Key building blocks of an operating model

Your business should establish relevant processes and practices in order to ensure business efficiency and long-term sustainability. Within your business, operational management will mainly encompass the management of areas relating to production, productivity, quality and cost.

An operating model shows how you use your resources in your day-to-day operations. In essence, it shows how you are creating and delivering your products and services to your customers.

The model describes operations through a number of different but interrelated layers: 

Processes and functions – your business operations and everything you do to run your business, including:

- finance

- human resources

- IT

- customer operations

- procurement and supply chains

- risk management.

People – including:

- who does what

- the reporting lines

- the required skill sets, roles and responsibilities.

Include an organisation chart with clear job definitions and direct connections to your processes.

Service delivery models – what will get done and where. Identify what capabilities are delivered and how.

Technology – the environments, applications and integrations that enable and automate processes.

Performance insights and data – what information will be reported and how. Define:

- the information requirements: the data you will need to derive your insights

- key performance indicators: a system of values that matter to your business 

- master data governance: maintaining a single source of truth for business critical data.

Use these to drive business insights and optimise decision-making.

Governance (organisation structure) – how the business is overseen. Define the segregation of duties, internal controls and policies that should exist.

Your business operations should be aligned to your strategic vision and goals and your operating model will help you break down roles, milestones, key performance indicators (KPIs) and deliverables over time by providing clear points on how every aspect of your business functions. For a small business, this may mean defining goals for each and every day.

If designed well, your operating model will help support rapid and effective change within your business. 

Your business transformation can fail if your operating model cannot provide the support needed to manage the change. For example, switching to a new sales channel without having well-developed distribution processes may not work. 

Learn about basic operating models.

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