Organisations have a desire to become increasingly customer-centric, with the digital operating model also adapting to new customer demands, shaping the way organisations deliver value. Moving ICT and digital processes from one silo to another, or simply updating technology, is not the solution. To succeed in this ever-changing environment, executives must design an adaptive high-performing ICT and digital operating model and structure that comprises a network of internal and external operating units working toward a common goal – delivering value to your customers.

Traditional Operating models

Traditional IT operating models are not high performing; most have static structures relying on slow-to-change skills. Few organisations have explored the benefits of lean IT operating models, preferring to own all capabilities rather than work with external partners to execute non-core capabilities. Even fewer are transforming to align with their customers’ new demands. Organisations can drive their transformation by shifting their mindset and embracing change so they can deliver the performance and agility that meets or exceeds their customers’ expectations. I have found that non-performant IT operating models exhibit two or three of the five key structural attributes:

  • They focus on traditional IT work rather than value delivery work. Following traditional IT frameworks, execution of work is delegated to subordinates, allowing them to focus on efficiencies and costs, rather than on the business value that is needed.
  • They use supply and demand or project-style resource models. To contain full-time equivalent (FTE) costs, silos of skills are created and allocated resources based on project or operational demand. There is insufficient focus on the holistic delivery of business objectives and how they can be delivered efficiently.
  • They don’t define enough boundaries around work. Through organic growth or acquisition, IT teams may be federated with others, without concern for integration or centralised, without consideration for local needs. The more boundaries in the operating model, the more potential issues arise in passing work from one boundary to another inappropriately.
  • They have poor workflow design. The conceptual design of the operating model looks good on paper, but implementation reveals that workflows were not tested with sufficient scenarios. There are gaps in how teams, functions, and units interact, hindering the performance of  IT.
  • They focus on empire-building at the expense of empowerment. Micromanagement and culture of control often reduce the ability of IT to deliver high performance. Many organisations exhibit a lack of trust in their staff to make sound judgements and thus become a bottleneck to flow

These are the key questions when designing your structure:

  1. Is there an opportunity to become lean?
  2. How can we best execute the work?
  3. Where should this work be executed?
  4. How do I ensure that those executing work don’t become dysfunctional? and
  5. What is an appropriate management framework for overseeing work execution?

High performing Operating Model

For high performance, organisations must:

  • Balance internal and external ownership of IT work to ensure effective value delivery. As organisations look to become leaner, there is an openness to consider working with external partners to deliver value to customers. By reevaluating core and non-core digital work and assessing the impact of emerging technologies and automation on work, organisations can allocate work to those entities best placed to ensure optimum value is delivered to customers.
  • Define how operating units execute work in line with the cadence of change. Our research has found that many IT operating models are based on resource pools of skills, such as architects; application developers; and infrastructure, security, and project managers. These operating models are resourced by supply-demand models that rarely meet the delivery expectations of the business or the efficiency needs of the organisation. To overcome these challenges, many organisations have moved to adopt integrated teams to execute work. Having previously identified the scope of digital work, organisations can then define the mode of operation —the relationship between software and infrastructure and planning and operations — then the style of operations — the relationship between speed of delivery and the need for specialist skills. 
  • Balance the location of work execution to optimise value delivery. As organisations react to continuously evolving client demands, they will be under enormous pressure to meet fluctuating demands and priorities. Businesses are increasingly leveraging remote and regional workforce operations to manage risk, enhance resilience, and serve regional differences in customer expectations. This will significantly impact the digital operating model. Organisations must consider the effects of regional operations and define design criteria that will drive the location decisions.
  • Define the “glue” of the operating model structure and the role of each operating unit. Organisations must ensure that tasks work in context, exploring the fit between the location of the operating units in their organisation and how they interact to deliver results. This becomes core as organisations design their structures of operating units as the foundation of their digital operating model. Tech execs must define proven interaction patterns that work for their environment, their level of operating maturity, and the culture of the organisation. I have seen a growing trend towards integrated teams. These teams have various interaction patterns, but they aspire to adopt an interaction pattern based on voluntary cooperation.
  • Balance the need for empowerment with the need for control. Every enterprise is unique and requires a different organisational design approach. Hierarchical reporting lines hinder organisations’ ability to be agile. I’ve seen a move to reverse the management pyramid so that those closest to the work are empowered. Though this may not work for every organisation, balancing empowerment will improve the engagement of staff and increase value delivery.

Layers supporting the digital operating model design

Here I present one model representing a possible operating model design. This can be adapted to suit the needs of the organisation. The structure of the conceptual design builds on the design of the customers, services, and capabilities layers of the operating model. The benefit of the design process is that it ensures that the organisation consider leadership, governance, and capabilities layer factors when designing the structure layer of their operating model. These three layers ensure that the organisation focus on the impacts to employees, partners, decision-makers, and capability owners.

  • Strategy layers guides your decision to externalise capability execution. Organisations need to develop their business capabilities to ensure that the optimum value is transferred to their customers. It’s imperative that organisations align their capabilities with the strategic objective of the organisation and assess the ability of those capabilities to enable the strategy. If the organisation recognise weakness in certain capabilities, they can make those capabilities candidates for allocation to a partner — if the organisation aspires to be lean. The Strategy layer design considers the key capabilities required by the organisation and the ability to execute them.
  • Your Operations layer ensures that appropriate controls guarantee quality delivery. The move to future fit is changing significant elements of the digtal operating model. ransforming to future-fit means adopted new governance practices based on empowered, trusted, and shared governance practices. These governance practices often lead to joint accountability for delivering value. The operations layer design focuses on the decisions that are appropriate for empowerment, the distribution of accountability to ensure high performance, the relevant controls to ensure agility, and the transparency to build trust.
  • Your leadership layer ensures that the organisation consider the impact on people. Leaders must collaborate with their peers to drive the digital operating model strategy. When designing the structure, the strategy will determine which capabilities are unbundled to partners, the impact on employees and culture, and the performance goals and objectives of operating units and partners. The leadership layer design focuses on both the human and technical aspects of the operating model. The human aspects are particularly important as they focus on the need for continuous skills development to enable the workforce to adapt to the dynamic demands of the business.