Strategic ambition is easy to declare. Growth targets, bold market entries, and new business models capture attention. Yet many strategies fail at the point of translation. Leaders underestimate the challenge of converting high-level direction into daily execution. The Operating Model is where this translation either happens effectively or collapses under its own weight.
An Operating Model is not a static chart of reporting lines. It is the blueprint of how an organization mobilizes resources, makes decisions, and prioritizes capabilities. When designed and implemented properly, it transforms strategy into measurable performance. When neglected, it becomes a silent drag on execution, slowing speed, creating friction, and sapping energy.
When to Rethink the Operating Model
Operating Models require redesign at inflection points. Entering new growth vectors demands different structures and governance. Mergers and acquisitions create complexity that outpaces legacy ways of working. Scaling into new markets introduces tensions between global scale and local responsiveness. Shifts toward Digital Transformation require clarity on new roles, decision rights, and capability priorities. Even without external shocks, persistent inefficiencies and unclear accountability may signal the need for change.
Executives often resist redesign because of the disruption it implies. Yet ignoring the need is more costly. Models that no longer match strategic intent lead to wasted investment, delayed execution, and leadership frustration. The most disciplined organizations treat Operating Model review as a recurring leadership responsibility, not a crisis-only activity.
Strategic Requirements as the Starting Point
Effective design begins with Strategic Requirements. These requirements capture ambition, choices of where to play and how to win, value drivers, target customers, cost targets, and critical capabilities. They define the fundamental sources of growth and performance differentiation. Without them, design risks drifting into internal politics.
Strategic Requirements should be explicit and fact-based. They serve as the foundation for Operating Model choices. For example, if speed-to-market is central to strategy, governance mechanisms must favor rapid decision-making. If global efficiency is the priority, roles of the corporate center must be clearly defined to capture economies of scale.
Assessing the Current Organization
The next step is organizational assessment. Leaders must confront reality. Which parts of the current model work, and which are failing? Are decision rights clear? Are capabilities aligned with value drivers? Are there cultural or structural elements that accelerate or constrain performance?
Honest assessment matters. Overconfidence or blind spots distort design. Leaders must acknowledge where the Operating Model creates friction and where it delivers strength. Protecting what works well is as important as fixing weaknesses.
The Role of Design Principles
Strategic Inputs and assessments are converted into design principles. These principles are concise, fact-based criteria that guide choices on structure, governance, and capability building. Six core principles anchor the framework: focus on value, highlight decisions, clarify boundaries, define the center, build capabilities, and preserve strengths while fixing weaknesses.
Design principles are not abstract statements. They must be practical, specific, and directly linked to strategy. They fit on a single page, serving as a constant reference point during design debates. Their brevity forces clarity. Their fact base prevents drift into subjective preferences.
Implementation Is Where Value Is Created
Principles only matter if they are implemented. Effective implementation follows four disciplines. Translate principles into specific design choices and operating practices. Sequence decisions logically, tackling structural and governance choices early while phasing capability-building later. Align stakeholders by involving leaders across the organization. Embed discipline through governance mechanisms, performance metrics, and feedback loops.
Implementation is often where organizations stumble. Leaders underestimate the effort required to embed new behaviors. They fail to communicate boundaries or decision rights clearly. They treat design as a one-time exercise rather than a continuous process. Sustaining momentum requires visible leadership commitment and disciplined follow-through.
Lessons from a Global Service Organization
A global service organization that had acquired multiple companies faced mounting complexity. Its Operating Model had not been updated in a decade. Fragmented structures, unclear governance, and duplicated capabilities were slowing growth.
The leadership team applied the design principles rigorously. They evaluated four models: country-based, matrix with country leadership, matrix with functional leadership, and global functions. Each option was tested against the principles. The winning choice—matrix with functions leading—balanced global efficiency with local responsiveness.
The outcome was not just a new chart. It was a disciplined process that translated strategy into practical governance, clarified the role of the center, and prioritized global scale where it created the most value. The case illustrates that models are not chosen on instinct—they are proven through structured evaluation.
Common Pitfalls That Undermine Design
Six pitfalls consistently undermine Operating Model efforts. Overcomplication dilutes clarity. Weak linkage to value creation causes drift. Ignoring cultural strengths erodes credibility. Poor sequencing overwhelms the organization. Treating design as static misses the need for adaptation. Weak implementation discipline undermines sustainability.
These pitfalls are avoidable. Leaders must insist on simplicity, anchor all design decisions in value, respect cultural realities, phase the work, adapt continuously, and enforce disciplined execution. Operating Models succeed when leaders maintain this level of rigor.
The Payoff of Getting it Right
Operating Models are rarely the center of attention in executive meetings. Yet they quietly determine how effectively strategy translates into results. When designed well, they accelerate execution, reduce internal conflict, and focus energy on what matters most. They create the clarity leaders need to move fast and the accountability teams need to deliver.
Ignoring the Operating Model means leaving strategy stranded. Investing in design and implementation creates a durable bridge between ambition and execution. For leaders committed to making strategy real, few responsibilities are more important.
The Executive Checklist
- Have we defined explicit Strategic Requirements that anchor design choices?
- Do we know when and why our model requires redesign?
- Have we conducted a rigorous assessment of current strengths and weaknesses?
- Are our design principles fact-based, concise, and specific enough to guide trade-offs?
- Is implementation sequenced, disciplined, and reinforced through metrics?
- Are leaders aligned and accountable for living the model, not just approving it?
Why this Matters Now
Organizations operate in volatile environments. Digital disruption, regulatory shifts, and market turbulence test strategy relentlessly. In such conditions, Operating Models cannot be afterthoughts. They must be actively designed, stress-tested, and reinforced.
The leaders who embrace this discipline will not only see strategy executed but will also build organizations that adapt more quickly, act more decisively, and sustain performance over time. Strategy sets ambition. The Operating Model determines whether that ambition becomes reality.
Interested in learning more about the steps of the approach to Operating Model Design? You can download an editable PowerPoint presentation on Operating Model Design here on the Flevy documents marketplace.
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