There are different ways of defining the elements that make up an operating model. :
People,
process and
technology is one commonly used definition,
process,
organization and
technology is another. More recently, an operating model standard has identified some 31 areas of interest for those designing, developing, and managing operating models, and which considers both the context and structure elements of operating model transformation. An organization is a
complex system for delivering value. An operating model breaks this system into components, showing how it works. It can help different participants understand the whole. It can help leaders identify problems that are causing under performance. It can help those making changes check that they have thought through all elements and that the whole will still work. It can help those transforming an operation coordinate all the different changes that need to happen. An operating model is like the blueprint for a building. It is more dynamic than a building blueprint, with changes occurring regularly. Also, an operating model is not usually just one blueprint. There are likely to be blueprints for each element: processes, organization, decision making, software applications, locations and so on. An operating model can describe the way an organization does business today – the
as is. It can also communicate the vision of how an operation will work in the future – the
to be. In this context it is often referred to as the
target operating model, which is a view of the operating at a future point in time. Most typically, an operating model is a living set of documents that are continually changing, like an organization chart. An operating model describes how an organization delivers value, as such it is a subset of the larger concept 'business model'. A
business model describes how an organization creates, delivers and captures value and sustains itself in the process. An operating model focuses on the delivery element of the business model. There are plenty of disagreements about the use of the words
business model and
operating model. The term operating model may have been first used in corporate-level strategy (see
History below) to describe the way in which an organization is structured into business divisions, what activities are centralized or decentralized and how much integration is required across business divisions. The term is most commonly used today when referring to the way a single business division or single function operates, as in 'the operating model of the exploration division' or 'the operating model of the HR function'. It can also be used at a much more micro level to describe how a department within a function works or how a factory is laid out. The section below titled
Business/IT dialogue, explores one framework for thinking about the IT implications of different corporate strategies. An operating model is one of the tools that leaders can use to help them formulate and execute strategy. Typically work on an operating model starts after some strategic plan has been proposed. It translates that plan into operating requirements and decisions and often also contributes to the plan by showing areas where the plan will be hard to implement. An operating model can also be used as a tool when an organization is facing performance challenges. These challenges include such areas as fear of failure, financial uncertainty, poor decision-making, resource management concerns, staff morale and productivity concerns, regulatory and compliance risk, ineffective governance, and difficulty in scaling and adaptability. The model can help with the diagnosis (what is causing the performance problems) and with the solution (what needs to change to correct the problems). However, probably the most common use of the operating model tool is to get alignment between managers in different functions or divisions about how they are going to work together for the benefit of the whole. Additional maps and charts are often needed. For example, an operating model will typically include an IT blueprint, locations maps, a supplier matrix, people models, decision grids and other elements such as a scorecard for assessing performance. The particular set of documents created will depend on what the operating model is being used for. There is no generally accepted set of charts or at least there is no agreement yet about what charts make up an operating model. ==History==