Operating Model

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A very simple definition of an operating model for a business is a schematic which shows the operating units for the business and the relationships between these operating units.

Operating Model is a term that is used in many contexts. In essence an operating model describes how an organization operates across both business and technology domains. The Operating Model describes what is important for the organization. The operating model can be a product that in great detail describes how the organization does business today. This can be the foundation for organizations that want to transform it's business. The business drivers are then translated into new requirements that leads to a new Target Operating Model. The Target Operating Model represents the high level requirements, that drives the future Business and IT development. In many situations developing the Operating Model at a very detailed level requires substantial resources in both the business units and IT.

Another approach is to create a high level Operating Model, that describes how the business cooperates across its business units. Center for Information Systems Research (CISR) [1], a research group at the MIT Sloan School of Management has defined this lightweight method to capture the business needs for Business Process Standardization and Integration (data sharing). CISR recommends that this type of Operating Model is used to build reusable Core Capabilities and follow this base to guide IT Investment decisions. The Operating Model will drive the architecture and infrastructure development ensuring that business needs are met with the right IT foundation. The result is a foundation that enables the company to grow its business with the right level of IT, without having to do deep surgery on the IT systems each time the business grows either organically or through acquisitions. The implementation of business processes and IT systems is the realization of the Operating Model.

The Operating Model is an important tool in the dialogue between business and IT. The dialogue can be on different levels of the business. It can start with top management and enable them to decide which operation model pattern, that best describes the way the company operates. This description can be an overall description of the company supplemented with a description of each of the business units. When the result of the discussion with top management is ready, the operation models can be used in the discussions with the different business units and create the basis for concrete business and IT projects.

An important part of the outcome is the organizational learning that takes place, when the Operating Model is transformed into Enterprise Architecture and IT Governance initiatives to control the learning.

Industry standard operating models: