What is an Operating Model?

Definition: Operating Model

An operating model is a framework that defines how an organization delivers value to its customers and stakeholders through its structures, processes, and systems. It encompasses the operational procedures, organizational structure, technology, and governance necessary for achieving strategic goals.

Understanding Operating Model

An operating model serves as a blueprint for how an organization operates on a day-to-day basis. It aligns the organization’s resources and capabilities with its strategic objectives, ensuring that every part of the organization works cohesively towards common goals. The operating model is crucial for translating strategy into operational effectiveness and efficiency.

Key Components of an Operating Model

1. Processes: These are the workflows and procedures that dictate how tasks are accomplished. They ensure consistency, efficiency, and quality in operations.
2. Organizational Structure: This defines how the organization is arranged, including the hierarchy, roles, responsibilities, and relationships between different parts of the organization.
3. Technology: The tools and systems that support the organization’s operations. This includes software, hardware, and IT infrastructure.
4. Governance: The policies, controls, and decision-making frameworks that guide the organization. This ensures compliance, risk management, and accountability.
5. Culture: The shared values, beliefs, and behaviors that shape how employees interact and work together. Culture influences employee engagement and overall organizational performance.

Benefits of a Well-Defined Operating Model

• Alignment with Strategy: Ensures that all parts of the organization are working towards the same strategic objectives.
• Operational Efficiency: Streamlines processes and reduces waste, leading to cost savings and improved productivity.
• Agility and Flexibility: Enables the organization to adapt quickly to changes in the market or industry.
• Enhanced Customer Value: Focuses on delivering consistent, high-quality products and services to customers.
• Improved Decision Making: Provides a clear framework for governance and accountability, leading to better decision-making processes.

Uses of an Operating Model

An operating model can be used in various ways to enhance organizational performance:

• Strategic Planning: Helps in translating strategic goals into operational plans.
• Process Improvement: Identifies inefficiencies and areas for improvement in existing processes.
• Organizational Design: Guides the design or re-design of the organizational structure to better support strategic objectives.
• Technology Implementation: Ensures that technology investments are aligned with operational needs and strategic goals.
• Change Management: Supports the management of organizational change by providing a clear framework for how changes will be implemented and managed.

Features of an Effective Operating Model

An effective operating model should have the following features:

• Clear Vision and Objectives: A well-defined purpose and clear goals that guide the organization.
• Integrated Processes and Systems: Seamlessly integrated workflows and technologies that support efficient operations.
• Flexible and Scalable: Capable of adapting to growth and changes in the business environment.
• Employee Empowerment: Engages and empowers employees to take ownership of their roles and contribute to organizational success.
• Customer-Centric: Focused on delivering value and quality to customers consistently.

Developing an Operating Model

Step-by-Step Guide

1. Define Strategic Objectives: Clearly articulate the strategic goals and desired outcomes of the organization.
2. Assess Current State: Evaluate the existing processes, structures, technologies, and culture to identify strengths and weaknesses.
3. Design Future State: Develop a vision for the future operating model that aligns with strategic objectives.
4. Gap Analysis: Identify the gaps between the current state and the desired future state.
5. Develop Implementation Plan: Create a detailed plan for transitioning to the new operating model, including timelines, resources, and key milestones.
6. Implement Changes: Execute the implementation plan, making necessary adjustments along the way.
7. Monitor and Adjust: Continuously monitor the performance of the new operating model and make adjustments as needed to ensure it remains aligned with strategic objectives.

Example of an Operating Model

Consider a technology company aiming to enhance its customer support operations. The operating model might include:

• Processes: Streamlined customer support workflows, automated ticketing systems, and standardized response protocols.
• Organizational Structure: A dedicated customer support team with clearly defined roles and responsibilities, including support agents, team leads, and managers.
• Technology: Implementation of a Customer Relationship Management (CRM) system to manage customer interactions and track support tickets.
• Governance: Establishment of policies for response times, escalation procedures, and performance metrics.
• Culture: Fostering a customer-centric culture that emphasizes the importance of excellent service and continuous improvement.

Frequently Asked Questions Related to Operating Model