People & Organizational Performance Practice
A new operating model
for a new world
While your strategic goals may be the right ones, is the organization built
to achieve them? New research reveals a dynamic system that creates
value in the face of volatility.
This article is a collaborative effort by Alexis Krivkovich, Amadeo Di Lodovico, Brooke Weddle, Dana Maor,
Deepak Mahadevan, and Richard Steele, representing views from McKinsey’s People & Organizational
Performance Practice.
June 2025
Every ambitious CEO will tell you that the way to beat the odds is to have the right strategy.
That’s because a smart, actionable strategy is the foundation for how a company allocates its
scarce resources, including people, capital, and materials.
Yet even the best strategy does not magically yield a strong performance. For that, companies
need an effective operating model that is intentionally designed to deliver four outcomes that all
organizations covet: clarity, speed, skills, and commitment. The right operating model is what can
turn strategic potential into market-beating results.
Leaders understand this, which is why they frequently try to adapt their operating models. Two-
thirds of the organizations we surveyed have redesigned their operating models in the past two
years, and half of the organizations say they plan to embark on a redesign in the next two years.
Numbers like that highlight the ongoing challenge of creating a high-functioning organization
that consistently generates value. McKinsey research indicates that even high-performing
companies have a 30 percent gap between their strategy’s full potential and what is actually
delivered, which can be attributed to shortcomings in their operating models.1
Given the scale of this gap, we decided the time was ripe to update the best practices for
operating model design.2 Our analysis, based on academic research, interviews with hundreds of
executives, and extensive experience working on redesigns, yielded a new approach: a dynamic
system composed of 12 elements (including purpose, talent, leadership, and rewards) that can
be tailored to an organization’s particular circumstances and goals. We call this the “Organize to
Value” system.
The new research represents a substantial evolution from McKinsey’s 7-S framework (see
sidebar “The classic 7-S”), which helped leaders design operating models in a more stable world.
Because executives today must address so many fast-moving geopolitical, technological, and
societal trends, their operating model needs to anticipate and react to change just as rapidly.
In this article, we describe actions CEOs can take to develop an optimal operating model
“fingerprint”—defined as the unique combination of design choices CEOs make across all
12 elements—that can deliver their strategy and create value. Our research shows that the
operating model is one of the most significant enablers of performance within a CEO’s direct
control. Before embarking on this journey, however, chief executives should identify the root
causes of their strategy-to-performance gap, consider how broadly to redesign their operating
model, and chart a course to lead the deep change required.
1
“Losing from day one: Why even successful transformations fall short,” McKinsey, December 7, 2021.
2
This article, which focuses on the “what” of redesigning an operating model, is the first in a series, Organize to Value, which is
meant to help leaders redesign their organizations to maximize performance and value creation. Our next article focuses on
the “how” of implementing an operating model redesign.
A new operating model for a new world 2
The classic 7-S
When introduced in the late 1970s, the values, strategy, structure, systems, with the speed and volatility of business,
7-S framework was a watershed in thinking style, skills, and staff—that influence an technological, and societal changes.
about organizational effectiveness. As organization’s ability to change. The lack
While there are now more operating model
organizations grew in size and complexity, of hierarchy among these factors suggests
elements and different design choices
the more critical question became one that significant progress in one part of
for each element, what has not changed
of coordination. the organization will be difficult without
is the recognition that elements interact
working on the others.
Featured in the book In Search of with one another as a system. When they
Excellence: Lessons from America’s Best- After extensive research, we have are aligned, the system is reinforcing, and
Run Companies, by former McKinsey refreshed the 7-S framework for a when they are collectively focused on
consultants Thomas J. Peters and Robert new era. This new “Organize to Value” value creation, they deliver a big impact on
H. Waterman Jr., the framework maps system includes added and redefined performance (table).
seven interrelated factors—shared elements that can help executives deal
Table
From the ‘7-S’ framework to the ‘Organize to Value’ system
7-S element Definition Shift driven by trends Updated 12
elements
Shared values What the organization is trying to In today’s complex world, purpose serves as a compass, –Purpose
achieve, or its set of superordinate guiding individuals and teams through the challenges
goals of navigating continuous change
Strategy What the company is doing to gain Value agenda is now used to define the rules for bold –Value agenda
a comparative advantage vs the resource allocation, which is managed dynamically to
competition adapt to changing needs and priorities
Structure The organizational chart and Structure has evolved to incorporate more sophisticated –Structure
the associated clear reporting elements such as enabling flat, fast, and flexible ways
–Ecosystem
relationships across different axes of working within teams, while also considering how an
of the business organization collaboratively creates value with partners
(ecosystem)
Systems The processes of the organization, This element has evolved from focusing solely –Leadership
or the major ways in which work on processes and procedures to incorporating a
–Governance
gets done comprehensive governance model, well-defined roles
in decision-making (leadership), and the efficient –Processes
execution of work, all powered by advanced –Technology
technologies, including AI
Style The culture of an organization, or Style has evolved to include the behaviors expected –Behaviors
“the way we do things around from all employees that drive performance, along
–Rewards
here,” including the informal rules with the rewards that motivate and incentivize
of conduct those behaviors
Skills The institutional and individual The definition of skills has been expanded to include –Footprint
skills that are possessed by the digital capabilities and now encompasses new
staff, including the required breadth approaches to sourcing skills, such as offshore or
and depth of skills and the skill outsourced solutions
acquisition strategy
Staff The people in the organization, in The focus of this element has shifted from simply –Talent
terms of their qualities, intrinsic retaining staff to adopting a differentiated people
talents, and demographics, and how model designed to succeed in a dynamic and
they are developed competitive talent market
A new operating model for a new world 3
What’s beyond traditional organizational structure?
When rethinking their operating models, many leaders begin by focusing on structure.
This made sense in the past, given the traditional hierarchical structures and more stable
environment that most executives were trained to operate in. Structure matters because it gives
CEOs insight into how strategy is implemented. It is also meant to create accountability and the
basis for managing performance.
But structure alone will not create value. Instead, companies should evaluate structure as just
one of 12 interlocking design elements, which we discuss later, that create a holistic system.
Operating model design has evolved substantially over the past decade, as organizations
have had to respond to fast-moving geopolitical, technological, and societal trends. A tailored
operating model, and how much change may be required to implement it, will partly depend on
the way in which an organization is experiencing these trends and the design choices they imply.
As part of our research, we asked executives to assess a wide range of developments to identify
both the most positive factors and the biggest challenges affecting their business and their
approach to organizational structure (see sidebar “Our methodology”).
Across industries, executives told us that the top opportunities relate to technology—
specifically, scaling AI and automation, accelerating digitalization, and expanding the value
of data. Thirty-eight percent also suggested that they would add a chief AI officer to address
these opportunities. Regarding geopolitical challenges, executives cite increasing regulatory
complexity and declining trust in business as their top concerns, while shifting workforce
demographics, including loss of skills from aging in developed economies, tops the list of the
most significant societal hurdles they face (Exhibit 1).
Our methodology
We created a multipart research program consumer, technology, media, public what makes them successful and
to refresh our understanding of the key sector, financial services, and energy; what choices executives must make
elements of operating model design and two-thirds of the companies had a market to implement them properly. We
to learn how different models are equipped capitalization of over $5 billion. developed tools to link the operating
to deal with crucial trends. model to value based on the principles
Simultaneously, we reviewed academic
of “new institutional economics” and the
We first conducted in-depth interviews literature and interviewed leading
“transaction costs theory.”1
and a survey of 757 senior executives academics in business and economics.
at global companies from April to May We also reviewed McKinsey’s work Finally, we developed deep-dive case
2024 to understand the predictors of involving hundreds of operating model studies to better understand high-
their business performance. Participants transformations. performance operating model fingerprints,
were screened to ensure that they had a including the discrete choices companies
Our research tested a set of common
deep understanding of the rationale for make to achieve their strategic goals and
operating model options to understand
their operating model. Industries included drive business performance.
1
For more on “new institutional economics,” see Douglass C. North, “The new institutional economics and development,” Economic History, University Library of Munich,
Germany, 1993, Number 9309002. For more on “transaction costs theory,” see Ronald Coase, “The nature of the firm,” Economica, November 1937, Volume 4, Number 16;
and Oliver E. Williamson, Markets and Hierarchies: Analysis and Antitrust Implications, New York: Free Press, January 1, 1975.
A new operating model for a new world 4
Web <2025>
Exhibit
<If 1 your strategy to deliver, take a fresh look at your operating model >
you want
Exhibit <1> of <4>
Geopolitical, technological, and societal trends present challenges and
opportunities for organizations.
Expectation of megatrends having a significant impact on organization,1 Highest share selecting
% of respondents selecting as top three impact (n = 757) as headwind/tailwind
Headwind Tailwind
Geopolitical Accessing new growth markets 15 29
Shifting globalization 20 12
Erosion of trust 29 9
Increasing regulatory complexity 57 13
Technological Scaling AI and automation 20 46
Accelerating digitization 17 40
Expanding value of data 13 39
Societal Adopting new ways of working 21 22
Investing in the green transition 15 23
Ensuring a healthy workforce 14 17
Expanding the gig economy 6 8
Navigating polarization 14 6
Addressing the changing workforce 32 14
1
Question: Which megatrends do you expect to have a significant impact on your organization? Please select up to 3 headwinds and up to 3 tailwinds.
Source: McKinsey Future Operating Model Survey, Apr 10–May 21, 2024
McKinsey & Company
How do different operating model structures respond to these trends? Many leaders have been
looking for new ways to make traditional structures, for example, matrix management, more
effective. Others have adopted new structures, such as enterprise agile, which is designed to
focus on speed, technology investments, and better deployment of scarce digital skills.
We asked executives to identify which structure out of six typical configurations most closely
represents their current design. The findings show that 89 percent of organizations in our
sample are still primarily using a traditional hierarchical structure—that is, a business unit/
holding company approach, matrix management, or a functional organization. The remaining
organizations have adopted one of three emerging structures as the basis for their redesign: the
product platform model, the enterprise agile model, or a decentralized network (Exhibit 2).
A new operating model for a new world 5
Web <2025>
<If you want your strategy to deliver, take a fresh look at your operating model >
Exhibit 2
Exhibit <2> of <4>
Operating model structures have evolved to address geopolitical,
technological, and societal trends.
Operating structure of respondents’ organizations, % of respondents (n = 757)
1 Decentralized network Organized around highly autonomous
4
Emerging teams where leaders have freedom to set goals and deliver
5 projects they view as most important.
17 Enterprise agile Organized around a network of agile teams
with end-to-end accountability; team leaders are held
accountable for delivering agreed-upon outcomes.
Products and tech platform Product managers own their individual
22
profit and loss for product verticals, while platform leaders provide
scaled operations and technology shared across products.
Traditional Functional organization Leaders are accountable for functional
excellence and collaborating to deliver organizational priorities and
manage a single-enterprise profit.
Matrix Contains multiple dimensions of management such as
50 business unit, geography, or function, with overlapping
profit-and-loss responsibilities and collaborative decision-making.
Hierarchical/business unit Business unit leaders are
accountable for making decisions while using services
provided by the corporate center.
Note: Figures do not sum to 100%, because of rounding.
Source: McKinsey Future Operating Model Survey, Apr 10–May 21, 2024
McKinsey & Company
We then asked executives to rate their organizations’ readiness to address the trends they had
identified as the most important opportunities and challenges today. The research confirmed
that no one structure can drive operating model effectiveness; high-performing organizations
can be found using any of these six structures. However, those that use one of the three
emergent structures tend to outperform those with a more traditional structure in their readiness
to address key trends. In particular, organizations that use emerging structures are more likely to
prioritize innovation, technology, and data and to be well prepared to handle the impact of scaling
AI and digitalization (Exhibit 3).
A new operating model for a new world 6
Web <2025>
<If you want your strategy to deliver, take a fresh look at your operating model >
Exhibit 3
Exhibit <3> of <4>
Companies with an emerging-structure design choice are more prepared to
handle key business trends.
Share of respondents reporting their organization is prepared Traditional
to address trend, by organizational structure, % (n = 757) Emerging
Percentage
point delta
0 20 40 60 80 100
Scaling AI and automation 25
Adopting new ways of working 24
Accelerating digitalization 23
Expanding value of data 11
Accessing new growth markets 10
Source: McKinsey Future Operating Model Survey, Apr 10–May 21, 2024
McKinsey & Company
This research on structure and the potential benefits of emerging approaches helps explain
why so many leaders focus on structural redesigns. Our analysis further reveals that structure
alone does not determine how fit an organization is to fulfill the business’s strategy in the
current volatile context. Other factors beyond structure are critical to building a future-fit
operating model.
The 12 elements of a dynamic operating model design
When we moved our research beyond structure, we set out to refresh our understanding of
the key organizational factors CEOs need to consider when designing their operating model.
Decades of experience working with organizations and new data collected on high-performing
operating models have yielded an updated system of 12 elements that together represent the
best of modern operating model design. In addition to structure, the elements are purpose,
value agenda, ecosystem, leadership, governance, processes, technology, behaviors, rewards,
footprint, and talent (table).
A new operating model for a new world 7
Table
The 12 elements of the ‘Organize to Value’ system
Element Definition Link to performance
Purpose How the organization defines its core reason for being Clear purpose helps employees and stakeholders
navigate uncertainty
Value agenda How the organization creates value Clarity on the value agenda enables optimal resource
allocation
Structure How accountable units and mission teams are Internal organization in the service of strategy
designed enhances prioritization and accountability
Ecosystem How the organization works with partners to create External partnerships create and share value beyond
value the organization’s boundaries and capabilities
Leadership How leaders make decisions and catalyze action Roles and dominant approach to decision-making are
clear and consistently implemented
Governance How to set priorities, allocate resources, and manage Ensures enterprise resources are managed in a
business performance consistent, integrated way in alignment with the
strategy
Processes How workflows are designed Approach to value-creating activities is clear and
consistent across the enterprise
Technology How digital, data, and AI enable value creation Data and AI are deployed to increase productivity and
drive new sources of value creation
Behaviors How culture is nurtured across the organization A unique “secret sauce” creates value for employees
and customers
Rewards How people are rewarded for performance Rewards support the desired behaviors and practices
that increase value
Footprint How the organization locates and deploys talent The right skills are available in the right locations in
alignment with business needs and priorities
Talent How the organization attracts and develops talent The right capabilities are available to meet value
creation goals
These elements act together as a system that enables the organization to deliver on the
strategy. By mapping current organizational choices across the 12 elements, leaders can better
understand their organizations’ unique operating model fingerprint and determine whether each
choice is aligned with their strategic goals. The system offers a way for leaders to either move to
an adjacent fingerprint, by refining only the elements that matter most to delivering on strategy,
or shift all 12 elements to an entirely new fingerprint. With either choice, they can create a unique
form of competitive advantage.
A new operating model for a new world 8
The case of a top-performing airline illustrates how an intentionally designed operating model
fingerprint can support performance. The company focused on achieving two business
outcomes: delivering an exceptional passenger experience and driving industry-leading
efficiency and financial resilience.
To reach those goals, the airline made specific choices across each of the 12 elements. For
example, to support passenger experience, it anchors its purpose in organizational reputation
and customer benefit. To ensure that the same high standards are met for every passenger, it
maintains an integrated approach to its location footprint, meaning that its globally distributed
workforce is directly employed by the company. To spur efficiency and resilience, it leverages
a traditional value chain ecosystem; to make its matrix structure work, it emphasizes decisive
leadership to ensure clarity and speed of decision-making. Finally, given the importance of costs
and safety in the industry, it relies on control-oriented processes.
Collectively, the airline’s choices across these elements and others formed its unique operating
model fingerprint. This clarity helps leaders execute the airline’s strategy on passenger
experience, efficiency, and financial resilience.
By making intentional design choices across its operating model, the airline has achieved higher
performance compared with its peers. It has better on-time performance, an EBITDA margin
that is several percentage points higher than that of its peers, and a customer satisfaction score
above the sector average.
Future-proofing the operating model
Leaders who become frustrated with their organizations’ performance often turn to redesigns.
But again, they are focused mostly on structure rather than the 12 elements and the system they
form. That is why redesigns happen so frequently—and why they tend to leave value on the table,
according to McKinsey research. 3 Four actions can help organizations avoid this constant churn.
The first step, as noted earlier, is to understand the organization’s unique operating model
fingerprint, or the combination of design choices it has made across all 12 elements. Next,
leaders can compare their fingerprint and outcomes to highly successful operating model
fingerprints across industries. They can then choose whether the best course is to move to
an adjacent fingerprint by refining select operating model elements or to move to an entirely
new fingerprint. Finally, they can commit to specific performance outcomes and a path to
deliver them.
Consider the case of a global financial-services-infrastructure company (Exhibit 4). It had grown
through acquisitions, but organic growth was slowing relative to its competitors, partly due to its
high cost base. Those costs reflected duplicated investments in functions such as marketing and
technology and the lack of an integrated and scalable infrastructure.
3
Steven Aronowitz, Aaron De Smet, and Deirdre McGinty, “Getting organizational redesign right,” McKinsey Quarterly,
June 1, 2015.
A new operating model for a new world 9
Web <2025>
<If you want your strategy to deliver, take a fresh look at your operating model >
Exhibit 4
Exhibit <4> of <4>
A financial-services company chose between refining several elements or
shifting its entire operating model ‘fingerprint.’
Illustrative example of operating model review Change in approach
Option 1: Refine Option 2: Shift
Element Starting point select elements entire fingerprint Rationale for shift to entirely new fingerprint
Purpose Customer Competitive Competitive Enables focus on the highest performance
benefit performance performance standards while still delivering a highly
differentiated customer experience
Value agenda Differentiation Innovation Innovation Enables faster innovation through emphasis on
software-as-a-service products
Structure Matrix Matrix Enterprise Enhances time to market and improves service
reporting reporting agile levels through transition to enterprise agile
Ecosystem Traditional Traditional Open Allows increased client access to APIs and
value chain value chain platform customizable data to meet client’s specific needs
Leadership Decisive Decisive Empowering Enables product managers to make decisions
independently and speed the rate of decision-
making
Governance Annual fixed Annual fixed Quarterly Allows for faster ability to course correct
budgets budgets outcomes
based
Processes Control-oriented Control-oriented Agile Supports transition to one sales force, creates
approach approach approach a standardized product manager role, and shifts
away from managing primarily for compliance
Technology Analytics Analytics Enabling Leverages potential of AI to support
copilots decision-making and customer experience
Behaviors Accountability Accountability Collaboration Supports implementation of data sharing,
technology scaling, and unified customer
experience across product teams
Rewards Individual Individual Collective team Incentivizes collaboration across shared goals
performance performance performance for senior leaders
Footprint Domestic Global Global Enables access to more diverse talent pool
integrated integrated integrated and workforce across offices, given global
client base
Talent Performance Performance Skills Addresses the need to have colleagues with
based based based specific functional skills to drive business
outcomes
McKinsey & Company
A new operating model for a new world 10
When beginning the operating model redesign, the company’s senior leadership team worked
through the four-step process.
Documenting the current fingerprint
First, leaders assessed their current operating model fingerprint. The historical strengths of the
fingerprint included the company’s purpose, which focused on customer benefits, and its value
agenda, which was based on differentiated products. These choices kept the company externally
focused but diverted attention from creating effective ways of working and operational efficiency.
The leadership also realized that the company’s matrix reporting structure had become too
complicated, as acquisitions required senior leaders to make too many decisions, which slowed
down innovation.
Comparing operating model performance with successful fingerprints
Next, the leadership team explored options for how best to increase growth, either by
evolving select elements or shifting to an entirely new fingerprint. In the first option, the team
considered placing more emphasis on competitive performance and innovation while focusing
on cost reduction by adopting a global integrated footprint that would enable investment in
new product development.
The second option drew inspiration from technology companies that operate in a software-as-
a-service model. By learning from exemplars, the leadership team realized that a step change
in performance across critical dimensions such as innovation, time to market, and return on
technology investment was possible. These outcomes were exciting but required shifts across
all elements of the operating model to move to an entirely new fingerprint. This included a
big structural shift from matrix reporting to an enterprise agile structure. To make the new
structure work, the team’s leadership style would need to shift from decisive (a top-down
approach) to empowering, and rewards would need to move from individual contribution to
collective performance.
Choosing whether to refine or remake the operating model fingerprint
The leadership team established the value at stake and examined the risks of the two options,
employing two methods. They first set an overall aspiration for the change by comparing
their outcomes against the performance of exemplar technology companies. Then they set
specific targets for key capabilities—in this case, increasing the effectiveness of their product
management function. This combination of top-down and bottom-up analysis created a robust
business case for each option.
While option one carried a lower risk in the short run because it focused primarily on liberating
costs and reinvesting them in innovation, the team decided on option two, shifting to an entirely
new fingerprint grounded in an enterprise agile structure. The thinking was that significantly
higher value more than compensated for the breadth and depth of change required.
Committing to specific performance outcomes and a path to deliver them
Equipped with the complete definition of the company’s target operating model fingerprint,
the team moved ahead with a broader group of 50 executives, giving them the opportunity to
refine how the fingerprint would be implemented and how talent decisions would be made.
Together, they enacted a program that made fundamental changes over the next 12 months.
These changes covered not only what some executives think of as the “hard” operating
model elements—such as structure, processes, and technology—but also the “soft stuff”
encompassing leadership style, culture (for example, new roles, behaviors, and rewards), and
talent development.
A new operating model for a new world 11
The leadership team also compared the company’s historical performance and future plans
to benchmarks for digitally native companies. This helped them commit to significantly more
ambitious goals for revenue growth, better customer experience, and accelerated new product
development, including up to 40 percentage points in speed to market and a 25 percent increase
in technology ROI. Upon completion of the transition, leaders continued to evaluate their new
operating model fingerprint, refining it as needed to align with their strategic aspirations.
Positive outcomes and performance gains
Our experience helping leaders to implement new operating models reveals that CEOs
and their teams are often confused about whether their models work as well as they could.
Lacking a perspective on the full range of possible structures and the 12 elements that can
be used to increase performance, they can get stuck in a frustrating cycle of underwhelming
redesign efforts.
Instead, it’s helpful to remember that there are many winning fingerprints, as we see in our airline
and financial-services examples. The robustness of these fingerprints depends significantly on
the organization’s strategy, business context, and the trends it faces. CEOs can create a unique
fingerprint for the organization and what it wants to accomplish.
Ultimately, a fit-for-purpose operating model that maximizes value creation enables CEOs to
achieve four measurable outcomes—clarity, speed, skills, and commitment:
— Clarity: Resources and accountabilities are aligned to strategy. In volatile times, it’s essential
that CEOs can see for themselves how resources and teams deployed throughout the
organization reflect strategic priorities. By clarifying who is accountable for this value agenda,
the whole organization can navigate change and replace bureaucratic layers with flexible
teams that have a clear sense of purpose. Creating ideal spans of control and flattening the
organization are crucial. The value of clarity also extends beyond the traditional boundaries
of the organization by enabling the development of an ecosystem of partners. This alignment
should also be dynamic, since the context will continue to change as the strategy is
implemented.
— Speed: Workflows are fast, tech enabled, and frictionless. Getting resource allocation
and accountability right is important, but it’s just the first step in translating strategy into
performance. It is often difficult to execute a great strategy quickly, either because leaders
take a long time to make decisions or because poor governance prevents the right decisions
from even being identified. Also, when work is done in silos with multiple hand-offs rather
than in streamlined workflows, it can be hard to capture the value of emerging technologies,
including gen AI. For leaders needing to move quickly, it’s no longer enough to codify
decision rights and incrementally improve processes to automate repetitive work. Instead,
leaders must also develop ways of using technology to spur human creativity, including
establishing how people and AI work together.
— Skills: A future-ready workforce is equipped to deliver the highest value. Geopolitics and
new technologies are challenging long-held assumptions about how to source talent and
whether to develop skills in-house or by partnering with others. Leaders can go beyond a
static workforce plan by continually upgrading their talent and reevaluating location and
outsourcing decisions. This allows them to keep up with a labor market that is changing at a
dramatic rate. With the wrong operating model fingerprint, the risk is that the market for skills
changes faster than the organization’s ability to source, hire, develop, and deploy talent.
A new operating model for a new world 12
— Commitment: Creating a performance-oriented culture. The implementation of strategy,
especially in a volatile era, requires a highly committed workforce and a motivating culture. By
creating a shared set of behaviors—a cultural “secret sauce”—organizations can move more
quickly and engage colleagues effectively. Reward systems can be designed to encourage
those behaviors, support how decisions are made, and ensure that the right work is getting
done. When employees adopt common behaviors, it creates a healthy organizational
culture that can act as a multiplier effect on performance, further focusing resources and
accelerating strategy.
When organizations take this holistic approach to operating model redesign, what can they
expect for their bottom line? Our research reveals that a great operating model can go a long way
toward closing the strategy-to-performance gap.
For example, the financial-services company discussed earlier achieved step changes in multiple
metrics after shifting from a traditional structure to an emerging structure and redesigning the
other 11 elements of the system. McKinsey research shows that gains from such shifts include
a 10 to 30 percent increase in customer satisfaction, operational performance, and efficiency; a
fivefold-to-tenfold increase in speed in driving change and decision-making; and an increase in
employee engagement of ten to 30 percentage points. 4
The big picture: Practical questions for CEOs
Before embarking on an operating model redesign, CEOs should take a step back to identify
the outcomes and risks of evolving or more radically redesigning their model. Many leaders
overestimate the results of changing individual elements of their model, especially structure,
yet underestimate the degree of difficulty in implementing a more holistic change. That’s why
a practical approach to refining and evolving their model as a system starts with asking five
key questions:
— What is the gap between your value agenda and delivered performance? Assess your
recent strategic plans, identify areas where you have not achieved your goals fully, and
identify potential root causes for these gaps.
— What are the critical outcomes your operating model should generate to enable the value
agenda? Define your desired future performance across the four outcomes, creating
accountability for your most important initiatives and the specific performance metrics you
must achieve.
— How does your operating model work as a system to create value? Assess the 12 operating
model elements to make design choices that work together and reinforce your ability to
deliver business outcomes and strategy. This includes identifying obvious inconsistencies
across the 12 elements and areas where poor execution has limited the effectiveness of your
design choices.
— What are the trade-offs between refining your current operating model and moving to a
new design? Evaluate the degree of change required to capture the value creation potential
of a new model and determine the hard and soft factors that could prevent you from doing
so effectively.
4
Wouter Aghina, Christopher Handscomb, Olli Salo, and Shail Thaker, “The impact of agility: How to shape your organization to
compete,” McKinsey, May 25, 2021.
A new operating model for a new world 13
— How will leaders need to engage differently to enable the operating model at scale? Take
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operating model and demonstrate the mindset and behavior shifts necessary for the model
to succeed.
Organizations looking to make their operating models more effective can start by identifying
the causes of their strategy-to-performance gap, followed by choosing whether to redesign
several of the 12 elements or all of them. Whatever choice they make, viewing the elements as
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a holistic system can help leaders meet strategic goals and bolster performance in a complex
business environment.
Alexis Krivkovich is a senior partner in McKinsey’s Bay Area office, Amadeo Di Lodovico is a senior partner in the
Dubai office, Brooke Weddle is a senior partner in the Washington, DC, office, Dana Maor is a senior partner in the
Tel Aviv office, Deepak Mahadevan is a partner in the Brussels office, and Richard Steele is a partner in the New
York office.
The authors wish to thank Aaron De Smet, Caroline Siebald, Chenxin Venable, Elizabeth Mygatt, Emily Acker, Emily
Field, Francesca Carini, Jenna Scalmanini, Mengwei Luo, Mikaela Appleby, Nathalie AbouHarb, Olli Salo, Sophie
Dodson, and Whitney Zimmerman for their contributions to this article.
This article was edited by Barbara Tierney, a senior editor in the New York office.
Designed by McKinsey Global Publishing
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A new operating model for a new world 14