In this article we want to give you an insight into the top line strategies we are seeing implemented, to optimise operating models to address budget cuts.
An excellent paper published a few weeks ago in the Industrial Marketing Management journal, analysed the impact of COVID-19 on business models. While exploring the history of business models and how a crisis impacts on business, this was its conclusion- “The evidence suggests very different impacts of the coronavirus crisis on business-to-business firms, and that understanding these differences is important for strategizing during the crisis but also to navigating successfully into the future.”
At ADAPTOVATE we are now working with clients in understanding these differences. We are working with them and looking at their business models to ensure they emerge from this global crisis. Not only as best they can, but stronger and more resilient than 2019. We are looking at their budget cuts, and how they need to optimise their operating models, to see themselves into 2021 with momentum.
Worst Recession since World War II
On June 8, The World Bank published a press release titled ‘COVID-19 to Plunge Global Economy into Worst Recession since World War II’. It’s an alarming read. We all know that many large organisations haven’t survived, and many are struggling to stay afloat. “This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. (For your regional outlook there are links at the end of this article).
While every business is different – there are of course the ‘must haves’. This is to ensure you can optimise your operating model for every chance of success. Perhaps you have already piloted Agile teams and are now ready to go full Agile. The same principles apply. (Read more on scaling Agile across your organisation here.)
Paul McNamara, one of ADAPTOVATE’s co-founders says, “We are all being forced to do more with the same or less resources, so this becomes a great time to address the effectiveness of your operating model.
Your teams understand the need for change as they are also drowning. Adopting a more agile operating model can create transparency on what everyone is doing, what work is important and what needs to stop,” Paul says.
There are five key areas that should be actioned immediately to optimise your operating model to address budget cuts.
- FOCUS ON SIMPLIFICATION
- VALUE PROPOSITION
- CUSTOMER PRESPECTIVE
- CENTRES OF EXCELLENCE
- PRIORITISE, PRIORITISE, PRIORITISE.
FOCUS ON SIMPLIFICATION
An effective operating model should ensure that effort is not duplicated within the team.
“Re-designing your operating model with a focus on simplification helps remove layers of overhead, handovers between teams and duplication of work within departments,” say Chelsea Bates, our managing director and principal in our Melbourne office.
However, reducing duplication is often easier said than done. “For effective reductions, process simplification will be essential to root out unnecessary process steps. This then typically leads to reductions in workload, which then enables role size rationalisation to be done,” says Charles Tan our managing director of ADAPTOVATE in Singapore.
Organise around value. When people are focused and organised around the work, you get fewer handoffs and more opportunities for synergies.
“When designing operating models to reduce cost, you must focus on value delivered. Aligning people along the flow of value drives a focus on what is needed,” says Steve Walton, a principal in Melbourne.
Prioritising work from the customer perspective pushes many items to the bottom of the list. Which of course helps with the simplification and value proposition.
“If budget needs to be cut a solid understanding of what the customer values will ensure we prioritise spending. You won’t overspend on what the customer doesn’t deem valuable,” says Caitilin Studdert, a principal at ADAPTOVATE in Sydney.
CENTRES OF EXCELLENCE
Set up centres of excellence for specific ways of working: Organisational changes usually mean a huge change in team structures. So find the skill experts and use them wisely.
“With budget cuts, creating cross-functional teams and working in an agile way can help with delivering more value,” says Benny Ko, agile consultant in Melbourne.
Andy Koh, one of our senior consultants in Singapore says, “Not every company will choose to do a type of “big bang” approach. One way to optimise the operating model would be to set up a group called a “centre of excellence”. They can cut across function and seniority.
This group can promote lean and agile principles. Both horizontally and vertically, playing the role of coaches and initiative coordinators,” explains Andy.
Steve Walton agrees. He says, “Understand which skills are only sometimes needed in your teams and implement centres of excellence. Coordinate these niche skill sets centrally while embedding them in teams as required.”
(To read more about how CoE’s are part of the full Agile operating model – we have written about that here)
PRIORITISE, PRIORITISE, PRIORITISE
Prioritise ruthlessly. There is always more work than resource.
“We need to find the courage to stop the ‘nice to haves’ and be clear on the impact of this. Establishing clearer ownership structures will help make decisions faster to break up the bureaucracy and just get stuff done,” says Paul.
Steve also says, “Rather than maintain a long backlog of work, only accept new items which are more important than those which are currently in the backlog.”
As each business is optimising their operating model, it will also be important to set themselves up for future preparedness for company longevity. As the aforementioned paper says, “there will be a new rationale for organizations to rethink their risk-management approaches and the solutions in which they invest to address those risks.”
Thank you to the ADAPTOVATE contributors to this article:
Chelsea Bates, managing director, Victoria and principal consultant
Benny Ko, agile consultant
Andy Koh, senior consultant
Paul McNamara, co-founder, partner and managing director
Caitilin Studdert, principal consultant
Charles Tan, principal and SEA managing director, Singapore.
Steve Walton, principal consultant
Here are quick links to the World Bank Group June 2020 Regional Outlooks:
East Asia and Pacific
Europe and Central Asia
Latin America and the Caribbean
Middle East and North Africa