K3 Insights

Over the past five years, the way organisations design and evolve their operating models has undergone profound change. Driven by accelerated digitisation, macroeconomic uncertainty, changing workforce expectations, and the rise of AI, traditional approaches to structure, decision-making, and value creation are being replaced by more adaptive, customer-led, and technology-integrated models.

For senior business leaders and owners, understanding these shifts is critical not just for efficiency, but for long-term relevance. Below are the top six themes (we normally work with 3’s, so this article has twice the value) shaping operating model design as we look into the immediate future.

1.  From Functional Silos to End-to-End Value Streams
   Organisations are shifting away from siloed functional models toward integrated, cross-functional value streams. The emphasis is on delivering outcomes, not just managing activities. This means designing around customer journeys or key value-creation flows, rather than internal departments.
   Why it matters: This approach enhances responsiveness, improves accountability for customer outcomes, and reduces handoffs and rework. It also encourages collaboration across disciplines, breaking down the “them vs. us” mindset between business units and enabling functions (e.g., HR, Finance, Technology).
    
2. Empowered, Accountable Teams – Not Just Hierarchy
   A growing number of organisations are flattening their structures and pushing decision-making closer to the customer. This is matched by increased investment in role clarity, performance frameworks, and operating disciplines to ensure empowered teams stay aligned.
   Why it matters: Decentralisation without discipline leads to chaos (I have witnessed it firsthand)! Successful operating models are striking a balance – giving teams autonomy while reinforcing shared principles and accountability for outcomes. Leaders are becoming more like coaches and conductors rather than command-and-control managers.
    
3. Talent and Capability Are Now Strategic Anchors
   While unemployment rates have increased in recent years in NZ, the desire for great talent has intensified. It’s no longer just about acquiring the best people – it’s about designing operating models that unlock their full potential. Businesses are aligning structures around where their scarce capabilities sit, not just around products or geographies.
   Why it matters: Capabilities like data science, sustainability, or digital experience often cut across traditional business lines. New operating models are placing these capabilities in centres of excellence or “embedded networks” to drive coherence and scale while remaining responsive to business needs.
    
4. ‘Digitally Native’ Ways of Working Are Becoming the Norm
   In just five years, we’ve seen a permanent pivot toward digital-first operations. This is not just about remote work – it’s about reimagining processes, decision rights, and interactions through digital tools and platforms. Agile and product-based models have moved from tech teams to enterprise-wide adoption.
   Why it matters: Organisations that robustly embed these different operating rhythms can reduce cycle times, unlock faster innovation, and improve data-driven decision-making. Leaders are redesigning governance, performance management, and budgeting processes to support shorter planning cycles and real-time adaptation.
    
5. The Rise of AI-Enhanced Operating Models
   The adoption of AI is triggering a redefinition of work and organisational capabilities. AI is no longer a back-office tool – it is now a core capability shaping how Customer Service, Marketing, Legal, and even Strategy functions operate.
   Why it matters: AI changes what work is done by people versus machines and requires operating models that are not just efficient but constantly learning and evolving. Organisations are creating new roles (e.g., AI Product Owner), revisiting workforce design, and investing in AI governance as a strategic discipline.
    
6. Operating Models as Living Systems
   Perhaps the biggest change is the realisation that the operating model is no longer static. Leading organisations now treat it as a continuously evolving system that is enhanced based on strategic priorities, external shifts, and internal learning.
   Why it matters: Annual (sometimes more frequent) restructures or three-year operating model refreshes no longer cut it. Adaptive organisations are building capabilities in scenario planning, change agility, and modular design – allowing parts of the operating model to flex without destabilising the whole.

In summary, today’s operating model is no longer just an org chart or a cost structure – it is a strategic asset. The most effective models are:

• Oriented around customer value, not internal functions
• Digitally enabled and data-informed
• Designed to unlock human and machine capabilities
• Flexible enough to adapt, but disciplined enough to scale
   

For leaders, the challenge is not just choosing the right model - it’s building the leadership, governance, and culture to evolve it continuously (see my previous articles re: our design cube). Those who treat operating model design as a one-time event risk falling behind. Those who treat it as an ongoing strategic capability will stay ahead.