliver value creation in a very targeted way. The model provides a line of sight that helps identify which business processes support value creation (aka capabilities), as well as identify which applications support the business processes. The main thing to bear in mind is that all activity is connected to strategic intent (explicitly connecting thinking to doing).

“We cannot ignore the daily demands of running a company, which traditional hierarchies and managerial processes can still do very well. What they do not do well is identify the most important hazards and opportunities early enough, formulate creative strategic initiatives nimbly enough, and implement them fast enough.”
John Kotter, Harvard

Visualisation, Design & Implementation

Shortly after commencing a new project, once the project scope, logistics and participants have been agreed, I transition to activity with the following design thinking in mind:

Orienting everyone to a different, highly creative and collaborative way of working – including the use of visualisation, visual thinking and corporate story-telling (aka strategic narrative); and
Commence the process of producing a range of practical tools that start the iterative visualisation process – designed to stimulate creativity, ideas, big-picture thinking… and produce ‘meaning’.

One example tool that I use is called a Blueprint Concept Board (see figure 3). The concept board allows me to:

Collaboratively walk through the operating model visualisation process, so that everyone is clear what we are all working towards;
Clarify what an operating model ‘is’ and ‘does’; and
Clarify the detailed critical path steps required to deliver a fit-for-purpose (agile) Network Operating Model.

The Blueprint Concept Board Explained

Level 1 – Delivery & Impact

Level 1 tells the story how the organisation will create value through its enhanced internal and external relationships. The organisations purpose, mission, vision, strategic imperatives and values are connected to a stakeholder landscape – bringing the organisations reason for being to life through blended mix of high-level big picture and deep-dive scenario-based value stories.

Level 2 – Network Connectivity

Level 2 illustrates how the network is built. It provides a practical mechanism for people to visualise the organisation from multiple dimensions, describing how the organisation does business ‘now’ and in the ‘future’, including reflecting how the people will need to operate in the real world.

Level 2 features the operating model moving parts including people, process, systems and technology required to bring the corporate vision and strategy to life. Network design is arranged around the organisations Decision Value Chain and Customer Journeys with the prime intention of shortening the gap between decision-making and value creation.

Level 3 – Capacity & Capability

Level 3 is focused on ensuring ‘thinking’ leads to ‘doing’. It features all the dimensions that inform and guide ‘change roadmap’ development.

Level 3 is the operational manifestation of the corporate vision and strategy – what the organisation wants to do, how it wants to do it, where, when, who-with and who-to.

Level 4 – Visualisation, Design & Planning

Level 4 illustrates the strategic delivery planning process. It provides an aide memoire of the critical path activity required to visualise, design, build, implement and embed a successful and sustainable Network Operating Model… that is business ready and adopted.

Network Operating Model Architecture

The Network Operating Model is similar to Kotter’s ‘Dual Operating System’ in as much as it is designed to handle the daily demands of running a company in a traditionally efficient ‘hierarchical’ way – while also operating a highly responsive and innovation-friendly structure wired to navigate difficult change at pace.

Unlike the Dual Operating System, the Network Operating Model is what it says on the tin – a single network with three kinds of interconnected structure that act similar to communication/redistribution nodes:

The Parent Organisation (aka Mothership) is designed to facilitate extensive control of the whole network. The Mothership structure is hierarchical with a focus on disseminating and supporting the on-time completion of strategies that support the whole network purpose (aka mission, vision and strategic imperatives) – delivering the clearly defined outcomes that fulfil the collective organisations reason for being.
The Sub-organisation (aka Advance Base) is designed to align with the Mothership strategic intent while facilitating localised control on the Advance Base and associated Enterprise Cells downstream. The Advance Base is hierarchical but with a distinctive Identity that focuses on disseminating and supporting the on-time completion of strategies that align with the Mothership direction and Advance Base individual identity – delivering the clearly defined outcomes that align with the Mothership and fulfil the Advance Base reason for being.

The Enterprise Cell (aka Satellite) is designed to come together and disband as required. The Satellite structure is distinctly network oriented with ‘founders’ acting as the central guiding force. The Satellite structure mimics how successful new venture enterprises operate during their start-up phase. Activity is opportunity seeking and guided by a vision that the team buy into. Much of the work that demands innovation, agility, difficult change or strategic initiatives executed quickly are-shifted to the Satellite part of the network. Teams are typically made up of an outcast crew of intrepid explorers, resourceful free thinkers and progressive minds – people that are prepared to back their ideas, take courageous leaps of faith – and with a collective single-minded discipline that is wired to deliver value at pace.The network is visualised and built by separating the network architecture into three areas that are woven together: ‘physical’, ‘structural’ and ‘intellectual’. Taking this deconstructive approach simplifies complexity into parts when following the AllChange vision-led design process. Clear agreed terms of reference (the strategic narrative) informs and guides the collaborative and co-creative visualisation activities that articulate how the network will form (take shape), behave (character) and operate (perform/create value).

Strategic Narrative

I have found the strategic narrative to be a valuable tool to support operating model development. Alongside providing a whole-system capability, it tackles a whole range of things required to build a fit-for-purpose and business-ready outcome. For brevity reasons I will list the top three benefits:

The strategic narrative is a powerful mechanism to generate a shared senior leadership consensus view of the past, current and future state. Gaining an on-message senior team always accelerates follow-on operating model design and implementation because everyone is working on the same page with a clear agreed mandate to proceed.
The strategic narrative places a practical container on the strategic intent. Providing clear and meaningful terms of reference wired to inform operating model visualisation, design, planning and implementation. The story format provides meaning to design teams, making the thinking (aka strategic intent, technical concepts and creative ideas) more accessible – so the narrative can be easily unpacked and explored.
The strategic narrative is capable of articulating the new strategic direction to the wider organisation and key external stakeholder audiences in an accessible, user-friendly and richly meaningful way – connecting the head and heart to the new initiative in equal measure – providing a clear ‘north star’ for everyone to align behind.

The Strategic Narrative Value:

Strategic Narrative is a powerful tool that captures strategic intent, complex technical concepts and creative ideas in a way that everyone can understand, identify with and believe in. It is also capable of:

Translating strategy into meaningful execution;
Generating a mandated consensus leadership view – with full executive sponsorship;
Providing clear leadership direction. Enabling the leadership to implement effective joined-up oversight across the organisation in a practical and engaging way;
Providing a governance framework (with decision rules) that describe what success looks and feels like – informing and guiding decision-making, ways-of-working and behaviour;
Providing clear terms of reference for project and business design teams to unpack;
Positioning and facilitating the change in a respectful way;
Accelerating engagement by helping leaders appear more human when communicating the story;
Creating an inclusive environment;
Reinforcing key strategic messages and company values; and
Helping employees retain the key information required to execute.

The Iterative Process: Connecting Visualisation To Business-As-Usual

During operating model development, to ensure ‘thinking’ connects with ‘doing’ a project ‘war’ room is set-up to ensure the project teams and other key stakeholders are on the same page.

To facilitate exploratory dialogue across the organisation and ensure the operating model thinking connects with the organisations day-to-day, a purpose-built centralised visual project meeting space is set up to promote exploratory design thinking, collaboration, knowledge-transfer and teamwork.

With the aim of developing business ready outcomes, all key stakeholders are involved in the design debate. A premium is placed on visual thinking as the prime mechanism to engage technical and non-technical stakeholders in the solution design. The combined use of story and picture removes abstract, technical jargon and management-speak – ensuring everyone is clear, with all thinking and activity joined-up (see Fig. 10 below).

Some Guidance To Get You Started

Organisations are built for people. The more visionary, meaningful, collaborative and inclusive your methods; the better your operating model will be.

I have highlighted a few select take-aways alongside sketching the indicative steps to produce a fit-for-purpose agile network-operating model. The guidance is based on my hard-earned real-world experience of what works:

Visual Thinking

The use of visual thinking is an effective way to resolve complexity and confusion in groups that arise from inadequate or conflicting mental models. This is crucial when the models involve our ideas of how work gets done, how teams co-operate, how decisions are made, how people organise and learn. Much of our understanding of systems and how things work together is represented through visual imagery – this capability is extremely valuable when collaboratively designing and building the Network Operating Model. A large amount of time in meetings is spent working out these differences. Using visual thinking techniques accelerate the process of getting the upfront design thinking right, and in a highly collaborative and efficient way.

Clarity of Direction With Clear Terms of Reference

Strategy execution is a journey, as much as a process. All organisations need to know ‘where’ they want to get to before they set off on the journey. Continually planning for ‘what’ you are going to do without knowing, or fully understanding ‘what’ you want to achieve, will result in disappointment.

Systems Thinking

To control a system, you have to have an accurate model of how it works (ref: Conant-Ashby Cybernetics Theorem) – for an operating model to be effective, it needs to accurately capture the multi-dimensional organisation characteristics that inform operating model design and build. Effective operating models need to incorporate how the organisation does business now and in the future, as well as accurately reflect how the people operate in the real world.

Summary steps to developing an agile Network Operating Model that is business-ready and adopted:

Step 1: Produce a single, cohesive, overarching strategic narrative to inform the delivery of the journey of change.
Step 2: (If appropriate) produce additional ‘identity-based’ strategic narratives for selected organisation areas.
Step 3: Unpack the strategic narrative to explicitly connect strategic intent to action (connecting thinking to doing).
Step 4: Develop a common agreed approach to operating model design, with agreed terms of reference, language and definitions.
Step 5: Build a hi-level (multi-dimensional) operating model, taking a network approach utilising collaborative visualisation techniques – with an emphasis placed on achieving simplification through visual design.
Step 6: Develop guidance/instructional materials and enforce guidelines when rolled-out to ensure consistent best practice is applied. This should include:-

A common team approach – including defining clear decision rights, roles, responsibilities, accountabilities and team ways-of-working; and
A common communications approach – in particular with document management. This specifically refers to ensuring relevant strategic intent/thinking is clearly referenced within all appropriate documented artifacts.

Step 7: Update all existing document artifacts and review previous content to ensure the design is consistent.

Final Thought

Circling back to my reading Kotter’s book in Starbucks, there are no prizes for guessing the tune I was humming…

“It ain’t what you do it’s the way that you do it, that’s what gets results!”

When developing your operating model, to gain optimal buy-in and adoption, please remember that ‘how‘ you approach the design and build is just as important as ‘what‘ you do.