Hi, this is Jesper and I make videos on YouTube for those who like to challenge mindset and make a difference in the workplace. Most transformation projects fail. The failure differs depending upon who conducts the research. Yet if we take an average of what McKinsey, Bain, BCG and other heavy hitters state, the failure rate is around 75%. Put inversely, only 1 in 4 succeed. These are not very good odds, especially as companies invest millions, sometimes billions in transformation programs. There are several reasons, but one more common is the inability to define new ways of working and operating. Often, business transformation gives way to digital transformation, where a business keeps operating similarly but with new technology. Put simply, they transform the technology but not the business itself. There are benefits in this approach. It decommissions legacy systems, reduces technical debt, and reduces overall technology risk. But it's also a lost opportunity to transform how a business operates, that is, to reimagine its structure and roles, capabilities, and processes to meet future requirements. And here is a kicker. Digitizing suboptimal ways of operating can highlight inefficiencies and make business perform worse. I repeat it. Digitizing suboptimal ways of operating can highlight inefficiencies and make business perform worse. Ouch! The answer lies in defining and developing a future state operating model. But what is an operating model? To create a context for understanding, we can look towards its close cousins, the strategy and the business model. The strategy outlines an organisation's ambitions and its competitive markets. It sets an intention of what an organisation wants to achieve and where it wants to achieve it. The business model outlines how it generates value, that is, how it makes money. It identifies the customers and defines the value proposition. A value proposition is a simple statement summarizing why a customer would choose a product or service over a competitor. A business that competes in multiple markets has multiple business models. The operating model defines how a business operates and structures itself to generate value. It describes how to deliver the value proposition. Each business model typically has its own operating model. A business model can also be transformed, but the operating model does the heavy lifting. An example is Amazon. It has an overall strategy covering multiple markets. One market is a corporate sector where it offers cloud services through its AWS brand. Another market is a consumer market where it offers the Amazon marketplace selling consumer products. Each of these markets targets different customers, presents different value propositions, and has its own business model, which has its own operating model. If you want to know more about the business model, I've created a video about the business model canvas, a popular approach for defining business models, and I put a link in the video description. There are different ways of defining an operating model, but the most common approach you've probably heard of is people, process, and technology. The people dimension can be divided into sub-components like organizational structure, culture, and capacity. The process dimension can also be divided into sub-components like value streams, capabilities, governance, space and facilities. And the technology dimension can be divided into operational, management and reporting systems. If you google operating models, you will receive many different approaches and models, but most are too high level to be meaningful to a transformation program. For example, the Deloitte Industrial Transformation Framework takes a holistic approach and describes a linear process for developing an operating model. It begins with defining a strategy and, from the strategy, a business model. It then identifies the capability uplifts and new capabilities required, and uses these to determine the operating model and its impact on people, process, and technology. It explains a potential process and the context of the operating model vs. strategy vs. the business model, but is not detailed enough to make transformation decisions. I prefer the Operating Model Canvas by Andrew Campbell. It is more granular, focuses on defining an operating model, assumes an existing strategy and business model, and identifies six specific areas to deliver a value proposition. It begins with defining what needs to be done to deliver the value proposition. What needs to be done can be called by different names such as value chain, value stream or a high level process. Regardless of name, it describes the steps to create and deliver value to a customer. The concept of value streams will be familiar to anyone interested in business architecture. Next, it defines the inputs into the value stream. In the canvas, it's called Supplies, which I find a little bit misleading, as it makes you think of something external when it defines any input, internal or external. It then defines the locations of where the work is performed. Depending on the organisation size, it can go as wide as countries or as narrow as specific work locations within the building. Next, it defines the organizational structure that creates and delivers the value proposition. The structure is about the relationships between the roles and the roles themselves. In my experience, especially for smaller organizations, it may not change that much, but the roles do. So to be meaningful, individual roles in the structure need to be defined. Next, it identifies the required operational systems such as technology applications. In the real canvas, this is called information. The final step is management and reporting systems, which contain the metrics and key performance indicators to ensure that the operating model runs smoothly. There are several templates available on the internet for download. In case you'd like my template, I've included a link to the PowerPod presentation in the video description. Let's unpack a case study to understand how the operating model Canvas works and how to use it. The Mental Health Association is a not-for-profit member-based organisation for mental health practitioners. It has 50,000 members and Covid has put a lot of strain on the organisation. The CEO has decided that MHAs need to transform to assess and onboard new mental health practitioners to meet an increasing need for mental health services. Currently, MHA receives 1000 applications from mental health practitioners per month, creating a huge backlog. The CEO wants to use the operating model canvas to transform the application to onboarding value stream, which is mainly manual. The assessment team consists of four full-time employees who can assess around 500 applications per month. MHA began by mapping the application to onboarding value stream and defined five stages. First, it receives the application. Second, it confirms that the application contains the required basic information. Third, it assesses the application by checking the applicant's qualifications. Fourth, it communicates the outcome of the assessment. Fifth and final, it onboards approved applicants. MHA then created current and target state views of the value stream and the processes within each stage. MHA currently receive applications via email or fax. Application data is manually entered into an application spreadsheet, which takes 15 minutes on average. The target state is to use an online form with built-in data validation to store the application data in a database. MHA intends to make it a fully automated process. Confirming applications is tough consuming and often requires a team member to contact the applicant. The confirmation takes, on average, 15 minutes. In the target state, the information is checked as part of the application form submission. Once application data is confirmed, the application's qualifications are assessed. It is currently a manual process and consists of first checking that the qualification entitles the applicant to practice and second, to check the applicant has achieved the qualification stated. The qualification is checked against a natural database maintained by a regulator. If it is an overseas qualification, additional assessment time is needed. The assessment takes, on average, 15 minutes. In the target state, MHA wants to use the newly developed API by the regulator that enables a direct connection to the national database. Overseas qualifications still need manual checking, estimated to take an average of 3 minutes. Once application is assessed, the result is communicated to the applicant. It is a manual process where the team member either writes an email or calls the applicant which takes 5 minutes on average. In the target state it will be an automated email. The final step is onboarding. It is a most time consuming process which takes 30 minutes where a team member makes several phone calls and writes several emails. MHA intends to implement email automation in a target state and call the applicant once during the onboarding process. It is estimated to take 5 minutes on average. MHA believes it will be able to run the future state assessment process with two part-time employees and intends to redeploy the remaining employees to other parts of its business. MHA is now ready to start populating the operating model canvas. The input into the value stream is the regulator who provides the national education database. I have seen some canvases that include internal suppliers such as IT. I don't usually include these unless they add necessary context. For example, if we model a finance process, it might be important to list internal audit as an input. The locations include the head office and remote working. The organization includes a part-time assessment manager and two part-time assessment officers. Operational systems include Salesforce Sales Cloud to store and manage application and application details. And Salesforce Marketing Cloud to develop and capture application and application details and to automate email communication. Power BI will be used for reporting. Management systems include a weekly assessment review and a quarterly assessment performance review. The operating model canvas clarified MHA's understanding of how it wants to operate its most important process application to onboard in. MHA then used it as a template for examining other processes. MHA also used it as a communication tool internally and externally to explain its transformation program. From here on, I believe the best step is to develop business and the capability models and link capabilities to the value streams and value stream stages to gain insight into the full organizational impact and changes required to successfully operate in the future. MLJ knew that most of its changes were technology related and had previously developed an information technology capability model, which I described in a previous video. I have put a link in the video description. Please share any questions, feedback or insights in the comment section. I hope you found this video helpful. And if you liked it, please like it and subscribe to my channel. Thank you for watching and I hope to see you in my next video. Take care until then.