Business design is now a necessary leadership competence.
The speed of business evolution has increased and is increasing exponentially. The pace of adoption of new technologies and products in a digitally-connected world has been transformed, enabling rapid shifts in customer behaviour, business operations and competition – from new entrants, adjacent players and disrupters.
As the ability to sustain differentiation based on product and services decays faster, business design has become an increasingly important source of competitive advantage. That applies at the level of business model design (eg Ryanair, Amazon, Netflix) and organisation design (including digitally-enabled process, resource configuration, decision-making and culture).
Your business design is likely to determine how fast you evolve, how well you play, whether you win, and how hard you are to copy.
But too often it is delegated and disconnected.
Business model design (self-reinforcing asset, policy and governance choices that define how the enterprise operates and creates value) is rarely approached holistically by leadership teams, and often subject to external advisors' PowerPoint recommendations.
Process design and digital enablement is frequently perceived as the domain of IT and business process management (BPM), or worse, abdicated to a supplier, whilst resource configuration and culture is a job for HR.
Our experience suggests that business design needs to be led in a ‘masterful’, integrated way.
April has worked on business (re)design and implementation with clients around the world, ranging from fintech scale-ups in a single market to major hotel chains and international automotive and mobility services businesses operating 25 brands across 15 countries.
We have seen how, done well, it can yield step-change results within 12 months (eg increased customer NPS by more than 50%, decreased cost/income ratio by more than 10%, increased gross margin by more than 60%) and transform scale and performance within two years (eg trebling profit).
Here is a brief summary, based on our learning, of how to do it well:
1. Approach it in an integrated way
Business design is systemic and relies on alignment and mutual reinforcement between interconnected elements. All these elements need to be considered together, through iterative design to agreement before proceeding to implementation.
2. Start with the consequences of purpose and strategy
Interrogate your purpose and strategy to explore the consequences for business design. Some design principles (regarding business model and interconnected design elements above) will be clear, others will require teasing out and choices to be made. Involve your leadership team and test choices using practical scenarios.
3. Distinguish and design for your success models
Identify common ‘success models’ across brands, ie different forms/types of business with distinct conditions for success, business model requirements and core processes (eg new car sales, used car sales and quick service require distinct success models but are common across brands).
Designing for each success model (with common processes, digital enablement, structure, capabilities and governance where possible, different customer touchpoints where necessary) enables you to exploit synergies, scale efficiently and accelerate post-acquisition integration.
4. Create a common design product catalogue and build internal design capability
Business (re)design is complex. Those leading and managing it need to make it simple for the teams working on different components to understand what to focus on now and next. That is why we structure the detailed work required into a modular product catalogue, with supporting templates and tools for each product at each step, and each step broken down into short design sprints.
With internal HR, Finance and BPM leads involved in progressing parallel success model design, the use of a common modular approach helps to:
build internal design know-how rapidly, through common conceptual language, templates and tools (creating a ‘playbook’ for interconnected business design)
enable easier sharing of knowledge and learning between teams
simplify reporting, enabling easier understanding of progress and delivery
5. Manage step-by-step ratchet agreement with milestone ‘showcase’ events
Business (re)design, which impacts leadership and management roles, responsibilities and power, will inevitably raise contentious and difficult design issues and choices.
To navigate those difficult choices, it is important to create progressive alignment, ‘ratcheting’ cumulative agreement from strategic intent, through design principles and operating model blueprint, to detailed design.
Good programme governance is clearly important here, but it can be helped significantly through carefully planned events for the different success model design teams to ‘showcase’ final proposed design products at the end of each step (or ‘chapter’). These ‘showcase’ events:
help maintain rapid momentum, by creating a critical deadline for delivery
reinforce accountability for delivery and ownership of design
lock in ratchet agreements and steers from senior decision-makers, providing a solid, agreed reference base for subsequent steps (or ‘chapters’).
6. Involve those who will lead and manage the business from the outset
Business (re)design requires business leadership. It should not be purely delegated to supporting functions or external advisors. We have found that involving those who will lead and manage success models in the new design, in leading and managing the development of that new design, significantly accelerates implementation and realisation of benefits.
Often, that involvement is in the form of joint leadership of success model design teams, drawing leaders from different brands to work together on common success model design. Usually, they are supported by internal HR, Finance and BPM leads and selected business subject matter experts. Always, that involvement is within a carefully structured and orchestrated approach, framed by design principles and choices derived from purpose and strategy, centred on delivery of the product catalogue, and subject to review and ratchet agreement by senior decision-makers in milestone ‘showcase’ events.
Masterful because...
Our practical experience and learning summarised above reflects and corroborates work done by Deborah Rowland, Michael Thorley and Nicole Brauckmann on the most successful approaches to leading organisational change (see their article in Harvard Business Review, April 2023).
They characterise ‘masterful change’ as:
led by top management
held in a consistent manner across the organisation… within a clearly defined frame
involving leaders spending time and energy on engagement and dialogue to refine it
giving people freedom to design and implement (within the clearly defined frame)
supporting them with capability building and shared learning
They, in their research over two decades, like us, in our practical experience over two decades, found that this ‘masterful’ approach to leading business design was most present in successful, high magnitude change.
If you would like to discuss how you lead the (re)design of your business please get in touch.
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