As my continuing effort to learn and share about Organizational and Operating Models, this week I pulled information about the Dell Operating Model. The content posted here is from the Dell Operating Model thesis that was submitted to the Sloan School of Management by Blaine Paxton in 2004. In 2008, Dell drove actions to enhance Competitiveness, and Optimize Operations to improve profitability and cash flow. Like every company that went through growth and revenue adjustments, and organizational realignments because of 2008 financial crisis, the changed conditions may have influenced the current Dell’s operating model as well. However, if we assume that the Operating Model is the foundation for execution of Strategies, the fundamentals of the Core Operating Model should sustain up and down of the market place. To that end, I believe the premise of the thesis around People, and Practices at Dell should still be relevant now in understanding the subject of Operating Models.
Dell’s operating model consists of four assumptions about how people should work:
- Being obsessed with producing results,
- Being flexible in the way work is done,
- Leveraging the value of personal relationships, and
- Encouraging leadership at all levels in the organizations
If Vertical integration is about owning and operating multiple steps in the value chain, then Virtual integration is about owning one step, but coordinating the actions of many steps. Dell and its supplier’s area uniquely configured network of alliances and partnerships i.e. Virtual Integration. One of the core competencies is strategic outsourcing.
Some general management practices at Dell:
- Expecting a high level of personal accountability
- Minimizing celebration / maintaining sense of urgency
- Management teamwork, especially “two-in-the-box” management
- Tightly managing the balance of revenue and growth
- Being able to kill losing projects quickly
One of the interesting methods I noted out of thesis is “Time pacing” which is creating new products or services, launching new businesses, or entering new markets according to the calendar. Time pacing according to Blaine Paxton’s thesis “can counteract the natural tendency for managers to wait too long, move too slowly, and lose momentum”. It also “create a relentless sense of urgency around meeting deadlines” while at the same time creating predictability by giving “people a sense of control in otherwise chaotic markets”.
Is your Operating Model still relevant? If not, what is driving those changes?
by sravan ankaraju on May 23, 2010
in Execution
I am not here to promote the capabilities of Auburn University to respond to Deepwater Horizon Oil Spill. But their research paper highlighted areas of expertise that will be required in assessing and mitigating the impact of the disaster. Some of the capabilities required to respond post leak stoppage –
- Containment and Clean-up
- Environmental Assessments – Impact of the spill on Coastal wetlands. Coastal wetlands prove habitat for fauna and flora, hurricane mitigation, carbon sequestration, pullutant filtration, and in sustaining local to regional economies. Some of the impact on the wetlands will be seen years following this disaster.
- Remediation – Adding nutrients to Ocean water to increase microbial activity.
- Public Health – Managing health risks and communications.
- Hydrodynamic modeling of contaminated areas – Model the fate and transport of oil spills within estuaries and also in the rivers.
- Managing the impact on wildlife – handle and treat injured birds of prey, and in removing oil from birds & turtles.
- Managing the impact on Seafood – Process to monitor within the oil spill path marine bacteria in fish and shell fish that cause human illnesses in order to prevent human consumption of contaminated seafood.
- Ensuring Availability of Right Equipment – Gas Chromatographs fitted with various detectors to measure hydrocarbon, residues discharged, and partitioning characteristics of the non-aqueous phase (NAPL) oils.
This is few of the many capabilities that will have to be brought to bear to manage this disaster.
We have had many disasters over the decade – 9/11, Asian Tsunami, Haiti Earthquake, Gulf Oil Spill etc. The capability for first responders in managing every one of these crises is different.
- Haiti Earthquake – managing the immediate human death, disease control, and rebuilding of basic public infrastructure;
- Gulf Oil Spill – contain the spill, limiting the damage to the environment; and manage the immediate impact on wildlife & Seafood, and health.
Managing the crisis/disaster is different is from managing the risk of project. While one focuses on limiting the damage, the other focuses on prevention. The focuses of the firm on one or more of these functions depend on their own capabilities. Capability mapping – what capabilities should firms own and outsource others? BP America, Halliburton, and Transocean are three main companies that are working together on the Deepwater Horizon rig. What capabilities did these firms bring to the table and were they executed well? Risk Management (safety) is a big function – what processes were put in place to mitigate the risk?
Should we even be deep-water drilling? The answer to the issue may be as simple as expediting our investments in alternative energies. But understanding the capabilities of the new Energy companies firm is as important.
What are your thoughts?
by sravan ankaraju on May 2, 2010
in Execution
Talking about theoretical models and frameworks, and practical applications of the same, I have been fascinated by Mechanism Design & Complex Event Processing.
Per Alex Tabarrok at reason.com, mechanism design is to markets what genetic algorithms are to life. He also writes that – “Mechanism design is a very general way of thinking about institutions. An institution or mechanism takes as input "messages" or "signals" from agents and it responds with an outcome. The idea of mechanism design is to create institutions that produce a desirable outcome while respecting the fact that agents have private information and are self-interested. It turns out that designing mechanisms that work well while respecting information and self-interest constraints is very difficult”.
While Mechanism Design is an economic theory, Complex Event Processing (CEP) is the use of technology to predict high-level events likely to result from specific sets of low-level factors.
A typical complex event processing use case can be found in automated stock trading using Financial Services algorithmic trading. Prior to the advent of complex event processing engines, stock traders often sat at a desk manually monitoring 5-8 screens to identify patterns in the market that indicated an opportune moment for a trade. Analytic information and patterns were often manually tracked in a spreadsheet. Today, this type of tracking can be entirely done in the complex event processing engine and a trade automatically triggered when the patterns are right. While the System is monitoring real-time market conditions, the traders gain time and mindshare to evaluate the performance of their algorithms and refine them for desirable outcomes (the premise of Mechanism Design)
Smart market (Auction) is one of the practical applications of Mechanism Design.
A complex event is what one infers from the simple events. Social Networks (a blog post, a tweet), Matching Systems (profile/preferences match), GPS Tracking and Monitoring – every single & simple event, can be combined through Complex Event Processing to drive larger more practical consumable applications that assist in desirable outcome.
Professors Øystein Fjeldstad and Charles Stabell have developed a framework of three generic types of business models –
- Solution Shops – Employ experienced intuitively trained experts whose job is to diagnose problems and recommend solutions. High-end consulting, law, advertising firms, R&D organizations, and specialist physicians’ diagnostic activities in hospitals are examples. The firms abilities to deliver value to customers are dependent on the people who work there; standardized processes are uncommon in solution shops.
- Value Chains – Manufacturing, retailing, and food service companies are examples. These companies bring inputs of materials into one end of their premises, transform them by adding value, and deliver higher-value products to their customers at the other end. The ability to deliver value is embedded in strong, standardized processes.
- Facilitated User Networks – Telecommunications, Insurance, and Banking are facilitated user networks. Participation in the network typically isn’t the primary profit engine for participants. Rather, the network is a supporting infrastructure that helps the buyers and sellers make money elsewhere. The company that makes money in a user network is the one that facilitates the network.
