January 2019 | Insights From the CEO
Can a TV show really teach us much about an operating business? When Dr. Henry Gray published his Anatomy of the Human Body in 1858 he didn't change in any way the human body. He didn't add, subtract or change any of its parts. What he DID do was create a wildly useful depiction -- or 'model' on paper -- of the human body in order to make analyzing, diagnosing, fixing and improving it much more effective.
The Operating Model: A Model of the Platform
Across the whole range of Real Estate enterprises (investors, managers, operators), we have found that when working with executives to analyze, diagnose, fix and improve their enterprise, it's extraordinarily useful to have a similar instrument. If the 'body' of an enterprise is its Operating Platform -- then the 'anatomy' is the 'model of the Operating Platform' (or 'Operating Model' for short). That is, if we can create a model on paper (diagrams, charts, words) we can use that model in all sorts of useful ways to assess general health, diagnose problems, and materially improve an enterprise. *Prior to Dr Gray's innovative book much diagnostic work needed a costly and cumbersome cadaver. Paper is wildly cheaper and way more efficient!
To extend the metaphor a bit: if for a human there is thinking, doing and a body (that does things), then for an enterprise there is strategy, operations and the operating platform. Particularly in the large investor universe there is a lot of time spent -- by both the investor and investee -- articulating the thinking and the strategy: here's what we intend to do and why. That makes sense because without the right strategy good operations won't succeed. But once the Does this strategy make sense? hurdle is cleared, then comes the question Can you/we carry it out?' -- or, is the body/operating platform capable of executing the strategy.
The diagram below comes from a lot of work we've done specifically around the second question: (now that we've figured out what we want to do) how can we get it done or -- if we're already doing it -- how can we do it better? Whether an investor is evaluating the operational risk associated with a potential investment in an enterprise, or an enterprise wants to make sure that it can show the strength of its operations, or an enterprise wants to analyze itself to just make itself better, having a common and reusable vocabulary and componentry makes that analysis much more productive.
The Functional, Sourcing & Information Models
In the common framework (vocabulary and componentry) we use to diagnose and help R/E enterprises run better there are three inter-related but distinct components: the Functional Model, the Sourcing Model and the Information Model. One can think of those like the bones, muscles and circulatory system of a human body. They don't work without the others but it IS possible to articulate each distinctly. Doing so can be tremendously helpful in assessing health, diagnosing issues and solving problems. These three components provide a way to express the answers to the three most fundamental questions about the 'how':
Is the enterprise doing the right work?
Does it have the right resources (employees, partners, suppliers) doing that work?
Does it have the right tools to do that work as well as measure and manage the business?
There is a great deal more to go into about the detail below these three components as well as how the 'model' gets used in real life to evaluate health and solve problems. If there is interest perhaps we'll explore those in more depth in subsequent posts. And to answer the burning question about whether a TV show can teach us something the answer is - not particularly. But the actual artifact from which that show drew its name -- Gray's Anatomy -- can!
Authored by: Chris Shaida, Founder and Enterprise Managing Consultant, RealFoundations
About the Author Chris Shaida is an Enterprise Managing Consultant and founder of RealFoundations. Mr. Shaida founded RealFoundations to provide a place where like-minded professionals are able focus their deep industry and solution knowledge and passion to help improve the operations of our real estate industry and corporate real estate clients.
About RealFoundations RealFoundations is a professional services firm focused on the real estate industry. With offices on four continents, 400+ client-serving professionals and off-shore delivery capabilities in India, RealFoundations provides Management Consulting, Managed Services and Energy Solutions to developers, builders, owners/operators, service providers, institutional investors and corporate occupiers. From the building itself to the way it is used, operated and financed, no firm understands the inner workings of the entire real estate ecosystem as well as RealFoundations.
We Make Real Estate Run Better.