![]() 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 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'. 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. There are plenty of disagreements about the use of the words business model and operating model. An operating model focuses on the delivery element of the business model. A business model describes how an organization creates, delivers and captures value and sustains itself in the process. Most typically, an operating model is a living set of documents that are continually changing, like an organization chart.Īn operating model describes how an organization delivers value, as such it is a subset of the larger concept 'business model'. 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. It can also communicate the vision of how an operation will work in the future – the to be. There are likely to be blueprints for each element: processes, organization, decision making, software applications, locations and so on.Īn operating model can describe the way an organization does business today – the as is. Also, an operating model is not usually just one blueprint. It is more dynamic than a building blueprint, with changes occurring regularly. It can help those transforming an operation coordinate all the different changes that need to happen.Īn operating model is like the blueprint for a building. It can help those making changes check that they have thought through all elements and that the whole will still work. It can help leaders identify problems that are causing under performance. It can help different participants understand the whole. ![]() An operating model breaks this system into components, showing how it works. Īn organization is a complex system for delivering value. People, process and technology is one commonly used definition, process, organization and technology is another. There are different ways of defining the elements that make up an operating model. 2.2 Service Orientation Operating Models.
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