To survive in an increasingly competitive environment, the key ingredient is innovation. But this applies to more than just product or market innovation. While these are important, another type of innovation, just as important, often gets ignored. This is operational innovation, which simply means creating new methods of business activity to bring costs down, outperform competitors or provide the "wow" factor for customers. The reason why operational innovation is key is that it carries little risk yet provides maximum impact, with results that can be felt almost immediately. The idea of operational innovation is simple: your business's operating model must always enhance shareholder value. In other words, you need to create an operating model that increases revenue growth, improves the operating margin or increases asset efficiency. Our research on hundreds of leading companies around the world shows that 75 per cent of operating models are forced to change when the external environment changes. Hence, why should we wait for external events to force change, while we have the time to bring about better change? To be properly prepared, your operating model needs to be highly cost effective, responsive and flexible. You need to start identifying which business processes should be outsourced, centralised or handled by business units; which business processes need to be improved or streamlined; which alliances or partnerships can level your playing field; and how your organisation should be structured to get your products or services to the market fast and to assist responsive decision making throughout the organisation.