Part 1 – Overview
Over the last 15 years Steve Ingall, former Head of Business Services at iCore Ltd, has been advocating the need for IT Departments to adopt a blended use of the numerous IT good practice frameworks and guidance, including ITIL, COBIT, SFIA, SIAM, PMBOK, Agile, DevOps, SAFe, and relevant ISO Standards.
Today this culminates in Steve presenting an approach for businesses and IT departments to ensure that they now have a truly Flexible Operating Model.
All organisations are facing the need for speed and agility in delivering products and services to an ever changing customer base and disruptive technologies. For the last 10 years there has been a significant move from ‘Business IT Alignment’ through ‘Run IT as a Business’ and now ‘Run the Business using Technology’. As we go into the 4th Industrial Revolution we need to adopt the 4th Generation Flexible Operating Model. The technology that gets delivered is increasingly end customer facing, but we cannot lose sight of the continued need for business facing technologies and also the back-office operational technologies. The Flexible Operating Model accommodates all of these.
Both the Business and the Technology Department face significant cultural transformation challenges as they both jointly need to become more agile in order to fully utilise the potential created by innovation and digitalisation. The task is not easy as we need a multi-modal operating model that ensures the existing systems, processes and ways of working can co-exist with the new systems, processes, and ways of working, and indeed integrate seamlessly, work in harmony and flex as demand dictates.
Without embracing a Flexible Operating Model the Business and Technology Department will drift further apart and harmful Shadow IT will increase, making the overall enterprise less efficient, less effective and with non-viable costs. Just considering the ‘cost of a minute downtime’ conundrum at the highest level for one minute we can see that the cost of downtime has increased exponentially and will continue to do so. The ROI on this sort of business transformation can only really be measured in saved cost, which has to include the cost of downtime, which in turn usually means lost production, lost sales or lost productivity in other ways.
An organisation that iCore worked had informed shareholders that income from online payments to be in the order of £millions per hour and had promised that transaction speeds would on average be sub 2 second. Anything that caused those targets to not be met meant not only lost revenue but also lost shareholders and lost customers. Stating that the reason they were not met was because we couldn’t put the right resources on the Incident / Problem or that we didn’t have good governance over suppliers is not a good answer.
The Flexible Operating Model
The Flexible Operating Model needs to be applied across the Business and the Technology Department in a consistent programme of change to ensure that the use of technology is optimised across the whole business. This needs to ensure that the legacy technical estate can be modernised/ transformed/retired in parallel to the new digital backbone being deployed.
Driven by the need for business excellence delivered through agile development leading to operational service excellence and controlled by minimum viable governance, every aspect of the operating model has to be flexible. The Flexible Operating Model ensures that we provide the right balance between business alignment and delivery autonomy.
The Flexible Operating Model is made up of blended practices, processes, tools, structures and governance models designed to allow effective management of the demand, delivery and operation of system, processes and data. These are drawn in the main from ITIL®, COBIT®, LEAN®, CMMI®, SAFe®, and Agile.
Another major aspect of the Flexible Operating Model is that, in order for it to remain fit for purpose and not just a theoretical annual exercise that becomes shelfware, it needs to be reviewed regularly. It becomes the Blueprint for how you work, so if you make a major change to any of its components you need to review and reflect the impact of that change. This means therefore that someone needs to be accountable and responsible for the operating model, which is likely to be the COO or the Office of the CIO.
The Flexible Operating Model is supported by an integrated capabilities model (combining and adapting ITIL®, COBIT® and IT4IT®) and a new roles and responsibilities model (using aspects of Spotify Agile, DevOps, SAFe® and SFIA®)
New Operating Model
According to Gartner:
“An IT operating model describes how the information and technology capabilities the enterprise requires to successfully execute its strategy will be delivered”
– Ian Cox, Gartner CIO Research Director
Simply put its ‘The Way We Work Around Here’ so if what we have to deliver is changing then the way we work has to change. A new Flexible Operating Model must involve a new, closer collaboration between the Business and the Technology Department but some of the basics for operating model design still apply. The operating model must still be developed to align with the Business Strategy and must be built upon agreed Design Principles. Some typical components of an operating model are shown in Figure 1.
For example, the Business Objectives could be written as a number of Value Propositions and Value Streams; the Suppliers section could consider how to develop the ecosystem; in Ways of Working you may allude to more flexible work patterns. Fundamentally we are looking at how a business with technology will plan, build and run technology products and services to deliver the business and customer value using a common strategy, consistent governance, effective sourcing and continual optimisation. The aim at all times must be to improve efficiency, deliver exceptional customer experience, reduce operating costs, and enhance business value.
Surrounding the operating model we will also have to factor in enterprise wide Governance, Culture and Customer Experience as these should touch every components. One prevailing aspect of the Flexible Operating Model is to adopt the Agile approach to Governance where we focus on outcomes, progress and minimum viable bureaucracy.
Whilst developing the operating model it is essential that a capabilities map is developed to show the capabilities (or competencies) required to underpin the operating model and to convert demand into delivery, which in turn delivers value, benefit and the required outcomes.
And to support the operating model and capabilities map there needs to be an organisation structure with roles and responsibilities clearly defined and a high level RACI used to ensure accountabilities and responsibilities are clear and understood. The Flexible Operating Model proposes a flat organisation structure with no more than three levels and adopting self-organising teams, collaboration, steering, affiliations, professions, and Agile approaches to solution development. There should be no boundaries between the Business and the Technology Department, and to support this the Flexible Operating Model suggests that the role names for the Business and the Technology Department are the same and only vary in content to acknowledge their sponsorship. This also helps when working in a multi-modal environment. A good way to implement this structure is to abandon all existing roles name, e.g. Service Delivery Manager and focus on capabilities that the role needs to perform in order to assure service excellence, e.g. Service Owner.
Building the Ecosystem
The Flexible Operating Model acknowledges that the modern Technology Department has to rely on a multitude of suppliers and these suppliers need to be managed carefully to ensure that the business gets the best value from them all. Where a supplier is a Tier 1 supplier, i.e. a strategic supplier / partner, then that supplier needs to be considered part of the Technology Department and be involved in the strategy, innovation and solution development in a way that is not just responding to a statement of work or request for purchase. This is what makes it a true ecosystem, a community of components working together in an integrated way that makes best use of the strengths of the individual components whilst creating a single technology platform.
Effective management of the Sourcing Strategy (internal and external), Supplier Tiering (focus on value add not spend), Vendor Management (as an integrated purchasing, contract management and performance management capability), and Collaboration (within defined rules) all become essential aspects of governance.
Whilst many large Managed Service Providers will tell you that they can provide just about anything, you really do need to focus on their ‘sweet spot’. Would you really buy Data Centre Hosting, Server and Storage from Vodafone; or Local Area Network Management from IBM? Generally all IT is made up of just a few things, namely Applications, Infrastructure and End User Services, all enclosed within a ‘Service Management Wrap’. This wrap needs to be both technical in nature and also service delivery by design, but ensure you do not just man-mark the ecosystem or make up for their deficiencies by plugging gaps.
You do also need to remember to leave the suppliers with a ‘reasonable profit’ because if you make their business un-viable you lose out in the end. Sometimes it’s not about nailing down the BAFO (with the aid of benchmarks and industry experience of course) and then getting another 10%.
It’s all about People
In recent years a strong message has been coming from the world of Agile, and that is to “trust the people, motivate the people, empower the people” because only if the operating model enables the people will they be motivated to perform at the highest level and deliver the products and services demanded by the business in a manner that delights the customer.
Flattening the organisation structure and making accountabilities and responsibilities clear enables better decision making, and moving the competencies of the people from being seen as Specialist or Generalist you should aim for the ‘Versatilist’ which enables the people to be able to perform in different roles, making them flexible, able to contribute in many ways and with a fuller, more rewarding job.The Flexible Operating Model begins with the ‘Ways of Working’ looking at what prevents people performing to their full capability and defining the general principles that people work to, e.g. Product based management, Agile development, Lean processes, self-organising teams. I often quote Spotify as a great example of how adopting this approach can lead to a major successful business, and indeed many digital start-ups only work like this. However, I have also seen this in organisations with more traditional IT (people, process and technology) where, with the right leadership and a strong change programme, can introduce the right operating model with the right governance, culture and mind-set.
Organising the people with the same skillset into a Profession (or Chapters) enables them to grow together, to think outside the box, define their minimum viable XYZ, set their performance standard, and form an identity.
When a new team is required to meet a new demand then the Product Owner simply needs to request resource from the specific professions that can provide the right business capabilities, development capabilities and service capabilities. There may be a need for some adhoc roles, e.g. governance, who are assigned to the team but may not co-locate with the new team. Whilst working in the team the individuals report to the Product Owner for their work, their Profession Lead looks after their pay and rations, and the Product Owner and Profession Lead will jointly manage their performance.
The Head of Professions should consider establishing a ‘Profession Health Rating’ so that they know how the profession is maturing and where there is a development need. There are a number of characteristics that could be included in the Health Rating, e.g. Ease of Releases, Learning, Workable Process. The Profession can score itself against the criteria and the Head of Profession can discuss with Profession Leads, Product Owners and Service Owners as well to get an external view.
It is clear that Businesses and Technology Departments need to re-wire the systems, processes and tools they need to continue to provide effective, efficient, and economically viable products and services to not only their end customer but to the internal customer as well. Demand is increasing and we cannot just continue to try to work in a traditional hierarchical structure that is relying on being able to react fast enough. The Flexible Operating Model can help the Business, Technology Department and Ecosystem to work closer together as a single entity, enable the organisation to flex to meet demand and provide a more attractive place to work through AI and automation of mundane and manual tasks.
Without this change in how we operate then the Business will find other ways to get the flexibility it needs and the IT Department will become less and less effective or even cease to exist.
To find out more about iCore’s approach to the Flexible Operating Model or about the iCore Rapid Operating Model Assessment. Contact us on firstname.lastname@example.org or 020 3821 1252.