Designing the Operating Model of the Future for Sustainable Efficiency

How Leaders Achieve Sustainable Efficiency Without Breaking the Business

Editorial written by Managing Director, Australia - David Gumley

TL;DR Summary:

Many organisations respond to economic pressure with aggressive cost-cutting programs. While these initiatives often deliver short-term savings, they frequently erode capabilities, slow strategy execution, and allow costs to gradually return. Sustainable efficiency requires a different approach: redesigning the operating model. An operating model defines how strategy is executed—how decisions are made, resources are allocated, and work is coordinated across the enterprise. Organisations that align their operating model with strategy create structural efficiency rather than temporary savings. By clarifying decision rights, strengthening the enterprise centre, embedding technology and AI, and prioritising high-value initiatives, leaders can build organisations that deliver both cost discipline and long-term competitive performance.

Periods of economic uncertainty tend to trigger the same response across many organisations: cost reduction programs. Boards demand efficiency, leadership teams set aggressive savings targets, and functions are asked to cut budgets fast.

In the short term, these initiatives often deliver results. But over time a familiar pattern emerges. Capability is lost, strategic momentum slows, and gradually the cost base begins to creep back up.

The problem is rarely the ambition to reduce cost. The problem is the approach.

Too often, cost programs focus on what to cut rather than how the organisation should operate. The organisations that succeed take a different view. They understand that sustainable efficiency is not achieved through periodic cost programs. It is achieved through better organisational design, that is, through the operating model.

An operating model defines how strategy actually gets executed: how decisions are made, how work is prioritised, how capabilities are organised, and ultimately how value is delivered to customers. When the operating model is aligned to strategy, efficiency becomes an outcome of good design rather than an ongoing management struggle.

When economic pressure mounts, leadership teams often move quickly to reduce spending. The pattern is predictable: cost targets are set across the organisation, functions are asked to reduce budgets, and headcount reductions and spending freezes follow.

While understandable, this approach consistently produces unintended consequences.

First, capability erosion. Critical expertise and institutional knowledge disappear faster than organisations anticipate. Second, shadow organisations emerge – business units quietly rebuild capabilities that were removed centrally, because the work still needs to be done. Third, cost creep returns. Over time, duplication and inefficiency reappear, leaving organisations roughly back where they started.

This cycle is not a failure of discipline. It is a failure of design. If the underlying operating model remains unchanged, the organisation naturally gravitates back to its previous cost structure.

Strategy determines what an organisation wants to achieve. The operating model determines whether it can actually achieve it.

It governs how decisions flow through the organisation, how resources are allocated, and how teams coordinate to deliver outcomes. When organisations redesign their operating model alongside cost transformation, something different happens, instead of temporary savings, they create structural efficiency.

Work becomes clearer. Decisions become faster. Duplication disappears. Cost efficiency stops being a periodic exercise and becomes part of the organisation’s natural rhythm.

Across industries, most organisations gravitate toward a small number of structural archetypes.

Some operate with strong centralisation, concentrating capabilities and decision-making authority within the enterprise centre. This model creates scale and consistency, but risks slowing responsiveness at the frontline.

Others operate in a federated structure, where business units retain autonomy and accountability. This encourages ownership and customer proximity but can lead to costly duplication of effort.

Increasingly, organisations are moving toward platform-based models, where shared capabilities – technology, data, and operations – are delivered through enterprise platforms that the rest of the business draws on. And in many digital-native businesses, teams are organised around products or customer journeys, creating clearer accountability for outcomes and faster innovation cycles.

Most successful organisations operate somewhere between these archetypes. The real challenge for leadership is not choosing a model. It is designing the right balance between enterprise efficiency and local empowerment, and being willing to revisit that balance as strategy evolves.

Several structural shifts are reshaping how organisations operate today. Digital technologies continue to redefine customer expectations. Artificial intelligence is rapidly transforming productivity and decision-making. And organisations themselves are becoming more complex as globalisation, regulation, and technological change accelerate simultaneously.

In response, the operating models of high-performing organisations are evolving in several important directions.

Accountability is shifting toward outcomes rather than functions. Teams are increasingly organised around customer journeys, products, or measurable business outcomes, with clear ownership for results rather than activities.

The role of the enterprise centre is changing. Rather than acting primarily as an administrative layer, the centre is becoming the orchestrator of strategy execution: setting priorities, allocating resources dynamically, and managing shared capabilities across the organisation.

Technology is no longer a support function. Digital platforms, data, and AI are becoming deeply embedded in how work happens across the enterprise – not bolted on, but built in.

And high-performing organisations are becoming far more disciplined about prioritisation. Instead of pursuing dozens of competing initiatives, leadership teams focus on a small number of high-value strategic priorities and align resources accordingly. In a world where AI is shifting what is possible operationally, that discipline matters more than ever.

Cost reduction becomes sustainable only when the operating model reinforces discipline over time.

Several structural elements are particularly important. The first is clarity of decision rights. When responsibility for decisions is ambiguous, duplication and inefficiency inevitably follow. Organisations that clearly define who decides what move faster and operate more efficiently — and that clarity becomes a competitive advantage in itself.

The second is a well-designed enterprise centre. The centre must provide genuine alignment, governance, and shared capabilities without becoming a bureaucratic bottleneck. Getting this balance right is one of the most consequential design choices an organisation can make.

The third is disciplined portfolio prioritisation. Leadership teams must continually direct resources toward the initiatives that create the greatest value — and away from those that don’t.

And finally, cost discipline must be embedded into governance. It cannot exist as a standalone program. It must become part of planning cycles, performance management, and executive accountability.

One of the most damaging mistakes organisations make during cost reduction is cutting resources uniformly across the business. This approach may reduce spending temporarily, but it often slows progress on the very initiatives required to transform the organisation and strengthen its future position.

Leaders must take a more deliberate approach. Critical strategic initiatives should be protected and, in many cases, accelerated. At the same time, organisations must be willing to eliminate work that consumes resources without contributing meaningfully to outcomes, even when that work is familiar, comfortable, or politically sensitive.

Achieving this balance requires transparency: clear visibility of the strategic portfolio, disciplined governance, and strong alignment across the executive team.

While operating model design involves structures, processes, and governance, its success ultimately depends on the leadership team.

Transforming how an organisation operates requires genuine alignment across the executive on several fundamental questions: What is the operating model we are trying to build? What role should the enterprise centre play? Which capabilities are truly critical to our future success? And how will we ensure discipline in prioritisation and execution?

When leadership alignment is strong, organisations can move quickly and decisively. When it is weak, operating model redesign becomes slow, fragmented, and ultimately ineffective. The technical work of design is far easier than the human work of alignment.

Most cost programs begin with urgency. But their long-term success depends on something deeper: structural change.

Organisations that treat cost reduction as an opportunity to redesign their operating model create lasting advantage. They clarify decision rights. They strengthen the enterprise centre. They embed disciplined prioritisation. And they align structure with strategy.

In doing so, they avoid the common trap of cutting their way to weakness.

Instead, they build an organisation capable of delivering both efficiency and growth, an operating model that not only reduces cost today but strengthens the organisation’s ability to compete in the future.

David Gumley is Managing Director, Australia at ADAPTOVATE.

If your organisation is pursuing cost reduction or transformation, the real opportunity lies in redesigning how the business operates.