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How to build a Product Based Agile Operating Model

Never before have organisations been faced with such pressure to deliver new products to market quickly, to not just grow, but to survive. To adapt and change to meet constant changing market conditions organisations have found that they are not organised to “win” and need to rethink how they approach setting up their organisations. Moving from a project to a product-based model is vital for their business agility as a more modern way of operating is needed that links strategy to the detailed organisational design. Product based operating model focus on people internally within the organisation and the customers they serve.

There are six key elements of an operating model that helps organisations move away from traditional project-based model with its associated rigid organisational structure and centralised decision making, to one that is product based and shifts the focus from deliverables to value.

6 Elements of an Operating Model

Structure

Boundaries for lines of business and defining shared services to leverage scale and expertise

Accountabilities

Defining the agile roles and responsibilities and how self organisation will work

Capabilities

Combining people, process and technology in a repeatable way to deliver desired outcomes

Governance

Executive forums and processes that yield decisions on strategic priorities

Ways of Working

Expected cultural norms for how people collaborate, especially across the boundaries between functions or teams

Metrics

Aligning metrics around key clear strategic objectives and priorities.

These elements  all work together as a bridge between strategy and operations and lead to new ways of working that “stick” and create real organisational change. The principles of an operating framework include:

  • A combination of custom talent, processes and capabilities that dictate how the organisation works, and how people within the organisation work together
  • Serves as the vital link between company’s strategy and the detailed organisation design that it puts in place to deliver on the strategy
  • Designed so that organisational structure, accountabilities, governance and employee behaviours, along with the right people, processes and technology, all work together to support the strategic priorities

Operating Framework Blueprint

An operating model dictates where and how the critical work gets done across an organisation. It is important to define a consistent and appropriate operating model before making detailed changes to an organisation’s design. This is a change to ways of working and needs to ensure all elements of the framework are based on the nature of the organsiation’s products, capabilities and culture to understand where there is potential for either greater localisation or greater globalisation.

organisational operating model 2021

Agile organisations adapt their operating model success by applying their core assets, greatest strengths and processes in new contexts—thereby generating further growth and profits. Furthermore, the right operating model carefully considers a company’s DNA, culture, values and management philosophy and builds upon what is working well and what needs to change. This means creating a network of teams operating in rapid learning and decision-making cycles to combine adaptability with stability and efficiency.

Don’t Just Fund Projects

“Got funding for an idea? – Great let’s set up a project” is an all too familiar path that many organisations follow. They may set up agile teams but continue to enforce project management governance and organisational reporting lines built around cost coding for the project. These siloed structural hierarchies with complex governance at the apex, hinder decision flows and ultimately lead to a “hybrid” type agile implementation that is agile at the team build level only. There is no leadership support for true organisational change. Over time, the organisation quickly reverts back to a project based traditional waterfall model. 

As the lessons of COVID pandemic of the last couple of years have highlighted, organisations are quickly coming face to face with the reality that what may have helped them be successful in the past, may not serve them now.  A new strategy is needed to be able to pivot and respond and an operating model based on products and value will help ensure there is a vital link between the organsiation’s strategy and its organisational design to set them up to deliver on the strategy.

Build Product based Operating Models

Rethinking how and where critical work gets done may sound daunting, but organisations that apply elements are able to make the important changes—addressing their biggest pain points.

Adopting an agile  product based operating model can alleviate challenges in the current organisation (such as unclear accountabilities, problematic interfaces, or slow decision making), yet a desire to address pain points is not enough. We need to fundamentally transform the organisation to compete in the future.

Focusing on products and how value flows to the customer will help ultimately ensure the organisations is more likely to succeed in transforming their business. A product based operating model will help ensure decisions are made more quickly, talent and assets are deployed in the right places and improve performance.

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