Is your operating model trailblazing or trail-gazing?

Following are three recommendations for companies looking to become operating model trailblazers:

Build a clear strategy that anticipates multiple needs

Successful consumer products companies will need operating models that can support evolving business needs, and leaders recognize this requirement. However, many leaders seem to lack clarity about their vision and priorities. In other words: Some organizations seem uncertain about why they're tackling operational transformation.
More than 70% of respondents feel that clear leadership is needed to navigate required changes in technology and data. At the same time, 63% cite divergent internal strategic priorities as a significant barrier to change, and 55% see the inability to develop a transformation road map as a major hurdle. Companies seeking to transform without clear objectives and road maps risk expensive failure, which will push them further behind in their efforts to win consumers.

Focus on where you need to change

Operating models include a wide range of capabilities, from supply chains to talent pools. Asked where they needed to transform “to a great extent,” respondents chose almost everything, including supply chain (48%), finance (48%), talent (48%), marketing (46%,) manufacturing (46%), sales (45%), strategy (45%), and R&D (43%).

Responses to a question asking them to rate their current capabilities showed much greater variation. Some areas, such as digital operations, reflected relatively high levels of development. Others, such as talent, were generally viewed as less mature.

Implementing plans to change virtually everything, and to do so immediately, would, of course, be a huge undertaking. In addition, such an approach may not address where existing strengths lie — and risks shifting focus away from where change is most urgently needed.

Ideally, companies will be able to rely on operating models that remove silos and use technology and data to integrate their business function. But each company will have to prioritize based on its individual needs and capabilities.

If you want to transform quickly, don’t go it alone

Many of the companies surveyed may struggle to meet their transformation goals as fast as they’d like if they focus only on developing or acquiring their own capabilities.

We asked respondents how quickly they anticipate the need to address six operating model practices1. Looking across those activities, 21% to 30% of respondents see them as critical now, 31% to 38% anticipate needing them in one to two years, and 18% to 35% see implementation as being three to five years away.

Most respondents say they typically acquire or develop the required capabilities for those practices in-house. However, those approaches can be slow and inflexible compared to partnering or outsourcing, which appear to be much less favored.

During the pandemic, consumer products companies have made changes at speeds that wouldn’t have been possible without partnerships. Some turned around direct-to-consumer (D2C) operations in weeks or months with support from third-party platforms and logistics providers — efforts that might have taken years on their own. Given the time frames companies are setting for themselves, building an ecosystem of trusted partners is likely to be a crucial factor in helping them acquire skills and capabilities quickly, without the investment or effort required to do the job alone.

1The six operating model practices were embedding digital technologies; integrating data and analytics; creating an integrated business ecosystem; embedding environmental, social, and governance (ESG) considerations; connecting silos to enable scalable innovation; and leveraging a people-centric model for decision-making.