From strategy to work activity
Discover how clear strategic direction shapes the work that creates customer value and helps you organise teams to reduce fragmentation and clarify who owns the outcomes.
Summary ideas
Start with the value stream
Identify the core work and decisions that create customer value, ensuring their sequence reflects your strategic position.
Organise around work
Structure should organise the value stream to provide focus and coordination, with the organisation chart following these choices.
Design for whole work
Group related work into units with clear ownership to reduce fragmentation, handoffs, delays and errors.
The purpose of an operating model is to translate the intention of a business into operating behaviours and the outputs and outcomes a business exists to deliver. Design activity must start with a clarification of business direction. Have you had the experience of reading a company’s statement of strategy and not understanding what it offers and to whom? It is somewhat common. It is not possible to design anything based on ambiguous aspiration. Second, you must identify the end-to-end flow of core work that will create necessary capability. Afterwards, you can design formal structures to organise the work. Comprehensive operating model design and organisational transformation do not start with the organisation chart.
Clear business direction
Form follows function. Your organisation’s form – its work process, structure, management systems and supporting policies – exists solely to achieve its intended purpose or function. Without an explicit business direction based on pragmatic and agreed objectives, an organisation will be pulled by environmental or political currents of the moment. Your design process will also be pulled by the same currents without clear business direction. There would be no agreed and stable basis for making design choices.
Business direction is a real-world set of objectives for your operating model. You will recall that strategic position describes the basic competitive orientation of the organisation. It tends to be very stable over time and includes no further objectives. Business direction begins with strategic position and extends it into a more detailed set of requirements for an operating model.
Desired culture is often overlooked as part of a complete statement of business direction. This is a shortcoming for two reasons. First, your organisation will have a culture. It will acquire this culture by default or by design. Once cultural patterns are in place, they are difficult to change. It is better to actively shape culture through design choices and the design process itself.
Second, different strategic positions require different cultures. A business that requires creativity will look different from those built for tight adherence to operational process. A business that requires high levels of collaboration will look different from those built to promote internal competition. A business that requires superior service at point of customer interface must have a culture of employee care and distributed empowerment before employees will feel safe to act on customer needs.
Lastly, business direction requires strong leadership commitment if it is to serve as a reliable basis for design choices. A critical aspect of this design exercise is strong horizontal alignment among leaders across the business. Missing alignment will cause problems that will surface in some form of splitting within the leadership team. Fundamental disagreements will stall design progress, inhibit effective stakeholder alignment, promote localised pockets of poor implementation and produce other forms of misdirected energy.
It is wise to take the time necessary to ensure alignment to a clear statement of future business direction. This will require leaders to self-assess any pressure they may be applying onto the leadership team to force a point of view. It is better to ‘pay now’ in the form of building real leadership alignment and commitment than ‘pay later’ to resolve differences of opinion that are then built into operating model design? It is very expensive redesign substantive choices that have then become the basis for further downstream design choices.
CHECKLIST FOR SUCCESS
1. Your mission – What business are you really in?
2. Your desired culture – What values and ways of working must exist in the organisation?
3. Where will you play? – This includes your market and product definitions.
4. How will you win? – This is your basic strategic position and its meaning for customer experience.
5. Priorities – What are your critical business objectives in the next 1-3 years?
6. Metrics and goals – How will you know if you’re successful?
CORE VALUE
Creating work activity
Once future business direction is clear, a strategic view of core work activity in the organisation is possible. This high-level view is called the value stream. Simply said, it’s the sequence of value-adding activity and decisions, produced at a macro view, that are required to design, produce and deliver goods or services to a target market. This is the core work of the organisation. Management activity is considered non-value-adding work. It is important, but does not directly add product value or utility to the customer.
Design teams must define key process steps in the value stream and the key activities within each before the structure of work may be considered. It is important to note that the value stream is core work that does not include management activity. Working concurrently with value-creating work and management work complicates the design process. It is also important to recognise that the value stream is not process mapping. The concepts are similar but exist at very different levels of granularity. Attempting to simultaneously work with the value stream, management work and process maps will overwhelm a design process.
You should expect to see strategic position expressed in the sequencing of major value stream activities. This is not only a general principle but also a good validation step for design coherence. The sequence of major activities is not strictly rigid for each strategic position but must express how a firm will operationalise its chosen business model.
Product leadership strategy
Design it, promote it, sell it, make it
With a product leadership strategy, organisations generally lead with design and demand-building activity. Afterwards, they may even sell the product and service before satisfying demand with production and distribution. Early adopters are prepared to commit their purchase based on effective promotional activity even before products and services are available for delivery.
Operational excellence
Design it, promote it, sell it, make it
With a product leadership strategy, organisations generally lead with design and demand-building activity. Afterwards, they may even sell the product and service before satisfying demand with production and distribution. Early adopters are prepared to commit their purchase based on effective promotional activity even before products and services are available for delivery.
Customer intimacy
Design concept, promote it, sell it, customise it (with customer), make it
Customer-intimate organisations use sophisticated systems to understand a narrow target market and prepare and promote a baseline product or service offering. These firms then sell the experience to buyers who appreciate individualised attention and product customisations. Afterwards, the organisation makes and/or delivers the product or service to specification. These consumers are willing to pay a premium.
Like business direction before it, crafting the value stream requires thoughtful deliberation within the design team. This is a strategic exercise. A design team is not into the detail of process maps at this point. The value stream is a high-level view of required capability and flow of work in an organisation. It provides the end-to-end view of work activity in the future operating model around which design teams will configure organisational structure. Each step builds on previous design activity in a disciplined process.
Some approaches to design will include explicit articulation of core capabilities required in the organisation. A simple definition is some activity system an organisation must be exceptionally good at, perhaps uniquely so, to succeed in a chosen strategy and market. It is a sensible design interest. However, core capability requirements will naturally emerge in discussion of future strategic position, future business direction, future value stream and design criteria for the future operating model.
STRUCTURE
Organising into work units
After business direction is set and the flow work is mapped in the value stream, design attention turns to shaping the structure of the organisation. Structure is the sum-total of ways work is divided into boundaries for specialisation and focus. The objective is to minimise boundaries that separate work that is highly integrated and promote human ownership of identifiable outcomes from start to finish. The design principle is called ‘whole work’.
The alternative to whole work is fragmented structure. It creates problems for error-free production. Excessively dividing work into small, repetitive and highly controllable tasks is a hangover from industrial-age management theory. It was better suited to standardised, high-volume, linear production environments and leadership that had little concern for the human dimension of work life. Fragmentation and its boundaries are a poor fit to today’s fast-moving, competitive, ambiguous and creative economy. Boundaries separate related work, inhibit understanding of interdependence, slow decision-making, diminish employee identification with work products and increase possibility for error as work products and information flow across boundaries. Context and accountability are lost. Competing priorities are introduced. Contribution to the complete end-to-end value stream is difficult to see.
The alternative to fragmentation is whole work. The principle is to create work units that produce an identifiable and ‘whole’ output that can be passed error-free down the value stream. Members assigned to units of whole work share common context, know when outputs meet and do not meet standards, can readily troubleshoot and solve problems, receive feedback from their downstream clients, and develop commitment and pride in ownership. Whole work promotes engagement and quality.
Anywhere a boundary exists that separates related work, a mechanism must be designed to move work products and information across this boundary. Such mechanisms are sometimes called ‘glue’ because they stick the organisation back together into a whole, interdependent system. Opportunity for error increases with the number of boundaries that must be spanned. Whole work design is a very strong glue mechanism. As whole work design increases, the need for less reliable and sometimes expensive glue mechanisms decreases along with reductions in sources of error as work moves along the value stream.
CASE EXAMPLE
Organising around customer needs
An organisation was seeking better responsiveness and accountability for the needs of identified market segments. The solution was to create lightweight teams charged with understanding a specific market segment, translating enterprise strategy into initiatives relevant to that market segment, prioritising development activity with product engineering specialists, and coordinating with marketing specialists to support feature introductions.
Jobs in this unit were designed to integrate with interdependent specialist units within the organisation. The team was to build a well-informed and integrated plan, organise resources and assess market performance by way of agreed metrics. Accountability was clear, market performance was broadly understood by all within the team, and decision rights were close, clear and rapid. The whole team was designed to own a product within a market.
Contrast this whole work design with an alternative structure where people sit in their functions and report to their functional managers. When structure separates people who must fluidly work together, attention shifts inwards and away from customer value creation. The result is familiar siloed behaviour – competing priorities, lack of responsiveness, misunderstandings, error and rework, wasted time and reductions in client satisfaction, competitiveness and business results.
SOURCES
- Lafley, A.G., & Martin, Roger L. (2013). Playing to Win: How Strategy Really Works. Harvard Business Review Press.
- Martin, K., & Osterling, M. (2014). Value Stream Mapping. McGraw-Hill Education.