Impacts to operational models, organizations, employees and customers

Organizations face several challenges in generating value, and myriad factors exist behind those challenges. Even once-successful organizations can face considerable challenges in generating value, such as complex organizational structures and poor culture, leadership support that falls short, and weak employee autonomy to complex product portfolio technology that does not meet the needs of the business. Likely all of us have experienced these during our careers. Let's take a closer look at how they affect success.

Organization impact

1. Reduced business agility. Organizations with complex functional silos or departmental structures may struggle to quickly sense and respond to industry and market opportunities. The organization is then affected by decreased agility which potentially impacts the organization’s top line.
2. Innovation opportunities. Without cross-functional teams and a culture of collaboration, innovative ideas from one group may not benefit other teams, limiting the organization's ability to capitalize on its full intellectual potential.
3. Inefficient resource allocation. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads.
4. Increased risk. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads.
5. Reduced revenue. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads.
6. Brand erosion. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads.

People impact

1. Job satisfaction. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads
2. Low morale. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads.
3. Duplicated efforts. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads.
4. Poor decisions. Without alignment and coordination, an organization may make decisions regarding resource allocation in isolation without considering the organization's priorities and objectives. It can also result in suboptimal allocation of resources, leading to inefficiencies and unbalanced workloads

Different roles may also cope with different impacts.

1. Increased stress. Value creation challenges can lead to increased pressure among employees. Work processes that are not streamlined or cross-functional teams who do not work well together can lead to confusion, missed deadlines, and increased workloads, leading to burnout and stress.
2. Limited growth opportunities. Value creation challenges can hinder growth opportunities for employees, as they may not have access to new information, skills, or resources to develop themselves. Additionally, teams operating in silos may limit employees' exposure to various aspects of the business, limiting their professional development.
3. Increased turnover. The inability to create value and achieve objectives can lead to employee frustration and may result in turnover. When employees feel unchallenged or undervalued, they may seek other opportunities.

These impacts on people can have a ripple effect on the organization, leading to decreased productivity, increased costs, and lower morale. Therefore, addressing value-creation challenges and providing a supportive work environment for employees to thrive is crucial.

Customer impact

1. Decreased satisfaction. Customers may experience delays, inferior quality products/services, and lack of personalization due to inefficient processes and lack of collaboration between teams – which can result in fragmented customer interactions, inconsistent service delivery, and a lack of holistic understanding of customer needs.
2. Increased churn. Dissatisfied customers are likelier to switch to a competitor, leading to lost revenue and negatively impacting the company's reputation.
3. Decreased loyalty. Customers who do not feel valued or receive inconsistent service are less likely to remain loyal to the brand, decreasing revenue over time.

Impact on business operational models

We have seen to this point various challenges organizations face during value creation, the reasons behind those challenges, and the impact of those challenges on the organization, its people, and its customers. We will now see what these challenges mean in businesses' operations and what operating models successful organizations have adopted.

The challenges and impacts discussed earlier directly correlate and reflect an organization's culture and business model. Primarily there are two business operation models that organizations tend to adopt. The first model reflects a startup mindset—typically small, nimble, and adaptive to change, with a flat organizational structure and lean processes. These organizations are quick to sense and respond to business opportunities and are not afraid to take calculated risks. They have well-connected systems, a high degree of automation, and self-governed, empowered teams with good collaboration. Overall, in this model, organizations typically do not face most of the challenges in value creation highlighted earlier in the document. These organizations have various tenets of VSM embedded already without explicitly adopting VSM.

Applying VSM can enable course corrections for challenges that can develop as an organization scales and grows.

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The second model caters to both a growth mindset, like that of a startup, and to sustain the other parts of the business already established. Successful organizations follow this model, known as organizational ambidexterity. These organizations can balance exploration, such as new ventures or similar activities, and exploitation, such as capturing the market, allowing them to be adaptable like a startup and have a highly efficient execution business. Amazon is an excellent example of this model, with a highly innovative exploration business co-existing with a production/implementation business characterized by extremely efficient e-commerce, supply chain, and cloud, among other things.

Moving towards a better future

Most organizations globally fall somewhere in the middle of the above spectrum, facing one or more challenges during the value-creation process. Typically, such organizations start small, with a core business that functions efficiently like a startup. However, as they scale and grow, misaligned organizational hierarchies, siloed processes and systems, legacy technology, and a lack of collaboration can hinder value growth. Applying VSM can enable such organizations to overcome these challenges and put them on a successful path. We will continue to share details on how organizations can benefit from VSM in the next installments of this series.

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