Exploring Operating Models: Real-World Examples and Best Practices for Businesses A how-to guide for building an effective operating model

Exploring Operating Models
Table of Contents

Operating models and strategy execution

For an organisation to achieve success, operating models and strategy execution are intertwined. Despite a well-defined strategy defining the overarching goals and direction, the operating model serves as the practical guide for executing those strategies.

To ensure seamless implementation of the strategy, internal processes, resource allocations, organisational structures and other components must be optimised. People, processes, and technology are aligned in an effective operating model, fostering agility and innovation as market demands change.

By harmonising the strategy and the operating model, businesses can efficiently implement their plans, adapt to changes swiftly, and achieve sustainable growth, creating a solid foundation for long-term success.

What makes an operating model effective?

Having an effective operating model is the foundation for any successful organisation, which ensures that strategy and execution are aligned seamlessly. The success of an operating model depends on streamlined processes, clear communication channels, and a robust infrastructure. The ability to adapt to market changes, coupled with continuous improvement initiatives, fosters resilience.

Additionally, a cohesive organisational culture, empowered employees, and strategic integration of technology enhance efficiency. This synergy optimises resource utilisation as well as promotes innovation and agility, making the operating model truly effective in today’s dynamic business environment.

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How do you build an effective operating model?

A successful operating model requires meticulous planning and execution. Start by defining clear objectives that are aligned with the corporate strategy. Establish communication protocols to ensure seamless coordination, recognise key processes, and streamline workflows. Technology and tools that support these processes should be invested in.

Moreover, creates a collaborative, innovative, and continuous learning culture within the organisation. Provide employees with the necessary skills and autonomy to make decisions. Analyse performance metrics regularly, collect feedback, and adapt the model as the market changes.

Furthermore, to implement a successful operating model, it is not only essential to align goals with corporate strategy but also to use the operating model canvas to visualise, optimise, and integrate key business components seamlessly. Additionally, developing a sustainable operating model requires a flexible, adaptive, and well-integrated approach and a clear value proposition.

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Operating model examples

An operating model varies according to the organisation’s goals and industry.

Companies such as Amazon, exemplify a robust digital operating model, emphasising automation as well as data-driven decision-making. However, fast-food chains such as McDonald’s demonstrate efficient supply chain and performance management and standardised processes, thereby ensuring consistency across international locations. The Mayo Clinic emphasises patient-centred care and seamless coordination between medical teams through patient-centric models. In their operating frameworks, financial institutions such as JPMorgan Chase focus on regulatory compliance and risk management.

In each example, tailored approaches are highlighted, illustrating the diversity of strategies used to achieve operational excellence across different sectors.

Operating model vs. business model

Business models and operating models are related but distinct concepts.

A business model outlines how the company generates revenue and creates value for its stakeholders, emphasising customer segments, revenue streams, and market positioning. An operating model, on the other hand, focuses on the processes, capabilities, and infrastructure required to effectively deliver products and services. A business model defines the overall strategy and an operational model defines how it will be implemented, including resource allocation, workflows, organisational structure and investment decisions.

An aligned business model and operating model ensures sustainable growth for an organisation, balancing strategic vision with operational efficiency.

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How are company operating models designed?

An operating model is designed through a strategic and iterative process.

The first step is to understand the organisation’s goals and market demands. Following the analysis of existing processes, resources, and capabilities, areas for improvement and innovation are identified. Business units must collaborate across functional lines, ensuring that diverse perspectives are taken into consideration.

Moreover, the integration of technology, the streamlining of workflows, and the empowerment of employees are key considerations. The target operating model is refined through regular feedback loops and adaptability to market changes. Continual evaluation of performance metrics ensures alignment with strategic objectives.

In the end, a well-designed operating model maximises efficiency, fosters innovation, and enhances a company’s competitiveness.

Reviewing your existing operating model

Organisational growth requires a review of an existing operating model.

Processes, resources, and efficiency are assessed comprehensively. Companies analyse their current strategies, identifying their strengths and weaknesses. As a result of this introspection, bottlenecks can be identified, workflows can be optimised, and resources can be allocated most effectively.

Reviewing the plan regularly ensures alignment with changing market demands and technological advances. It is often necessary to make adjustments based on feedback from employees and stakeholders.

Businesses can adapt, innovate, and stay agile in a dynamic business environment by critically examining their existing operating models.

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Build a strong operating model with a mentally fit workforce

Establishing a strong operating model requires a mentally fit workforce. Employees who are in good mental health are more productive, creative, and resilient.

By providing mental health initiatives, counselling services, and stress management programs, companies create a workplace that is more engaged and effective. Communication, collaboration, and coping with challenges are all improved when a workforce is mentally fit.

Businesses rely on such employees to achieve sustained success and a positive work culture by navigating complexities with agility and innovation.

Align with your business strategy

Organisational success depends on aligning with your business strategy and business model. All decisions, from resource allocation to operational processes, should reflect the company’s overarching goals and objectives.

Alignment allows the entire workforce to work together towards a common goal, ensuring focused efforts, value delivery and maximising efficiency. In addition to improving adaptability to market changes, this synchronisation fosters innovation as well as strengthens the company’s competitive edge.

No matter what aspect of product development, marketing, supply chain or customer service, a constant alignment with the business strategy provides a guiding principle for making sure every action contributes to the overall growth and sustainability of the business.

It may be necessary for you to engage the services of an external consultant if you need assistance. The sales professional can be either a consulting firm or an external sales company such as Komor.

Organisational structure

The organisational structure of a company defines its hierarchy, roles, and relationships. Information flows and decisions are made according to it. The structure of the organisation should be aligned with the company’s objectives, optimising efficiency and communication.

It is important to understand that the structure influences the work culture and the behaviour of employees, whether it is hierarchical, flat, or matrix-based. Innovation, adaptability, and overall performance are affected by it.

An organisation that is dynamic and adaptable is more likely to be able to respond swiftly to market changes, delivering value, promoting agility, and ensuring the ability of the company to thrive in an ever-changing business environment.

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Reflect on your company culture

Fostering a positive work environment and achieving organisational goals requires reflection on company culture and the company’s organisational structure. The process involves evaluating the shared values, beliefs, and behaviours among employees.

Collaboration, innovation, and employee satisfaction are all promoted by a healthy culture. To enhance teamwork, productivity, and employee engagement, businesses must acknowledge strengths and address challenges.

As a result of regular reflection, cultural evolution can occur within the company, ensuring alignment with objectives, and fostering a work environment where employees feel valued, motivated, and inspired, ultimately resulting in greater success and a positive reputation in the marketplace.

Identify (or create) your value chain

To understand how a company adds value to its products or services, it is crucial to identify or create a strategic plan and a value chain. From raw material acquisition through final delivery, it encompasses several business units such as production, marketing, distribution, and customer service.

By analysing this chain comprehensively, businesses can point out inefficiencies, optimise processes, and improve overall productivity. Additionally, establishing a value chain helps companies to innovate, collaborate with partners, and gain a competitive advantage, to deliver high-quality products and services that meet the needs of the customer and key stakeholders and deliver value.

The future of operating models

Technology integration, data-driven decision-making, and increased agility will be key to the future of operating models.

As a result of automation and artificial intelligence, routine tasks will be streamlined, thereby reducing the need for human intervention. It is expected that an operating model will place a high priority on sustainability and resilience, adapting swiftly to market changes. Digital collaboration, software applications and tools as well as remote work will become more ingrained, encouraging the development of global talent pools with a diverse range of backgrounds.

In addition, a customer-centric approach will remain a priority, resulting in more personalised service. Innovation, scale, and survival in an ever-changing business environment will require companies to embrace evolving technologies and foster a culture of continuous learning.

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Think about how your digital transformation strategy fits into the picture

A robust digital transformation strategy is essential in today’s fast-paced business environment. Providing efficiency, scalability, and enhanced customer experience, it aligns seamlessly with evolving operating models. Utilising technology advancements such as artificial intelligence (AI), Internet of Things (IoT), and cloud computing, companies can optimise processes, improve data analytics, foster innovation, and deliver value.

As a result of digital transformation, businesses can remain agile, competitive, and responsive to market demands, contributing significantly to the development of future operating models by enabling them to be technologically advanced, adaptable, and capable of delivering exceptional value to employees as well as customers.

Develop a strong leadership team

Organisational success depends on the development of a strong leadership team. The most effective leaders inspire, guide, and empower their teams, fostering a positive work environment and driving innovation. A clear vision is established, strategies are aligned, a value proposition is developed, and challenges are overcome.

The diversity of the leadership team contributes to the enrichment of decision-making processes. By investing in leadership development programs, we nurture talent and ensure a pipeline of skilled leaders.

An organisation’s leadership team not only guides the organisation towards its goals, but also motivates employees, thereby creating a climate that promotes growth, collaboration, and long-term success.

Conclusion

An operating model demonstrates the interplay between strategy and execution, emphasising the importance of alignment, efficiency, and adaptability. Successful organisations are built on streamlined and resilient operating models. A vibrant organisational culture requires careful planning, embracing technology, and empowering the workforce.

Examples from a variety of sectors demonstrate the diversity of approaches that can be taken to achieve operational excellence. The alignment of an operating model with the broader business strategy ensures sustainable growth, while regular reviews and adaptability to change are crucial.

The future of operating models depends on digital transformation, agile leadership, and a continuous commitment to innovation, enabling businesses to thrive and evolve.

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FAQ

When should I review and update my operating model?

For the operating model to remain aligned with market demands, regular reviews are necessary. Ideally, it should be reviewed every year or whenever significant changes occur in the market, technology, or business objectives. By continuously monitoring your operating model, you will ensure that it remains effective and responsive to changing circumstances.

Is it possible to operate a business according to a one-size-fits-all operating model?

An operating model rarely responds well to a one-size-fits-all approach. Each business has its own goals, resources, and market dynamics. It is essential to tailor the operating model to meet the specific needs of your organisation. The ability to adapt and customise allows companies to address their challenges effectively and capitalise on their strengths.

When implementing a new target operating model, what are the common challenges faced by businesses?

Employees are often resistant to change, communication is unclear, training is inadequate, and new technologies are difficult to integrate. Moreover, aligning the new operating model with the existing company culture and overcoming internal silos can be challenging. It is possible to mitigate these challenges by utilising effective change and performance management strategies, communicating clearly, and involving employees in the process.

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