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Strategy • Execution • PerformanceCreating Value in a Complex World
The Operating Model Imperative for Operations ExcellenceProcess Excellence Week 2016
Wilson Perumal & Company, Inc.
Right Offering
& Markets
OptimizedOperating
Model
Effective Processes & Procedures
Culture of Operational
Discipline
Leading Performance
Sound Strategy
Operational Excellence
Achieving Success Means…
Wilson Perumal & Company, Inc.
“We may get from 1500 to 1400 through continuous improvement, but we will need to think differently to get to 1300”
-COO Energy Services
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Companies As Complex Systems
1. Non-linear reactions3. Unknown interactions
2. Many feedback loops4. Emerging properties
Many companies are passing a complexity threshold
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VALUE
COST & RISK$
More and more companies are
now here New Channels & Formats
Expanded Geographies
New Acquisitions
BiggerPortfolios
MoreCustomers
More Regulation
IncreasingCompetition
More Suppliers &
Partners
Complexity is introduced in many waysComplexity is the opposite of scale
Wilson Perumal & Company, Inc.
Assets
Suppliers/Partners
Governance Model
Technology Architecture
Processes Architecture
Operating Model
Execution
Strategy Foundation
Framework
Organization Structure
The foundation for your strategy, the framework in which you operate
Wilson Perumal & Company, Inc.
“We have tried improving in a variety of ways, but we are still struggling to deliver what our customer (C-suite) wants”
-SVP FP&A Global Banking
Wilson Perumal & Company, Inc.
Operating models must evolve
Industry Characterization Strategic Orientation
RegulatedUnregulated
ExpandingShrinking
High BarriersLow Barriers
Innovation-drivenStable Technology
Capital IntensiveLabor Intensive
Many Customers & Channels
Few Customers & Channels
Product HeterogeneityProduct Homogeny
Regulation
Overall Market
Entry
Innovation
Assets
Markets
Variety
Environmental ContextChanges
Value Propositions Change
Low-cost ProviderProviding customers products at the lowest cost—focus on high-volume, efficiency & repeatable processes
Technology LeaderProviding customers cutting edge, advanced products—focus on research & customer-driven product updates
Customer Service FocusProviding customers personalized service —focus on meeting the individual needs of your customers
Inte
rnal
Exte
rnal
9Wilson Perumal & Company, Inc.
Financial Targets
Strategic Initiatives
Required Capabilities
Core End-to-End Processes
5% Annual Revenue Growth
New products
Effective product development
Concept-to-Launch
Operational metrics Time to Market / % Rev. new products
ExampleConvert strategy to capabilities
Expected targets Six months / 20%
Design Parameters Ongoing measures of success
Operating models need to be aligned to strategy and fit-for-purpose
10Wilson Perumal & Company, Inc.
Trigger: Realizing Diseconomies of Scale
Economies of scale
DIS-economies of scale
S&P 500 companies with economies (or dis-economies) of scale9 years financial data as of January 2015
n = 423
Almost half of S&P 500 companies are actually
becoming less efficient as they grow
The bottom 20% of companies (with the greatest DIS-economies of scale) actually have the highest revenue growth
Wilson Perumal & Company, Inc.
Trigger: Poor End-to-End Performance
Overlap
Latency
Ambiguity
Wilson Perumal & Company, Inc.
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Trigger: Lack of Visibility & Accountability
AllCustomers
Sales &Service
($$$)
Field ($$$)
Inside ($$)
Before After
Partner($)
↓ Organization Complexity↑ Process Complexity↓ Transparency & Accountability↙ Scalable growth
Commodity & Quoted Customers
High Value, High Touch Customers
Transactional customers
& new markets
↗ Organization Complexity↓ Process Complexity↑ Transparency & Accountability↑ Scalable growth
13Wilson Perumal & Company, Inc.
Operating Model Imperatives for Achieving Operations Excellence
1. Understand current operating model and strategic direction– Failure: Doing what you shouldn’t be doing
2. Address operating model issues during your journey– Failure: An ineffective program at the end
3. Develop operating model competencies in your organization– Failure: Watching transformation from the sidelines
14Wilson Perumal & Company, Inc.
Thank You!
Questions?
