What is an Operating Model?

It is how the business runs. Operating models represent the step between strategy definition and delivery of that strategy. Specifically a Target Operating Model (TOM) is a future state operating model. To truly define an operating model, it is important to keep it distinct with other terms:

Business Strategy & Vision

• Defines the strategic intent and goals of a company
• Determines a company’s value positioning, and agility needed to compete and win in the market
• Enabled by interventions in Growth, Profitability and Sustainability simultaneously to create an interdependent strategy
• Drives business model decisions, but is additionally informed by the business and operating models

Business Model

• Defines how a company captures value and goes to market
• Outlines the customers and markets, products and services, revenue model, and channels to deliver value
• Defines how the company uses innovation to differentiate their offerings
• Informs and guides the requirements of the organisation and shapes the operating model design

Operating Model

• The way that a business constructs and operates its capabilities to deliver its business strategy and business model(s)
• Serves as a blueprint for an organisation’s capabilities and key relationships between business functions, processes, and structures
• Identifies what organisation behaviours should be encouraged as well as the enabling technologies and digital capabilities