Instructions

1. Step 1
Examine your entire production process and figure out if there are external
services you could cut out. It may be cheaper in the long run for you to make
small components, rather than buy them from a supplier. Also, some things that
you make yourself may be cheaper to buy from someone else.

2. Step 2
Remember that the end of your business operating model is always the
consumer. Refocusing some of your services around the needs of the consumer is
one way to help increase your business, but you'll also need a marketing plan to
reach the customer.
3. Step 3
Figure out what you need to deliver the best product. These needs can vary from
things like state of the art manufacturing facilities to highly trained professionals
managing your factory workers. Your requirements can also include intangible
things like marketing campaigns and grassroots support.

4. Step 4
Consider geographic locations for your business when you develop your model. A
centralized location will help decrease transportation costs, while basing your
company in an educated area could make more qualified workers apply to work
for you. Property cost, taxes and development must also be considered as part of
your start-up and operating costs.
5. Step 5
Incorporate environmental policies in the plan that you create. Sustainable
development guidelines preserve the environment and also help your business
appeal to people who are very interested in conservation.
6. Step 6
Work a production threshold into your business operating model so you know how
much growth you can sustain before you need to expand your facilities. Your limit
may depend more on capital than space if you are in a small start-up company.

7. Step 7
Create a target operating model that details how the company will develop in the
best case scenario. In addition to things like market share and financial goals, the
target model should include infrastructure, personnel and technology growth.

Read more: How to Develop a Business Operating Model |

eHow.com http://www.ehow.com/how_2103148_develop-business-operating-
model.html#ixzz0vKiZsN65

Tips & Warnings

• Once you develop your operating model, try to sum up your plans in just one
sentence that explains what you make, who you sell it to and why you're
doing it. Use this sentence in your company literature to lure investors to your
company.
• Your operating model must also include things like company culture, decision
rights and use of technology.
 Read more: How to Develop a Business Operating Model |
eHow.com http://www.ehow.com/how_2103148_develop-business-operating-
model.html#ixzz0vKjreeEs

A business operational model is a roadmap for managers and employees to use as a guide for
leading a business along a path to success. Operational models place the mission of the
company, and the means to achieve that mission, in front of employees for reference and
inspiration. A good operational model is easy to access by all stakeholders and is open to
amendment and change as environments and conditions change around and within the business.
Even the smallest business enterprise should have an operations model.

Read more: How to Make a Business Operational Manual |

eHow.com http://www.ehow.com/how_6023446_make-business-operational-
manual.html#ixzz0vKkq9cMI

Conceptual Business Operating Model

The Conceptual Operating Model of a business is used to understand what the key areas of the organisational
structure should be, how they would associate with each other and what each area does.
The conceptual model is concerned with how the business should look, not how it does look now. It can be
useful to allow understanding of what the key areas of the business are and how they interact. It allows an
organisation to focus on where they need to be and to plan to move towards this.

Capturing the Operating Model

The Business Operating Model is captured - in terms of the design of the organisation - by defining Business
Roles. These are used to represent the DESIGN of the organisation, in terms of the roles that are required and
how they are related. Business Roles perfom Business Processes and can be groups, departments, teams or
job roles within the enterprise, representing many levels of granularity as to how the processes are performed.
Roles can also own a process.

To capture the business operating model, the key relationships between Business Roles are:

• Containment - capturing the sub-roles that make up a Role, e.g. the Business Roles that are required to
make up a logical team (Group Role)
• Responsibility - capturing those roles to which a Business Role is responsible

http://www.enterprise-architecture.org/business-architecture-tutorials/92-conceptual-
business-operating-model
Operating Model is a term that is used in many contexts. An Operating Model is the abstract
representation of how an organisation operates across process, organisation, technology
domains in order to deliver value defined by the organisation in scope.

Any organisation is a complex system consisting of several different interlinked logical

components. An Operating Model breaks “this complex machinery” down into its logical
components and deploys the appropriate analysis and design techniques for each component in
order to deliver better value.

An Operating Model can be used as a framework for formulating Operations Strategy – explicit
choices about the best deployment of organisation’s elements to achieve the business goals. It is
usually informed by the Business Model. In some cases, an Operating Model can become the
source of competitive advantage and can inform the Business Model.

The Operating Model can be a vehicle product to describe how the organization does business
today - the "as-is" Operating Model. This can be the foundation for an organization that wants to
transform its business. New business drivers can be translated into requirements that can lead to
a new "to-be" or "Target" Operating Model. The Target Operating Model represents the high level
requirements that drive the future Business and IT Architecture design.
 Contents
[hide]

• 1 Operating Model in Context

• 2 Operating Model Defined

• 3 History of Operating Model Development

o 3.1 Origins in Corporate Strategy

• 4 Center for Information Systems Research

• 5 Role in Defining the Business and Technical Architecture

• 6 Creating a Dialogue between Business and IT

• 7 Industry Standard Operating Models

• 8 See also

• 9 References

[edit]Operating Model in Context

Several related terms are often used interchangeably to describe a business but are actually
quite different as illustrated in Figure 1:

 A Business Model describes the rationale of how an organization creates, delivers, and
captures economic, social, or other forms of value. The process of Business Model design is
part of business strategy.
 An Operating Model describes the necessary level of business process integration and
data standardization in the business and among trading partners and guides the underlying
Business and Technical Architecture to effectively and efficiently realize its Business Model.
The process of Operating Model design is also part of business strategy.
 A Capability Model describes the capabilities necessary to execute the Operating Model.
The process of Capability Model design is part of Operations Planning.

Figure 1: Relationship between Operating Model and Capability Model

[edit]Operating Model Defined
An Operating Model for a business is a strategic schematic which illustrates
the relationships among the operating units and trading partners and provides a set
of guidelines for both the business architecture and technology infrastructure that enable a
company to grow its business either organically or through acquisitions.

 Strategic: an Operating Model is a strategic choice as to the extent of process

standardization and data integration desired to achieve business results.
 Relationships: refers to the degree of cooperation across business units
including customers, suppliers and trading partners, required for efficiency or leverage.
 Guidelines: clarify what is important for the organization today and the rationale
for investments so that leaders are aligned. When the Operating Model is changed, the
"to-be" model sheds light on the transformations required for future success and the
decision process for investments among the units.
[edit]History of Operating Model Development
[edit]Origins in Corporate Strategy
Operating Model as defined here is similar to Corporate Strategy: "the relationships among
the businesses in the corporation's portfolio and the process by which investments will be
determined among them."[1] There are three basic models:

 Holding Company: each business has wholly self-contained brands/businesses

with dedicated core and support work. The businesses are tied together only by a
common funding source and financial requirements (e.g., Tyco International)
 Federated or Allied: each business contains the core work required to create
advantage autonomously. Issues of common interest are identified and worked among
businesses. Support organizations develop uniform policies and practices across
geographies, tailor them to meet the needs of each business and help achieve
synergies across businesses where desired (e.g., access to customer, product files,
needs to have own accounting tied to corporate). Some support work may be shared
across businesses (e.g., Canon or GE today)
 Integrated: single business, requiring a single business strategy for competitive
advantage. Important business issues are formulated centrally and tailored for local
needs to optimize the entire business. Success is measured by adding up the global
numbers (e.g., McDonalds or Harley Davidson).

Following are some of the operating implications of the choice[2]:

Component Integrated Allied Holding

Business Strategy One Many Many

Customers Same Shared Many

Corporate Role Resource allocations Define Protocols Financial roll-ups and analysis

Human Capital Common Some Shared Independent

IT Systems Common Common Different

Enabling Processes Centralized Centralized Decentralized

This "large grain" view informs many decisions about how to design and build the
capabilities that make up the organization. For example, the first choice for a Holding
Company such as Tyco Industries would not be to try to run all of the companies in its
portfolio on a single configuration of the same financial management business applications.
However, the "large grain" view insufficiently informs decisions within each model. For
example, the Federated/Allied model suggests common IT Systems. However it is common
that the Corporate/Home Office Company shares little with its Divisional Companies. MIT's
Center for Information Systems Research presents a useful model which provides a way of
thinking about the need for multiple Operating Models for a given Corporate Strategy.

[edit]Center for Information Systems Research

CISR, a research group at the MIT Sloan School of Management has defined Operating
Model in terms of this lightweight method to capture the business needs for degree of
Business Process Standardization and Data Integration. CISR suggests that this type of
Operating Model is useful to establish requirements for reusable Core Capabilities and to
guide IT Investment decisions governance. The Operating Model can be used to drive
architecture and infrastructure development ensuring that business needs are met with the
right IT foundation. The resulting IT systems enable the company to grow its business,
without having to do deep surgery on the IT systems each time the business grows either
organically or through acquisitions. The implementation of integrated business processes
and IT systems is the realization of the Operating Model.

The team of Jeanne W. Ross, Peter Weill and David C. Robertson summarized their
research in Enterprise Architecture as Strategy.[3] They found that an organization with an
explicitly defined operating model report 31% higher operational efficiency, 33% higher
customer satisfaction, and a 34% advantage in new product development. In an extension
to the earlier Corporate Strategy work, they outline four operating models:

Process Standardization

Process
Low High
Integration
High Coordination Unification

Low Diversification Replication

 Coordination – businesses requiring low business process standardization but

high business process integration (Compare with Allied Strategy – where
subsidiaries provide varied products to the same customers)
 Unification - businesses requiring both high business process standardization
and high business process integration (Compare with Integrated Strategy)
 Diversification - businesses requiring low business process standardization and
low business process integration (Compare with Holding Company Strategy)
 Replication - businesses requiring high business process standardization but
low business process integration (Compare with Franchisees or Replicated
Facilities of an Integrated Strategy)

[edit]Role
in Defining the Business and Technical
Architecture
Operating Models drive the necessary level of business process integration and
standardization to deliver the organizations proposition, goods and services to
customers, shareholders and it people.[4]

On the Business Architecture side, the Operating Model informs Business

Architecture as to the number of distinct market facing entities, the number of unique
value propositions, and the number Capability Models required. For example, an
Integrated Enterprise would have one customer facing brand and a single core
Capability Model and a Holding Company would have one for each company in its
portfolio. Depending on business strategy choice (profit propositions and value
propositions), a Federated/Allied Strategy may require more than one Capability
Model.

The Operating Model also informs IT and other support services as to the value and
appropriateness of shared services and related Service Level Agreements.

On the Technical architecture side, the Operating Model informs IT leaders about how
various technical and business components should be designed and implemented to
enable the chosen Operating Model:[5]
 Component Coordination Unification Diversification Replication

Customer Data X X

Product Data X X

Shared Services X X X X

Infrastructure Technology X X X

Portal Technology X

Middleware Technology X

Operational Processes X X

Decision Making Processes X

Application Systems X

Systems Component Technology X

From the table above, it is shown that Coordination and Unification models benefit
more from consolidated views of Customer and Data across the enterprise than do
Diversification and Replication models.

[edit]Creating a Dialogue between Business and IT

The Operating Model is an important tool in the dialogue between business and IT.
The dialogue can take place with top management and enable them to decide which
operation models best describe the way they choose to operate the company. IT can
also start with individual business units to identify the models (or mix of models) are
currently in place helping clarify both intent and sources of synergy and disconnect
between business and IT systems.

Such dialogues allow IT management to use the Operating Model as Strategy to drive
design of concrete plans to enable the business in the form of IT projects.

As valuable as the result of the dialogue may be in terms of aligned plans, is the
organizational learning that takes place through the dialogue, choices, and translation
of the Operating Model intoEnterprise Architecture and IT Governance that guide and
control IT investment over time.

[edit]Industry Standard Operating Models