What is an Operating Model?

By | June 4, 2014
This entry is part 18 of 31 in the series Defining words

We spend a lot of time creating target operating models (TOMs)–sometimes prematurely in my view.  A telling fact is that businesses create TOMs without anything in writing about the existing operating model or business strategy.

When I learned about target operating models I, thankfully, first grounded myself in what an operating model is, why it is important and how it is used.  Some published material that I have enjoyed reading is in the reading room at OperatingModels.com.

In particular, I like the following documents:

The Intro to TOMs provides a simple diagram about operating models that I think explains the purpose and use of operating models nicely.

operating modelThey also have a book on operating models but the essential content has been replicated into the TOM document.  I suspect that is because no one downloads the operating models book.  Why bother with an operating model when you can create a target operating model!

My advice is to read the book on TOMs but focus on the part about operating models.

Another book worth sharing is “Defining your Operating Model: Designing a Foundation for Execution“.  The key points are:

  • The operating model is a key enabler and constraint on the business model
  • Two key dimensions of operating models are process standardization andStandardizationIntegration integration.

They provide a 2×2 grid that breaks down into 4 operating models:

  • Diversification (processes are neither standardized nor integrated)
  • Coordination (processes are integrated but not standardized)
  • Replication (processes are standardized but not integrated)
  • Unification (processes are both standardized and integrated).



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