What is an Operating Model? – A convenient way to Strategic Success

In the dynamic landscape of modern business, many organizations have grown organically, adding processes and structures incrementally over time. This often results in a complex and unplanned legacy operating model. While such models can support success, they frequently lack the strategic alignment and efficiency needed for sustained growth. Transitioning from this ad-hoc approach to an intentional design enables organizations to develop operating models that are strategically aligned, efficient, and coherent.

In this blog, we explore how shifting to an intentional design can help organizations create fit-for-purpose operating models. We will discuss what operating models are, why they are essential, and provide insights on how to design them effectively. By the end, you’ll understand how a well-designed operating model can improve overall effectiveness and support strategic objectives, paving the way for future success.

Before delving into how to design operating models, it’s important to understand what they are and why they are essential for every organization. A successful business is built on several key capabilities, which represent its core functions. These capabilities encompass various processes involving numerous business actors, data objects, applications, equipment, and more. Amidst this complexity, it’s easy to lose track of the components needed to fulfill the organization’s value propositions. This is where operating models are invaluable. They provide a comprehensive overview of the organization’s main functions, ensuring that everyone involved understands how the organization operates and interacts.

Operating models can exist at various levels. In some cases, a one-page operating model for the entire organization might be sufficient. In others, detailed operating models with standard operating procedures provide step-by-step instructions for routine operations. Opinions on the best approach vary widely, but the key is to choose the level of detail that best suits your organization’s needs.

Operating models are typically defined on different levels, based on their purpose and audience 

For our business transformation initiatives, we choose a balanced approach. In our blog “The Power of Enterprise Architecture Operating Model”, we discuss using capability maps to structure the organization. We also mention value chains or high-level process maps as alternatives, but here we will focus on capabilities. Capability maps provide a solid foundation on which to build target operating models, offering overall structure and serving as a navigation point.

Typically, there will be an operating model for each key capability. In some cases, multiple capabilities may be combined into one operating model or a single capability may have multiple operating models. However, as a general rule, you will have one operating model per capability.

For each capability we need to design its inner workings – the operating model

Capabilities define the “what” of an organization’s functions. But when we delve deeper into each capability, we uncover the “how” – the essence of an operating model. This encompasses:

• The tasks required to deliver the capability’s value proposition
• The individuals or teams responsible for executing these tasks
• The locations where these tasks are carried out
• The necessary information for task completion
• The software and technologies utilized in the process.

TIP: While you have the flexibility to determine the level of detail in your operating model, keeping it concise on a single page is advisable to avoid confusion. This approach enables you to focus on crucial elements and their interconnections, ultimately enhancing clarity and effectiveness.

This is what the operating model for an airport’s passenger handling capability could look like.

It is divided into levels representing the BDAT stack:

• Business
• Data
• Application and
• Technology

The example illustrates an airport’s passenger handling process, detailing interactions among business actors, processes, application components, and equipment across four main business processes: Check-In, Security Screening, Immigration & Customs, and Boarding.

• Check-In: Check-In Staff initiate the Check-In process, supported by the Check-In Application, which validates passenger information and assigns seats. This process utilizes self-service kiosks and check-in counters. The Passenger data object is central, interacting with both the Seat Map for seat assignments and the Check-In application services.
• Security Screening: Security Personnel conduct the Security Screening process, supported by the Security Screening Application and X-ray machine, generating screening results. The process ensures that all passengers and their baggage are screened for security threats.
• Immigration & Customs: Immigration Officers handle the Immigration & Customs process, using the Immigration & Customs Application and passport scanners to process passport information and customer declaration forms.
• Boarding: Boarding Staff then manage the Boarding process, supported by the Boarding Application and boarding pass scanners, ensuring passenger verification and eligibility for priority boarding. The Passenger data object flows through these processes, ensuring seamless transitions and data integrity throughout the passenger’s journey.

Of course, you can add more layers or use other elements. ArchiMate, for example, offers over 60 elements that can help you with this.

TIP: But make sure you don’t go into too much detail. After all, you also want non-architects to be able to understand it. You should therefore limit the variety of elements to a maximum of 10 element types. There are other results in EA: Strategy maps, roadmaps, process architectures, application and technology architectures … so it is not necessary to pack everything into your operating models.

• You can use operational models to effectively explain the functioning of one or more capabilities. You can do this with a single diagram.
• You can explain the context for planned changes. Stakeholders will more easily understand what is at stake and which parts of the organization are affected.
• You can use it for modelling architectural threats. Risks can be more easily identified and their impact more easily determined.
• For capability-based planning, you need to define a roadmap with requirements for your strategic capabilities. The operating model helps you to identify weaknesses and optimization potential and to derive strategic requirements.
• You can use it to describe target operating models. This allows you to define, discuss and communicate how you want to work in the future.

TIP: Of course, it takes effort to create operating models and keep them up to date. Find as many interested parties as possible: CxOs, risk managers, strategic planners … the number of interested stakeholders will define your success.

The best thing is that you may have already defined much of what is necessary for this. For example, in application portfolio management, where you have defined the catalogue of your applications, or in strategic management, where you have defined your capability maps. This saves a lot of time and ensures that everything is harmonized.

No matter how big or small your organization – it works in a certain way. This way of operating can be represented in the form of a model. Whether you start from your capabilities or find another way to create the big picture, it’s always a good idea to get everyone in your organization on the same page about what’s happening in your organization. But don’t stop at the what! Once you have the big picture, you can break it down into any level of detail you want. That way, everyone knows how things are going. It also makes your organization more efficient as you can make more informed decisions, helps with strategic planning and brings countless other benefits!