All You Need to Know about Operating Models and Its Types

The first tier of an enterprise architecture's execution base is its Operating Model. It is the operating system that your company uses. This comprises your procedures and operations, electronic devices and software, physical facilities and tools, and human resources.

The operating model includes the standardization and integration of business processes required to provide value to customer segments. The conceptual part of organizational logic defines enterprise architecture.

An operating model is, therefore, essential to the success of an organization. It is vital to not-for-profit organizations and other for-purpose organizations’ ability to bring about constructive change in the world successfully.

If you manage a firm, you are aware that it consists of a wide range of various elements.

Of course, every company strives to offer something valuable to its clients. GrowthJockey helps your business provide value to your customers by helping you build an effective operating model. We also help you achieve organizational performance objectives with an operating business model designed especially for your business.

If you want to know more about operating models, types of models, and how you can bring positive outcomes to your business by building an effective operating model, dive right into the article.

What is an Operating Model?

An operating model is concerned with the "how" if strategy establishes the "why" and "where," and the "what" is provided by the business model.

According to our observations, a clearly defined and articulated operational model is—the link between strategy and day-to-day operations that directs the team, gives context and encourages behaviors that will help the strategy and vision be realized.

According to estimates, poor execution caused close to 70% of well-planned plans to fail. In addition, 61% of CEOs said they were unprepared for the difficulties they encountered as leaders. The outcome? Within the first 18 months of being promoted or recruited, 50%–60% of managers fail.

A company's operating model describes how it organizes its workforce, departments, projects, and infrastructure to carry out its business plan and strategy. It consists of the nuts and bolts, including the necessary teams and reporting lines, and the processes implemented from beginning to end.

Organizational leaders frequently have compelling aspirational ideas that inspire staff, and staff frequently have well-organized work procedures that work because they are subject-matter experts and are familiar with the details. However, we often observe that the true vision never materializes because staff members need help to relate to the plan.

Through an operating business model, Growth Jockey assists your processes and plans to become more efficient. Because although your company has effective business models, it is the operating model that makes your company's operations profitable. We assist firms in reaching their full potential by tying their operations to a larger context.

The Center for Information Systems Research at MIT performed research and discovered that businesses using an operating model reported the following:

• Their organizations had 29% more strategic agility than those that didn't.

• 17% more strategic effectiveness

• 31% more operational efficiency

• 33% more customer intimacy.

What are the Key Components of an Operating Model?

We have years of expertise in building and executing operating models in business at Growth Jockey. Therefore, we've learned that an operating model needs to include the correct components. While many businesses have accepted specific essential components (the "musts"), we think the most effective operational models also incorporate additional cutting-edge components.

These elements work together to enable a company to fulfill its strategic vision and brand value. This combination and makeup of these elements within an organization make this possible. The operational model components must be carefully considered and designed in proactive and reactive settings.

Some of the critical components GrowthJockey takes into consideration while designing a company’s operating model are as follows:

Business Capabilities

It is the collection of functional skills and responsibilities required to carry out the business strategy.

People

Any operational model's "people bucket" comprises the organization's structure, capabilities, capacity, and culture, as well as its business model and strategy.

Process

Process of operating model includes all physical and intangible resources necessary to support the organizations. This consists of office furniture and the necessary Xero and HR operating systems. It has a wide range, and many organizations concentrate on the operational infrastructure or the tools required to support employees' daily tasks.

Geographical presence

Operational and market presence are necessary, considering business capabilities and marketing objectives.

Workplace

This comprises the social and environmental aspects of the workplace that are most conducive to boosting productivity, motivation, and engagement.

What Are the Types of Operating Models?

Jeanne W. Ross, Peter Weill, and David C. Robertson describe how to evaluate and classify your organization’s operating model using the following four types of operating model in their book, Enterprise Architecture as Strategy: Creating a Foundation for Business Execution.

1. Coordination Operating Model

Businesses use operational coordination models with numerous diverse departments. Despite having distinct roles, these departments interact because they share clients, data, and processes. This indicates that multiple important company components are interconnected.

Coordination can be thought of as shared data access. This type of operational paradigm requires high levels of integration but little standardization. Each team or corporate division, being interconnected, however, operates uniquely.

2. Unification Operating Model

Undoubtedly, this operating system is the most practical.

The Unification Operating Model is built on a regionally dispersed collection of business operations that are globally interconnected. It is based on the idea that businesses operate most efficiently when processes are tightly connected and standardized.

Business units carry out similar tasks, but processes and data are created centrally to allow for sharing. To monitor the makeup of the business units, centralized administration of these operations often uses a matrix approach.

High-level business process owners strive to unify business processes throughout the business units, even though each has unique operations.

In essence, Unification is built on a standard set of procedures and information that one can dynamically adjust to operate within the framework of each business unit.

3. Diversification Operating Model

Companies with few or no shared customers or suppliers frequently employ diversification operating strategies.

Essentially, this approach aids businesses in diversifying their offerings to various clients to prevent a central hub that would restrict authority over several company divisions. Each department or company unit conducts independent business in its way. Additionally, it is less necessary to standardize corporate practices.

The following are essential components of a diversification operating model:

• The company's goods and services are the only thing the departments have in common.

• Each department has its operations and IT architecture.

• Each company unit conducts separate transactions, and management is independent.

4. Replication Operating Model

Additionally, there are very few, if any, shared clients or vendors in the replication operating model. This operating paradigm can also be considered autonomous but with some standardization.

The autonomous business units in this operating model use a syndicated approach to business system integration and standardization. Both IT services and business process design are centrally governed.

Canonical data definitions are used to standardize the information architecture, but the actual data is held locally and is aggregated to some extent for the company. The business units execute their operations in a very similar manner.

Key characteristics of a replication operating model include the following:

• There are few or any shared clients or vendors between departments.

• A local, non-governmental body typically owns standardized data.

• Department heads run their teams independently, and centrally developed IT solutions are used.

GrowthJockey assists you in selecting your operational model. We help you in laying a solid foundation for execution and enhancing your strategic agility by assisting you in choosing the proper levels of integration and standardization.

Our business operating models will assist you in deciding how to efficiently supply and retain value for your consumers while utilizing technology, labor, and processes. By doing this, you will maintain your competitiveness and lay a solid foundation for your business.

To Sum Up

For your organization to stay current and viable, you must continuously consider improving your operating model. It's crucial to put your employees at the forefront of everything you do in a constantly evolving world.

Your organization's operating principles should always be in line with a customer-focused strategy plan, regardless of whether it is for-profit or not. Although redesigning your operational model is not always appropriate or necessary, it should be seen as essential if you want to stay current and adaptable in a constantly shifting environment.

People are working from all around the world as hybrid and remote work become more popular. To stay ahead of the competition, businesses must have this competitive advantage. However, it all begins with having the vision and forward-thinking perspectives needed to execute quickly.

GrowthJockey helps you aim for that vision. We assist in highlighting essential duties and a business plan by helping you choose the most influential business operating model for your firm.

To guarantee strategic and operational alignment, we routinely attempt to understand external needs and contrast them with your team’s and board’s feedback. GrowthJockey considers your company's maturity level when determining where to spend for the most return within a strategic timeline.

Together, we can help you be prepared for the future. Get in touch with us today to scale your business by attaining perfection in your operating model !