Have you considered what your operating model is?

Organizations spend a considerable amount of time articulating the components of their business model such as the value proposition, target markets, revenue, or funding model because these get to the heart of the business: value creation. However, the operating model may receive less deliberate attention. Why is this?

Identifying how an organization will create value does not equate to how it needs to operate to deliver that value consistently. While the business model may rouse hearts and minds, the operating model may not elicit that same je ne sais quoi.

An organization may take steps such as establishing departments, hiring employees, introducing policy and systems, which may feel like ‘operations.’ This usually occurs in response to demand rather than an intentional strategy. This raises the question: Does an operating model emerge from the accumulation of organizational decisions or is it intentionally designed?

Does your operating model complement your business model?

The business model establishes an organization’s proposition for creating value. The operating model should establish the conditions through which the proposition can be realized. Ideally, both should develop in tandem. This becomes critical when an organization expands into new markets or introduces new service or product lines, while increasing headcount. If expansion takes place without considering how the operational system will support it, then that’s where friction may start to creep in. Without clarity around how responsibilities, information, and governance will move across a dynamic organization, the ability to continue delivering at a high level may be compromised. These inefficiencies accumulate over time and come at a cost.

Designing an operating model that aligns with organizational vision and strategy.

Strategy is the north star. The operating model is what turns the strategy into action. The model guides more than the day-to-day activities; it influences how people work, where they direct their energy, how human capital is utilized, decision-making, and organizational capacity to deliver on its promise. It’s the engine that helps drive the vision. Yet this does not happen in isolation.

The operating environment can be understood as the ecosystem within which the components of an operating model come together, interact, and function. The two are interdependent; they influence and reinforce one another. An organization may have the resources and capacity to deliver value; however, the operating environment may not provide the optimum conditions for realization.

For example, let’s look at department silos. Silos are often perceived as a behavioral issue, but I think they are influenced by operational conditions. There is a quiet assumption that everyone understands the role and function of a department and will organically understand how they are meant to work together. However, I view silos as a consequence of a lack of clarity around the role and intersection of functions. How easily are people able to collaborate, make clear decisions, or hand off work? This is a design condition. The mechanisms for collaboration may never have been intentionally designed.

Another design dimension to consider is the physical environment and how it enables or constrains operations. Organizations often consider their facilities in terms of space, requirements, functional needs, and alignment with culture. But how often does the operating model inform the workplace strategy and design? And conversely, how often is the physical environment considered in the development of the operating model?

So, how do you approach this tension?

Approach an operating model as a design challenge.

Design takes the components of an operating model and examines them as a system of interconnected relationships, dependencies, and interactions, rather than as separate elements developed and implemented individually.

Consider the actions involved in establishing departments, roles, and responsibilities. Within an intentionally designed system, these would be established in relation to one another. What is the purpose of a department and what is its value proposition? What roles are required to deliver on that proposition? How will governance establish accountability? And how must the department operate, not only internally, but in relation to other departments?

It requires examining each function as an individual component while considering its relationship to the whole.

Part of the design challenge is determining where functions need independence and where they need intentional coordination.

Design for organizational intent and lived experience.

The structures, systems, and processes established to determine how a department functions may make sense when viewed individually, but how often is their impact on the people who work within it considered? What makes sense in principle may not align with the reality of how people actually work, introducing more burden than efficiency. Most of us have experienced that long sigh when we're directed to adopt a new system or way of working without having had any input into its development.

Similarly, the design challenge is determining the relationship between what needs to happen and how people will do this on a day-to-day basis. An intentionally designed system will look at how people experience their work and take their input into consideration, designing in collaboration rather than imposing.

So, was your operating model designed with intention, or is it a byproduct of competing demands? It’s a question to consider, particularly if you’re starting to experience operational strain.