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Business & Information Systems Engineering (2024) AI Processed Human Approved
Navigating Business Model Redesign:The Compass Method for Identifying Changes to the Operating Model
This study introduces the Compass Method, a design science research artifact developed to guide decision-makers at tactical and operational levels in identifying necessary operating model changes following a business model redesign. Grounded in business model and business process management literature, the method utilizes operating model design cards and was iteratively evaluated through expert interviews, student applications, and an empirical case study in a tool manufacturing company.
Problem
Organizations frequently struggle to translate tactical business model redesigns into operational operating models and underlying business processes. Existing frameworks primarily focus on greenfield scenarios or network contexts, leaving a research gap in systematic guidance for evaluating internal operating model changes and assessing their feasibility during a redesign.
Outcome
- Formulated and validated the Compass Method, a structured three-step framework using design cards to translate business model changes into concrete operating model adaptations.
- Established prescriptive design objectives and solution knowledge bridging the research gap between business model innovation and operational business process management.
- Demonstrated across multiple evaluations that the method enhances traceability, standardizes operational change planning, and facilitates alignment between business and technical stakeholders.
- Established prescriptive design objectives and solution knowledge bridging the research gap between business model innovation and operational business process management.
- Demonstrated across multiple evaluations that the method enhances traceability, standardizes operational change planning, and facilitates alignment between business and technical stakeholders.
What it means for you
- CIO / IT Executive: On Monday morning, review the executive summary of the Compass Method paper and identify which of the 'design objectives' and 'solution knowledge' areas align with current or planned IT infrastructure investments to support business model redesigns.
- IT Manager: On Monday morning, pull up the 'operating model design cards' described in the paper and, referencing a recent business model change initiative, begin mapping existing IT processes and systems to these cards to identify potential operational gaps or inefficiencies.
- Business Strategist: On Monday morning, dedicate two hours to familiarize yourself with the three steps of the Compass Method and prepare to facilitate a pilot session next week applying the method to a specific, recently redesigned business model component.
- Researcher: On Monday morning, begin analyzing the empirical case study data presented in the paper, focusing on the specific metrics or indicators used to demonstrate the effectiveness of the Compass Method in enhancing traceability and standardizing operational change planning.
- Policymaker: On Monday morning, read the 'problem' section of the research and consider how the described gap between business model redesign and operational implementation might be addressed by future organizational policy or standard operating procedures, potentially incorporating elements of structured change planning.
Transcript
Host: Welcome back to A.I.S. Insights — powered by Living Knowledge. I'm your host, Anna Ivy Summers. Today, we're diving into a breakthrough study titled "Navigating Business Model Redesign: The Compass Method for Identifying Changes to the Operating Model." Joining me to break down this research is our analyst, Alex Ian Sutherland. Alex, welcome!
Expert: Thanks, Anna. I'm thrilled to be here. This study tackles a challenge that almost every modern business faces at some point: how to actually execute a new business strategy without breaking the underlying day-to-day operations.
Host: Exactly. We see companies constantly pivoting or introducing digital services, but shifting a business strategy on paper is very different from changing how a company actually runs. Could you elaborate on the core problem this study sets out to solve?
Expert: Absolutely. Think about a classic example mentioned in the study: Rolls-Royce. They famously shifted from just selling jet engines to selling engine maintenance services as a continuous offering. That sounds fantastic at the executive level, but how do you update the actual work routines of forty thousand employees operating across fifty countries? The study highlights a startling statistic from McKinsey: only twenty-three percent of organizational redesigns are successfully implemented.
Host: Twenty-three percent! That is remarkably low. Why do so many transformation initiatives fall short?
Expert: Because there's a major disconnect between the tactical level—where business models are designed—and the operational level, where business processes, IT systems, and organizational roles live. Most existing frameworks either focus purely on starting a business from scratch or look only at external networks. They lack practical, step-by-step guidance for an existing enterprise to figure out precisely what internal processes need to change, how they should change, and whether those changes are even feasible.
Host: So how did the researchers approach solving this design-implementation gap?
Expert: Following a design science research approach, the authors developed and evaluated a structured methodology called the Compass Method. It’s a three-step framework designed to guide decision-makers—like process managers, enterprise architects, and business owners—through translating business model redesigns into concrete operating model changes.
Host: Walk us through those three steps, Alex. How does the Compass Method work in practice?
Expert: Sure! Step one is about defining the future business model and mapping out every change—whether something new is added, altered, or made obsolete. Step two is where the magic happens: using what the study calls "Operating Model Design Cards." These cards ask targeted questions across key operational dimensions—like processes, roles, data, and technology—to spark concrete ideas on how operations must adapt. Finally, step three clusters these potential changes into feasible options and evaluates them using criteria like cost, time, quality, flexibility, and business model alignment.
Host: Those Design Cards sound really intriguing. Can you give us an example of how they guide a team?
Expert: Imagine an urban bike-sharing company moving to a pay-per-use, drop-off-anywhere model. Using the Design Cards for "Key Activities," the team asks: "How can this activity be decomposed into specific process functions?" That leads them to identify new operational needs, like tracking bike usage duration or measuring ride distance using GPS. The cards force you to think through the exact data, roles, and software needed to deliver that new customer promise.
Host: That brings so much clarity to abstract business ideas. How was this method tested to prove it actually works?
Expert: The authors evaluated the Compass Method across three rigorous rounds: first through expert interviews with industry architects and academics, second in an experimental application with master's students, and third in a naturalistic real-world workshop with a major tool manufacturing company in the construction industry.
Host: What were the key findings from that tool manufacturing company case study?
Expert: In that real-world test, the company wanted to introduce IoT-driven data consultation services for construction sites. Using the Compass Method, they mapped eleven business model changes into over twenty distinct operational updates. The feedback was overwhelming: participants found that the structured approach created a shared language between business leaders and technical teams. It prevented them from overlooking critical operational risks and standardized how they plan transformations.
Host: That brings us to the most important question for our listeners: why does this study matter for business leaders and technology professionals today?
Expert: It matters because strategy without operational execution is just wishful thinking. The Compass Method gives organizations a repeatable blueprint to evaluate the operational feasibility of a new business model *before* investing massive resources into implementation. It boosts traceability, breaks down organizational silos, and helps companies remain agile in a fast-moving digital economy.
Host: That is a crucial takeaway. If you want your business model redesign to land in that winning twenty-three percent, you need a systematic bridge to your operating model. Alex, thank you so much for sharing these insights with us today.
Expert: My pleasure, Anna.
Host: And thank you to our listeners for tuning in to A.I.S. Insights — powered by Living Knowledge. Be sure to subscribe for more deep dives into the latest business and technology research. Until next time!
Expert: Thanks, Anna. I'm thrilled to be here. This study tackles a challenge that almost every modern business faces at some point: how to actually execute a new business strategy without breaking the underlying day-to-day operations.
Host: Exactly. We see companies constantly pivoting or introducing digital services, but shifting a business strategy on paper is very different from changing how a company actually runs. Could you elaborate on the core problem this study sets out to solve?
Expert: Absolutely. Think about a classic example mentioned in the study: Rolls-Royce. They famously shifted from just selling jet engines to selling engine maintenance services as a continuous offering. That sounds fantastic at the executive level, but how do you update the actual work routines of forty thousand employees operating across fifty countries? The study highlights a startling statistic from McKinsey: only twenty-three percent of organizational redesigns are successfully implemented.
Host: Twenty-three percent! That is remarkably low. Why do so many transformation initiatives fall short?
Expert: Because there's a major disconnect between the tactical level—where business models are designed—and the operational level, where business processes, IT systems, and organizational roles live. Most existing frameworks either focus purely on starting a business from scratch or look only at external networks. They lack practical, step-by-step guidance for an existing enterprise to figure out precisely what internal processes need to change, how they should change, and whether those changes are even feasible.
Host: So how did the researchers approach solving this design-implementation gap?
Expert: Following a design science research approach, the authors developed and evaluated a structured methodology called the Compass Method. It’s a three-step framework designed to guide decision-makers—like process managers, enterprise architects, and business owners—through translating business model redesigns into concrete operating model changes.
Host: Walk us through those three steps, Alex. How does the Compass Method work in practice?
Expert: Sure! Step one is about defining the future business model and mapping out every change—whether something new is added, altered, or made obsolete. Step two is where the magic happens: using what the study calls "Operating Model Design Cards." These cards ask targeted questions across key operational dimensions—like processes, roles, data, and technology—to spark concrete ideas on how operations must adapt. Finally, step three clusters these potential changes into feasible options and evaluates them using criteria like cost, time, quality, flexibility, and business model alignment.
Host: Those Design Cards sound really intriguing. Can you give us an example of how they guide a team?
Expert: Imagine an urban bike-sharing company moving to a pay-per-use, drop-off-anywhere model. Using the Design Cards for "Key Activities," the team asks: "How can this activity be decomposed into specific process functions?" That leads them to identify new operational needs, like tracking bike usage duration or measuring ride distance using GPS. The cards force you to think through the exact data, roles, and software needed to deliver that new customer promise.
Host: That brings so much clarity to abstract business ideas. How was this method tested to prove it actually works?
Expert: The authors evaluated the Compass Method across three rigorous rounds: first through expert interviews with industry architects and academics, second in an experimental application with master's students, and third in a naturalistic real-world workshop with a major tool manufacturing company in the construction industry.
Host: What were the key findings from that tool manufacturing company case study?
Expert: In that real-world test, the company wanted to introduce IoT-driven data consultation services for construction sites. Using the Compass Method, they mapped eleven business model changes into over twenty distinct operational updates. The feedback was overwhelming: participants found that the structured approach created a shared language between business leaders and technical teams. It prevented them from overlooking critical operational risks and standardized how they plan transformations.
Host: That brings us to the most important question for our listeners: why does this study matter for business leaders and technology professionals today?
Expert: It matters because strategy without operational execution is just wishful thinking. The Compass Method gives organizations a repeatable blueprint to evaluate the operational feasibility of a new business model *before* investing massive resources into implementation. It boosts traceability, breaks down organizational silos, and helps companies remain agile in a fast-moving digital economy.
Host: That is a crucial takeaway. If you want your business model redesign to land in that winning twenty-three percent, you need a systematic bridge to your operating model. Alex, thank you so much for sharing these insights with us today.
Expert: My pleasure, Anna.
Host: And thank you to our listeners for tuning in to A.I.S. Insights — powered by Living Knowledge. Be sure to subscribe for more deep dives into the latest business and technology research. Until next time!