The Evolution of Operating Model Redesign: A Strategic Perspective
In today’s fast-paced and disruptive business landscape, the principles guiding operating model redesign must adapt to address the current pace of change. The traditional rules of integrating people, structures, and processes to deliver value and improve organizational health need to evolve. A decade ago, McKinsey identified nine golden rules for operating model redesign, which have since been put to the test in a global survey of 2,000 executives across industries.
The Original Nine Golden Rules: A Journey
A decade ago, McKinsey found that organizations using more than six of the original golden rules had a 73 percent success rate in operating model redesigns. However, the effectiveness of these rules has diminished over time. Today, using more than six of the original rules only leads to a 55 percent success rate. The landscape of operating model redesign has shifted, requiring a fresh perspective on the core principles that drive success.
Key Insights from the New Data
The motivations for undertaking an operating model redesign have shifted, with a focus on improving efficiency and refocusing on growth. Redesigns are now a regular rhythm rather than a rare event, with 50 percent of organizations anticipating a redesign in the next two years. The success rates of redesigns have also improved, with 63 percent meeting their objectives and improving performance.
Redesigns Are Completed More Often and They Have Higher Success Rates
Operating model redesigns are yielding better results than they did a decade ago, with a 79 percent completion rate and a 63 percent success rate in meeting objectives and improving performance. This increase in success can be attributed to the growing sophistication of redesign methodologies, leadership capabilities, and data-driven tools that enable informed decision-making.
Nearly Half of the Golden Rules Have Evolved
After testing 21 potential rules for their impact on redesign success, McKinsey identified nine significant rules, including five original rules and four updated rules. These rules emphasize the importance of top team alignment, leadership incentives, investment in upskilling people managers, and the talent and skills of the redesign team.
The Refreshed Rules: Success by the Numbers
When organizations use more than six of the refreshed rules, redesign success jumps to 95 percent. The refreshed set of rules reflects best practices that maximize operating model redesign success, drive performance, and create value.
The Refreshed Rules: Golden Again
The refreshed golden rules focus on creating alignment among leaders, investing in rewiring workflows, making significant investments in people, and fostering a performance-oriented culture. These rules help organizations increase the odds of better performance and long-term success through strategic redesign.
Recommendations for Operating Model Redesign
Based on the refreshed golden rules, organizations can take actionable steps to improve their operating model redesign efforts:
- Align senior leadership through a shared vision and clear design principles.
- Invest deeply in rewiring workflows to eliminate inefficiencies and optimize collaboration.
- Make significant investments in upskilling employees and fostering leadership excellence.
- Create a performance-oriented culture that aligns incentives with the new operating model.
FAQ
What are the key drivers for initiating an operating model redesign?
The primary drivers for redesigns include improving efficiency, refocusing on growth, enabling strategy execution, and increasing organizational agility and speed.
How can organizations increase the success rate of operating model redesigns?
By following the refreshed golden rules, organizations can increase their success rate to 95 percent or higher. This includes aligning leaders, investing in rewiring workflows, upskilling employees, and fostering a performance-oriented culture.
Conclusion
Operating model redesign is a critical process for organizations looking to realign their strategy, structure, talent, and culture. By adopting the refreshed golden rules and focusing on alignment, deep investment, and performance culture, organizations can drive success and create value in today’s dynamic business environment.
