How to Choose the Right Operating Model for your Business
Your operating model can make the difference between organisational inertia and strategic agility in a fast-changing, competitive business environment. How do you pick the best operating model when there are so many options?
It’s more than a simple structure. Your operating model is the blueprint of how your organization delivers value. It defines roles and responsibilities, as well as processes and the way decisions are made. A good operating model will align your strategy and execution, and allow you to grow, adapt and thrive.
What is an operating model?
A business’s operating model describes the way it is structured to achieve its strategy. It includes:
- Structure : How teams are organized
- Governance : How and by whom decisions are taken.
- Processes – How work flows in the business
- Technology : the systems that support execution
- Culture : the shared values that influence behavior
Consider it a bridge between your strategy and the day-today operations.
Why your operating model matters
McKinsey reports that companies who align their operating models with their strategies are 2.5x more likely than their peers to achieve higher total returns for shareholders over a 10 year period.1 A misalignment results in duplications, frictions, and waste of resources.
In a survey by Deloitte in 2023, 72% said that their current operating model inhibits their ability respond quickly to market changes.
The stakes of choosing and continuously improving your operating model are higher than ever.
Types Operating Models
Although there is no perfect solution, most operating models can be classified into the following categories:
- Centralised: The decision-making authority is concentrated in the top. It is good for standardisation and efficiency, but it can also slow down innovation.
- Decentralised : Business units operate separately. Decentralisation is good for responsiveness, but can also lead to fragmentation.
- Functional : Organized by expertise (e.g. marketing, finance). It is good for deep skills, but lacks cross-functional alignment.
- Divisional : Organized around customers, products, or geography. Enables autonomy but can duplicate effort.
- Matrixed : Employees are reported to by more than one leader. Function and geography). Collaboration is encouraged, but confusion can occur.
Hybrid models are also available, which are combinations of models tailored to certain industries or stages of growth.
What Model to Buy?
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Start with strategy
- Your strategy should drive your operating model, and not the other. Do you want to achieve rapid innovation, cost-leadership, or customer intimacy as your goal? Each requires a unique set of structures and behaviours.
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Map capabilities to outcomes
- Design your model to enable the critical capabilities that you require to execute your strategy. If speed to market is important, for example, minimize handoffs and empower teams from different functions.
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Consider Culture and Leadership
- A model cannot work without the right mentality. Decentralised models, for example, demand trust and accountability. Make sure that the leadership style and team behaviors are aligned.
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Test it and evolve
- Create a flexible model. Changes should be tested in certain areas before being rolled out to the entire company. Iterate and monitor performance. The best models should be adaptive and not static.
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Control and Autonomy in Balance
- It’s easy to decentralise too quickly, especially in scaling-ups. Too little governance is just as bad as too much. Create frameworks to allow local decision-making within boundaries that are clearly defined.
Technology and its role
Operating models of today are becoming increasingly digital. Cloud platforms, automation and AI enable flatter, faster organizations. According to PwC 60% executives believe that technology modernisation is the top enabler for operating model transformation.
Invest in collaboration, visibility and agility systems, particularly for hybrid or distributed teams.
Final Thoughts
The right operating model should not be viewed as a mere organisational exercise, but rather a strategic decision. The best operating models are not inherited, but designed. They are designed to serve your purpose and empower your team, allowing you to react with clarity in a world that is unpredictable.
Contact Cintriq today to learn how the right operating system can unlock exponential value.
Sources:
- McKinsey & Company “How Operating Models Power Strategy Execution,” 2022
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Deloitte “Global Human Capital Trends 2023,” 2023
- PwC “Global Digital Trust Insights Survey,” 2020
