Operational maturity for your IT doesn’t happen overnight. In fact, it takes years to fortify a strategy capable of securing such a status.
What is operational maturity? Put simply, for your technology, it’s a measure of IT scalability and sophistication, relative to the size and maturity of your overall business (it can be applied to other areas of business as well, but we will specifically be covering IT here).
Let’s walk through what this looks like over a business’s lifetime. When a business starts, its leadership is intricately involved with each of its operations. It takes time to figure out what works, and it takes a lot of trial and error. As a business grows, however, leadership begins to shift its focus. Day-to-day operations are no longer endeavors for leadership teams. Instead, the workplace’s leaders engage budget needs, long-term planning, and goal setting. An operationally mature company, at the top levels of operational maturity, can focus on innovation, marketing, and diversification. Operational maturity is reached with time, powerful decision-making processes and—of course—technology.
That said, technology isn’t always an advantage (though in order to be successful in today’s business world, it needs to be leveraged as one). It can be a liability if a business’s decision makers don’t scale correctly. To do so, they need to understand the five levels of operational maturity.
Herein, let’s detail the specifics of the five levels of Operational Maturity.
The Five Levels of Operational Maturity
When technology is introduced to a business, it’s installed with a goal. That goal could be to boost efficiency, to serve clients better, to foster business growth, etc.
In our experience the average mid-size business with an in-house IT team has achieved an operational maturity level (OML) 1 to OML 2 (on the five-point scale overviewed below). Quick elevation to OML 3, and a longer-term goal of OML 4.5 to OML 5, typically happens in one of two ways: 1) You devote a ton of internal resources and time to getting you there, or 2) You find an external resource or consultant to help you get there. (We can help you get there. Schedule a Meeting Today).
Fortunately, the earlier stages of operational maturity foreshadow the later stages. It’s possible to use early OMLs as stepping-stones to reach the next technological hurdle.
Operational Maturity Level 1
At Level 1 of operational maturity—or OML 1—businesses will experience a beginner’s level of flexibility, technological capability, and marketing potential. Likely, they are operating on a “break-fix” approach, wherein decision makers must keep the business afloat with hands-on approaches. These break-fix approaches might be viable—or even perfected—but they will fail to service complex client needs as the business evolves.
An OML 1 business can, however, provide its clients with basic goods and services. Everything is operational, and everything—for the most part—is reliable. OML 1 businesses, on the technological end, will focus on maintaining the IT environment—rather than introducing new ideas promoting expansion, or implementing a long-term technology strategy. Often there is no security (link to second half predictions blog) strategy in place, leaving them at high risk and vulnerable to cyber-attacks. Mid-size companies with OML 1 standards use management methods which yield low financial performances. They may also experience slow growth levels.
Operational Maturity Level 2
An OML 2 organization begins to recognize the shortcomings of their technology. They notice that things are not as optimized as they could be and are becoming aware that the break-fix model of IT will not scale as their business continues to grow. Downtime, due to the nature of their technology, is likely causing roadblocks, and both technological and business flexibility is not developed to support the business. While they still do not have a full IT strategy in place, OML 2 businesses know that they will need one, and are beginning to explore options to implement one.
Operational Maturity Level 3
OML 3 takes the recognitions from OML 2 and begins to act on them. Some controls, policies, and procedures for technology will begin to be put into place, along with some budgeting. This allows better service quality, as well as improved financial performance. This level is the stepping stone to what will allow technology to be leveraged in ways that not only helps you maintain your business, but allows you to continue on the upward path you envisioned.
Operational Maturity Level 4
OML 4, as stated above, is where technology strategy starts to take you above and beyond. Full policies, procedures, and controls are in place, with a proper strategy using things like Quarterly Business Reviews, budgeting and other reporting. Once these plans are in place, strategy to move forward can begin to be implemented. OML 4 companies have moved away from the break-fix model, and are using technology as a tool to grow their business. This increases employee and customer satisfaction, and of course, profitability.
Operational Maturity Level 5
OML 5 is similar to OML 4, but the basic strategies implemented in 4 can now be fully leveraged in OML 5. This is the stage of innovation. IT strategy is fully implemented into the overall company vision, and can be used to create new avenues of service or revenue. Businesses at OML 5 view technology as the constantly evolving growth tool that it is, and continue to assess how they can leverage it within their company strategy to keep improving their operations.
Operational Maturity and Financial Performance
While there are many benefits to identifying your operational maturity level and making plans to move to the next level, the major benefit is financial performance. Typically, organizations at the 1 or 2 operational maturity level are generating below average profitability. Those at OML 3 are generating average profitability. Those at OML 4 or 5 are achieving best in class financial performance.
It’s believed that companies with higher operational maturity consistently deliver EBITDA percentage (earnings before interest, taxes, depreciation, and amortization) about three times higher than those with a median OML. Meanwhile, the companies with the lowest levels of maturity regularly operate at almost no profit or worse—at least until they improve toward median, cease to exist, or sell.
So, what is your organization’s operational maturity level today, and what’s your plan to progress to the next level so you can be scaling, optimizing, or innovating within your industry?
Editor’s note: This post was originally published in 2017 and has since been updated for accuracy and relevance.