This document discusses managing complexity in operating models. It notes that operating models define how strategy is executed, but they often become misaligned over time due to organic and inorganic growth. This leads companies to struggle with inconsistent performance, inability to adapt, and higher costs. The document advocates designing an optimized "best fit" operating model through assessing capabilities, targets, industry dynamics, and strategy. It also notes the importance of change management capabilities to successfully implement a new operating model.

1. Managing Complexity in your Operating Model

2. Wilson Perumal & Company, Inc.
Operating models are the link between strategy and
execution – they define “how” a strategy is realized
An operating model is the coordinated collection of business & production
capabilities, organization structure, assets, people, technology, partnerships,
and governance a company uses to deliver its strategy
Assets & Capabilities
Governance
Vendors & Partners
Process Design
Technology Enablers
Operating Model ExecutionMarket Strategy
Defining where to play
and how to win –
understanding your
competitive advantage
and how to apply
The execution of the
business strategy more
consistently and
reliably than the
competition
Align
with
Strategy
Enable
Execution
Organizational Structure
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3. Wilson Perumal & Company, Inc.
As companies have evolved to compete, operating
models that worked in the past become misaligned
Organic Growth
Inorganic Growth through Acquisition
Operating model has failed to keep
up with the changing marketplace
and is no longer fit for purpose
Operating model has evolved over
time without an overarching plan,
creating execution gaps and overlap
New Ways to Deliver Value
Changing Customers / Markets
Evolving Supply Chains
External Factors:
Industry & Competitive Landscape
Internal Factors:
Organic & Inorganic Growth
• New products, segments, channels, line
extensions, etc. are introduced
• Operating model does not evolve with
the business needs
• Unique cultures, processes, technology,
systems of governance, etc. are merged
• Incomplete integration results in
inconsistency and misalignment
• Increasing diversity of customers,
markets, geographies, and the offering
to serve
• Increasing scope of suppliers, products
& components to source and plan
• New channels, product flow alternatives,
and technologies to deliver value
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4. Wilson Perumal & Company, Inc. 4
As a result, many firms struggle through the challenges
of misaligned or inconsistent operating model
Operating
Model
Execution
Market
Strategy
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‒ Inconsistent performance between
business units
‒ Business results are routinely lagging
despite good execution
‒ Competition is pulling ahead in market
share, efficiency, and profitability
‒ Underutilized assets
‒ Inability to quickly & effectively react to
changing market conditions
‒ Lack of visibility to company performance
‒ Reliance on contractors/suppliers for
core capabilities
‒ Lots of work being done, but no progress
or improvement made
‒ Market Strategy not being executed as
intended
‒ Confusion and lack of communication
‒ Frequent deviations from standard
processes; consistent rework
‒ Unclear and/or overlap of accountabilities
within organization; too many org. layers
‒ Ineffective/inefficient operating &
management processes
‒ Out-of-control IT spending; systems create
more complexity & work than benefit

5. Wilson Perumal & Company, Inc. 5
Misaligned operating models drive complexity, higher
costs, lower performance, and the inability to grow
Level of complexity
you can support
Complexity, already growing in your
business, is compounded by a
misaligned operating model—
increasing costs and risks
Returns
Cost (and Risk)$
Complexity
An increasing number
of companies
Any additional, unmanaged
complexity impedes performance and
amplifies the continuing impact of
the Vicious Complexity Cycle
Complexity
increases
Poor
execution
Loss of
process
control
Poor
business
results
More people
and
processes • Shortages
• Breakdowns
• Missed deliveries
• Accidents
$
Complexity is the most important issue facing most companies and
poor/misaligned operating models only increase non-value-add complexity
Increasing or misaligned SKUs, facilities, processes…

6. Wilson Perumal & Company, Inc. 6
An organization’s aligned, ‘best fit’ operating model
depends on both internal and external factors
INDUSTRY DYNAMIC
The nature of the industry and
competitive landscape in which
your company operates
TARGET PERFORMANCE
Your company’s desired
results—profitability, growth,
safety, efficiency, quality, etc
BUSINESS STRATEGY
Strategic decisions on where to
play and how to win—the value
you offer your customers
CURRENT CAPABILITIES
The current-state operating
model and existing staff, assets,
facilities, and resources
ABILITY TO CHANGE & SUSTAIN
The organizational tools, culture, and
discipline to get from the current to the
desired model

7. Wilson Perumal & Company, Inc. 7
Current capabilities and performance objectives
will drive operating model design choices
 Your ‘best fit’ operating model will be optimized specifically around
strategic imperatives and the capabilities required to deliver them
Financial Targets
Strategic Initiatives
Required Capabilities
Core End-to-End Processes
5% Annual Revenue Growth
New products
Effective product development
Concept-to-Launch
Operational metrics Time to Market / % Rev. new products
ExampleConvert strategy to capabilities
Expected targets Six months / 20%
Clear definitions of success

8. Wilson Perumal & Company, Inc. 8
Industry Characterization Strategic Orientation
RegulatedUnregulated
ExpandingShrinking
High BarriersLow Barriers
Innovation-drivenStable Technology
Capital IntensiveLabor Intensive
Many Customers &
Channels
Few Customers &
Channels
Product HeterogeneityProduct Homogeny
Regulation
Overall Market
Entry
Innovation
Assets
Markets
Variety
Your ‘best fit’ operating model is specific to
your industry and chosen strategy to compete
By taking into consideration the
industry in which you compete and the
competitive landscape…
…along with your company’s strategic
orientation has chosen to compete in
that industry…
…You can develop your organization’s unique, ‘best fit’ operating model.
Low-cost Provider
Providing customers products at the
lowest cost—focus on high-volume,
efficiency & repeatable processes
Technology Leader
Providing customers cutting edge,
advanced products—focus on research &
customer-driven product updates
Customer Service Focus
Providing customers personalized service
—focus on meeting the individual needs of
your customers
InternalExternal

9. Wilson Perumal & Company, Inc. 9
Choices made across design elements will
determine ultimate operating model effectiveness
A baseline assessment across design elements provides context for the range of
potential changes to develop your ‘best fit’ operating model
Process
Design
Process Design
Accountability
Process Execution
Measurement & Control
Organization
Structure
Organization Size
Organization Structure
Roles & Responsibilities
Skillsets
Technology
Enablers
Capability
Reliability
Sustainability
Scalability
Governance
Corporate Governance
Business Unit Governance
Value-Stream Governance
Assets &
Capabilities
Vendors &
Partners
External Capabilities
Supply Chain Partners
Contractor Usage
Facilities
Intellectual Property
Core Capabilities
Operating Model Evaluation Criteria
Criteria: Elements: Criteria: Elements:

10. Wilson Perumal & Company, Inc. 10
‘Best fit’ design is only realistic if there are
resources, capabilities, and willingness to execute
Operating Model Transformation Success Considerations
Leadership
Advocacy
Does leadership believe a change is needed? Are
they engaged and acting as champions for change?
Company
Culture
Magnitude
of Change
Available
Resources
Required
Timing
Is the workforce focused on continuous
improvement and open to change?
How much change is needed across the 6-Facets of
Operating Model Design?
How much capital, effort, and energy can be
dedicated to developing & implementing change?
Are there any external timing requirements (gov’t,
investor/creditor, market) on the change?

11. Wilson Perumal & Company, Inc. 11
Done correctly, operating model redesign can be
transformational for a business
Our clients typically realize >25% EBITDA improvement
Common Operating Model Alignment Benefits
 Clarity of roles and responsibilities,
with accountability measures
 Streamlined communication and
handoffs across functional units
 Significant reduction in rework and
non-value-added effort
 Prioritized strategic capabilities and
roadmap to target performance
 Scalable operations to allow for
new, profitable growth initiatives
 Improved visibility between voice
of the customer and value delivery
 Increased capacity for value-adding
capabilities, such as innovation
 Improve pricing and lifecycle
management
Frequent Operational Benefits Frequent Growth Benefits

12. Wilson Perumal & Company, Inc. 12
WP&C leverages a 3 step process to diagnose and
attack operating model issues
• Which areas of the current operating model can or cannot support
future state capabilities and targets?
• Are identified gaps a result of structure, execution, and/or governance?
• Are there opportunities for consolidation or shared services? For
customer design approach?
• What are the key capabilities needed to deliver differentiated value over
strategic horizon?
• What are the consumer and business-related operational performance
targets we need to achieve?
• What are the design principles against which we will assess alternatives?
• How does the “what”, “who”, and “where” need to change by
organization?
• How do we evolve to the target operating model over time so that we
realize value and mitigate risk along the way?
• What do we need to do to start and sustain the journey?
Phase 1
Define baseline &
future state
requirements
Phase 2
Assess the gaps and
opportunity
Phase 3
Design target
operating model and
delivery plan

13. Wilson Perumal & Company, Inc. 13
Our methodology is proven
Source: Case example of operating model redesign at global satellite communications company
• Operating model misalignment developed as
legacy structures endured, despite changing
marketplace needs
• Understanding the baseline, including capability
gaps/overlaps, was first step to sizing opportunity
Functional Overlap Assessment
Case Example
• New operating model elements developed to fit
with business strategy and core capabilities
• Fundamental design principles created with
leadership to establish operating requirements
Design Principle Creation Operating Model Alignment
Project resulted in significant reduction in overlapping roles, a redesigned innovation
capability, and $15-20M in cost reduction opportunity

14. Wilson Perumal & Company, Inc. 14
We offer multiple ways to engage
As leaders in operating model design and implementation, WP&C is uniquely equipped
to help your company develop an attainable operating model & improve performance
Workshop Diagnostic Optimization/Redesign
Interactive half or full day
workshop for executive
leadership to align on operating
model issues and paths forward
Focused diagnostic to specifically
diagnose operating model
misalignment, and quantify the
size of the prize to address
Full operating model assessment,
deep dive into key issues, and
redesign of target opportunities
with implementation plan
Summary report of the core
issues identified by leadership,
and prioritization of next steps
Detailed report on health of
operating model, and expected
benefit of prioritized redesign
Redesign, implementation plan,
and tracking metrics for agreed
operating model improvements
Approximate Scope
1 – 2 days
Approximate Scope
3 – 6 weeks
Approximate Scope
3 – 6 months

15. Wilson Perumal & Company, Inc. 15
Operating Model Professionals
Scott Stallbaum
• Expertise in Operational Excellence Management System design & implementation, culture definition &
change, business simplification, and operating model design
• Significant oil & gas, food & beverage, and financial services experience including projects in operations-
strategy alignment, operational efficiency & safety improvement, and growth strategy development
• Former operations manager in the medical device & automotive industries
• MBA from Harvard Business School; BS in Mechanical Engineering from Bucknell University
• Over 20 years of experience in Supply Chain and Logistics via consulting and industry operations roles
• Specific experience in inventory management, distribution operations, transportation management
(incl. fleet), reverse logistics and logistics network planning & design across multiple industries
• Specific retail experience from Lowes, Michaels, and Kmart with projects from enterprise
transformation programs to distribution center slotting improvements
• Former director of global logistics with responsibility for NA and European transportation and
distribution including international ocean and air from Asia
• BSIE and MSIE from Purdue University
David Toth
Steve Liguori
• Expertise in business simplification, operating model design, process optimization, and growth strategy
• Significant retail and consumer goods experience, including projects in portfolio optimization, process
design, promotional effectiveness, out-of-stock reduction, and distribution effectiveness
• Worked with retail clients from a $1B grocery retailer to an £8B European electronics retailer
• Former Manager, Analytical Research & Development, Pfizer
• MBA from Emory University; BA in Physics from College of the Holy Cross (National Physics Honor Society)

16. Wilson Perumal & Company, Inc.
North America Europe
One Galleria Tower
13355 Noel Road, Suite 1100
Dallas, TX 75240
+1 972-716-3930
Longcroft House
2/8 Victoria Avenue
London, EC2M 4NS
+44 (0)203 206 1496
Contact Us:
www.wilsonperumal.com
Business Simplification Leads
David Toth
+1 330-256-0175
dtoth@wilsonperumal.com
Steve Liguori
+1 401-207-9506
sliguori@wilsonperumal.com
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