I wrote on this some time ago (see here) and now there is a short video of a presentation on a key concept of the book: the operating model.
An Operating Model offers a means or a framework for understanding and then describing a company’s way of doing business. Interesting information, but useful only if one intends to do something with it.
The model abstracts a business or enterprise to such a level to be useful only to senior executives and only if they buy into it. I’m not sure why they would need such a model and if they did would that say more about their failure to understand how their company works than as a tool for effective inquiry into the issues faced by an organization?
Yet if such a model was to be developed I suspect agreement would be proportional to the impact on individual scorecard objectives. Granted one might expect scorecard objectives to be aligned with the operating model (if there was one) but in reality those objectives would be aligned with financial or softer goals such as customer satisfaction.
It is scorecard objectives that would prescribe what the actual operating model is and I’m quite sure that these would be fully understood as executive income would be directly tied to it. Having the operating model written down is useful for posterity, auditors and government agencies that seem to want to make sure business is doing whatever it is they do properly. However the actual operating model is usually quite dynamic and responsive to market pressures so any documentation would be time-sensitive. In the worst case such a framework represents a straight jacket tying a business into ineffective and unresponsive processes and controls.
While some might find irony that the presenter selected Delta Airlines as an example, another interpretation is spending time on such efforts is completely misdirected and a manifestation of a general incompetents and lack of ability. This single instance of focusing on the useless may be only the tip of an iceberg of misdirected efforts rampant across the firm. May be companies that develop such pictures of their operating model feel that by doing so they have actually accomplished the tasks; are able to execute. It leaves them with a false sense of security that they know what they are doing. I suspect that companies that can actually execute effectively and know what they are doing don’t need the model.
That’s the real issue. A successful company, with a clear business vision, stated in an understandable and executable form doesn’t need to draw pictures. It needs good management to execute effectively, tight leadership to keep things on focus, strategic thinking to look out for what’s coming down the road and capable employees that can execute.
Drawing the picture is useful to communicate to those that are developing a support system and auditors to demonstrate you know what you’re doing. But unless it is actionable and it can form a basis for consistent decision making towards some goal it’s not strategy.
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