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Operating model - Restructuring - Case study

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Operating Model

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Operating model - Restructuring - Case study

  1. 1. Methodology/Approach - Operating Model Presented By – Mohammad Mujeeb Beg EPGP, IIM Indore
  2. 2. • An operating model bridges the gap between and organization’s business strategy and it’s operations. • To implement the operating model, there are certain value drivers that needs to be identified and need to be taken care of. Approach - Formulating an Operating model Operating Model Business Capabilities Governance and decision rights Organization Model Process and Technology Talent Strategy
  3. 3. Business Strategy Operating Model Organization Strategy •What is organization’s strategy (Differentiator or Low cost leader) •Decision making authority? Country level Or Global level •Core focus of organization? Product, Geography, Customer or function? Organization Capabilities •Importance of building experts across products, geographies, customers or functions? •Talent strategy - Build, Buy, or Outsource (Rent) •Importance of product innovation? Business performance objectives •To what extent is the overall organization strategy focused on profitability vs growth? •To what degree is operational excellence emphasized as a competitive advantage? •To what extent, cost reduction is a priority? Culture and management practices •How much power does employees has in making decision power? •To what degree is the organization culture consistent throughout the organization •What are the inconsistencies in management practices that should be addressed? Key Questions - To formulate the Operating Model  Business Capabilities  Governance and decision rights  Organization Model  Process & Technology  Talent Strategy
  4. 4. Diagnose Design Build Implement  Define/Refine Strategy  Define Core Business Capabilities  Establish and test operating model hypothesis  Diagnose operating model effectiveness for- • Business Capabilities • Governance • Organizational Model • Process and Technology • Talent Management.  Establish Organization baseline  Identify Pain points, root causes, and improvement opportunities  Develop recommendations and business case  Define design principles  Develop operating model options, including: • Market orientation (product, customer, and geography) • Dedicated vs. shared functions • Shared services vs. center of excellence • Governance/decision rights (P&L ownership and decision making committees)  Evaluate and select preferred operating model  Define balanced scorecard  Refine organization baseline and business case  Define and build consensus around key operating model structures, business priorities, and potential benefits  Define and build organization structure  Confirm headcount requirements  Align with governance/decision rights, business processes, and talent strategy  Develop implementation roadmap and delivery timeline  Develop internal support structures to guide transition while maintaining core business  Refine business case  Develop organization and workforce transition plan  Reorganize key business units/functions around the new operating model  Develop a dashboard of key performance indicators to assist management with refining the new operating environment  Implement change impact plan  Transition workforce, including defining and executing staffing and selection process  Continuously monitor, evolve, and manage risks Once we have the answers of the key questions then an operating model can designed by using below methodology
  5. 5. CEO Country A Country B Country C Existing Organization Model Description: Each region has full control of all activities within its geographic boundaries Advantages: • Heightened responsiveness to region/ country requirements. • Increased ability for local talent sourcing and management. Disadvantages: • Inability to serve global/regional customers. • Global business strategy more difficult to implement. • Conflicts between countries, regions, and global. • Duplication of functions
  6. 6. Organization Model - Functional Driven CEO Human Resource Sales Manufacturing R&D IT Description: Functional expertise supports core competencies and can be based on company value chain Advantages: • Enables consistent global management practices. • Enables economies of scale • Enables deployment of talent on a global basis. • Enables end-to-end global process ownership. Disadvantages: • End-to-end model difficult to construct. • Limits organization flexibility. • Conflicts between functions and products.
  7. 7. Organization Model – Product Driven CEO Business Unit 1 Business Unit 2 Business Unit 3 Description: Each unit is responsible for the entire value chain relating to a product/suite of products. Advantages: • Adaptable to present and future business extension (Product/Service extension) • All resources support the same product • Consistent across geography Disadvantages: • High-cost structure due to poor economies of scale. • Missed opportunities for cross-selling. • Global business strategy more difficult to implement.
  8. 8. IT Roadmap –Key Steps Review Current IT functions Develop Alternatives Implement  Conduct a IT process review to understand the link to the organization’s structure and approach.  Interview key stakeholders to identify pain points/constraints/challenges with current IT process  Requirement Gathering  Generate hypotheses to identify new, inefficient, or redundant processes and technology elements.  Perform opportunity analysis (benefits), quantify associated costs, and build business case and framework for improvement  Analyze whether to develop the new IT process in house or Outsource to IT consultancy market leaders (TCS, Infosys etc.)  Develop refined business processes.  Establish enabling infrastructure, applications, tools, and data required to execute processes.  Develop implementation plan and align IT systems with the plan.  Launch and monitor new IT system.
  9. 9. • Previous slides provided a framework which the manufacturing firm can follow in order to identify the ‘BEST’ Operating Model • The framework identified various value drivers that need to be analyzed while formulating an operating model. • Case mentioned the challenges faced by the Organization while operating on the Country- Driven Operating model. The framework analyzed the two Organization model – Functional Driven and Product Driven - that can cater to the new needs (Globalization) of the Organization. • Framework also identified the Key steps that are needed to create an IT roadmap. • This framework can be put in front of the Organization and based on the responses of the organization, a sound operating model can be created which will cater to organization’s future needs. Summary
  10. 10. Thanks!!