Scale-up operating model: Michael Ardelt of Forto, the digital freight forwarder that's raised more than $100 million

Scale-up operating model: Michael Ardelt of Forto, the digital freight forwarder that's raised more than $100 million

Editor’s note: This is a series of stories brought to you by Julius Bachmann, a Berlin-based founder coach, and Joyce Mackenzie Liu at Pegafund, providing hands-on advice for how to build and define a startup’s operating model — feel free to reach out to them if that’s something you need. The articles are written exclusively for and edited independently by our team.

For scale-ups with an international focus, it can be tough to manage competing priorities in different markets. Having a fit-for-purpose operating model can really help when it comes to setting strategies for company expansion, both locally and globally.

This is definitely the case for supply chain logistics platform Forto. As part of our series looking at how Europe’s leading scale-ups use operating models to drive their growth, we sat down with Michael Ardelt, Forto’s Managing Director. Forto is a company with over 350 employees and more than 2,500 customers, and continues to triple its volume year over year.

Michael had a lot of helpful insights to share, including ways to adapt global company values to suit local contexts, techniques to build a healthy working culture between individuals and teams, and how to make sure an operating model remains a living and relevant document.

To kick things off, we talked about how Forto’s operating model works in practice.

“The why and the how” — Navigation and operation in practice

As Michael explains, Forto has two guiding documents working in concert: the navigating model and the operating model. “These are the two pillars of our playbook,” he says. “You have the navigating model answering the questions of ‘where do we want to go?’ and ‘why is this a great thing?’ Then, our operating model tells us how to get there.”

“Our navigating model covers our purpose, vision, and strategy. Our operating model covers all the daily things, such as our people and organization, our governance, and the core systems and processes we use. It also outlines our performance measures and motivations.”

A key step in developing a great operating model, says Michael, is to recognize your company’s unique circumstances. That way, you can reflect the things that make you and your people stand out in the market.

“It all depends on the stage of development you’re in, and the size and complexity of your company. At the beginning, you have a clear vision of how you want to change the world. You’re heavy on the navigation side. If you’re a small team, you don’t need an operating model to set roles and responsibilities, because you’re in the same room every day.”

“Companies can start with a very simple operating model alignment,” says Michael. “For one to five people, you just need alignment on who is doing what. Then, from five to ten people, you need a rough definition of roles and responsibilities, as well as things like core meetings. As you grow, it makes sense to ask yourself whether a more extensive definition of your current operating model would create value, and whether the current situation is becoming too complex or unclear for your teams. I suggest doing this every six months or so.”

But what about when you’re not only growing, but growing in different parts of the world?

Why an operating model is critical for global scale-ups

According to Michael, a clear operating model is even more important for a company with a strong global focus.

“As companies evolve, and the organization gets bigger, things change. For Forto, we now have offices in Berlin, Hamburg, Bremen, Frankfurt, Cologne, Hong Kong, Shanghai, Ningbo, Shenzhen, and Singapore. We’re very distributed. We need things to work in an orchestrated way, and we need to deliver on customer expectations in different countries.”

As Michael explains, when teams around the world are working together closely, they need an operating model to help guide them. “The more your globally distributed teams have to interact and work together, the more your operating model has to be defined on a global scale.”

“It all depends on the nature of your business. If you’re a global company, but your business model is very local (for example, food delivery in local markets), then you can define a local operating model as a blueprint and take this to other markets with some customization. In this case, you have local operating models and a ‘lean’ global operating model to help the top management steer fundamental things like profit and loss strategies.”

So, how exactly does Forto make sure its teams have the tools and guidance they need for processes to run smoothly from country to country?

“Our business model is about global logistics, so we need to reflect local contexts in how we operate. This makes it more important for us to have an operating model to run global operations, and to ensure this is a hand-in-hand process with the teams in our different offices. For a startup offering local services only, this would be a different story.”

“In our navigating model, we define company-wide values that are shared on a global scale. Then, our people make their daily decisions based on these values. That’s the biggest lever we have to make sure our people are acting consistently in serving our customers.”

“A well-defined and executed operating model is crucial,” says Michael. “However, an operating model only reaches its full potential when used in combination with the right purpose, vision, strategy, and values. For us, this is our navigating model. You can’t define everything, which is why creating a great culture is so important to empowering the right decisions at scale.”

Another lever available to growing scale-ups? Defining systems and processes in greater detail for individuals and teams.

How to define systems with greater depth and clarity

For emerging companies, defining core processes in an operating model can be simple. But as you take on more business, things can become complicated, and people can lose sight of their core responsibilities.

“As we grew, we had to define things with greater depth and clarity,” explains Michael. “At the outset, you just need to say who’s responsible for what. But let’s say you move from one shipment a day to a thousand. Then, the volume becomes so high that any mistakes or inefficiencies are compounded.”

“You shift towards greater specialization, but you still have the end-to-end responsibility to the customer. You have accounting, customs clearance, and other specialists all working together. Your people need to know exactly what to do, and when to do it. They also need to know where to go if they need help with something.”

One way Forto addresses this need for clarity is to support its people with the technology they need.

“We’re big believers in hybrid models (by which we mean technology-enabled operations) and automation. Human beings are great with creative and complex tasks, but we need to match this with software that can simplify and complete repeat tasks. Our operating model has to grow alongside this technology.”

One key step in this process is recognizing unique company culture.

Culture is key to every great operating model

As a hyper-growth company, Forto has experienced a huge amount of change in recent years, growing from a handful of people to a workforce of more than 350. As Michael explains, the company’s culture has been a key guiding force during this growth.

“You need a strong culture to manage change. On an emotional level, it’s different to move from a team of five to a large-scale operation. You might be used to working with the founder every day, but as you scale, you can’t do that anymore. You need to find a way to keep your distinct culture, but also allow it to evolve at the same time. As this culture evolves and your company grows, your operating model has to evolve too.”

This evolution can mean big changes for people who have been involved with the business from day one.

“As you grow, you have a greater degree of specialization,” says Michael. “Some people are amazing in the early stages, but they might not like the later stages, when there’s more specialization. This is a natural part of the process, because companies are about scaling.”

As Michael explains, some roles can change as companies grow. “We still have generalists now, but the share is much lower. For example, we had in-house recruiters from day one because this was a key position to manage our growth. However, in the early days they had to define and manage multiple people and culture processes, whereas now they’re focused almost 100% on recruiting.”

One other thing making Forto’s culture so important? The mix of people. “We have staff from over 30 countries, mainly from China and Germany. These cultures can be very different. We need a company culture that encourages everyone to contribute their ideas, and to speak up when they disagree.”

Making room for disagreement reflects one of Forto’s core company values: ‘We Are One’.

An operating model should be a living document reflecting company values

Having a fit-for-purpose operating model is crucial for any scale-up. But even more crucial is the process of working together to create and define the operating model in line with company values.

“Our operating model is a living document,” says Michael. “We have it in slide format, and we link to it in Confluence too. But the biggest value is not the document itself. People aren’t looking at it every day, necessarily. The process of working together to create and define the model is the real value.”

“It’s not that I define the operating model and dictate this to hundreds of people. Instead, I reach out regularly to people on different levels and ask them to actively describe their roles and responsibilities. Then, we present this in a workshop and iron out any overlaps and disagreements. The workshop itself is the most important thing - it’s a chance for us to identify misunderstandings and to align ourselves on the most important points.”

As Michael explains, this process of mutual creation is something many of Europe’s leading scale-ups are doing more and more.

“The best companies are working on their operating models in ways that are both top-down and bottom-up. You have ideas that filter down from the top, but people are also defining their roles and processes for themselves, and sharing their best ideas. That way, you find out what’s not working, and what you can improve. That’s where the real magic happens.”

“Our operating model has five dimensions,” says Michael. “We have people and organization, governance, metrics, processes, and systems and tools. We define some of these topics from the top-down and collect feedback to adapt over time. Other elements are defined in special workshops. For example, we define roles and responsibilities from the bottom up and then align them in Role Charter workshops.”

For Forto, this operating model has really helped their teams to cope with recent global events.

How an operating model helps Forto turn crisis into opportunity

The COVID-19 pandemic has disrupted supply chains around the world, and has had huge implications for many companies. As Michael explains, having a great operating model has helped Forto to step in and offer their customers greater certainty and resilience.

“The COVID crisis has really accelerated the need for digitization, especially within the logistics industry,” he says. “Many companies are still working with traditional processes. For our teams and our clients, we’re completely software-based. This means we can respond swiftly to a crisis like this.”

“Our service was super reliable during this time. Our mindset in terms of our people and our culture is digital-first, and this gave us the ability to acquire new customers and serve existing customers well. We were able to grow our business without being impacted in a negative way.”

As Michael explains, there are a few key reasons behind Forto’s resilience. “Due to our well-defined operating model, people knew exactly what their roles and responsibilities were, and as a result we could offer very stable support for our customers. On top of that, we had already established a ‘Corona Task Force’ in January - a cross-functional team with people from different departments such as people and culture, marketing, and operations. The Task Force was able to gather information, make quick decisions, and communicate a single coherent message to our employees, customers, partners, and investors. We also had full transparency with our digital KPI tracking, which helped us to steer ourselves in the right direction.”

“Now, as the crisis is becoming the new normal, we are on the way to defining our new way of working. This won’t affect our operating model. Instead, it’s about the practical details, such as office work vs. working at home, office design and desk booking, and individual mobility.”

This illustrates the value of a well-defined operating model. Not only does it help your people to weather the storm; it also helps to demonstrate your distinct value for customers during moments of crisis.

Featured image credit: Dimitri Houtteman on Unsplash

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