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Before we kick off let us identify and share a few definitions that will help us to understand the process a little better and help to minimize confusion in terms and terminology later.

Business Model:
Your organisation has a Business Model. This is the description of how your organisation creates value in its output or outcomes and in the organisation itself. This value creation process is controlled by your management and results in the production of your organisation output.

Operating Model:
Your organisations Operating Model is the definition of the operational processes as controlled by your management which result in the production of your output. When you conduct an organisational business change project your planning process will normally describe your current operating model as your As Is Model and your To Be Model as your target operating model (TOM).

Target Operating Model:
A target operating model is the description of an organisations design and operation represented by the requirements of the proposed business system. This proposed design is typically derived, refined and defined by senior management. It is normally identified and typified by a series of organisational models or themes.

While the Business Model will include elements of the Operating Model it also comprises the capital financing and banking model, the real estate and department, branch or location model, the growth targets and competitive strategies of the organisation, the definition of costs, budgeting and revenue processes. It will involve the legal arrangements of the organisation as well as the supplier and any partnership arrangements. Importantly, the Operating Model is comprised by five organisational models identified by the mnemonic : CHIMP:
  1. Customer Model

  2. This defines the customer value proposition, the customer journey to realise this proposition, distribution and customer communication strategy and the customer services and products offered.
  3. Human Resources Model

  4. This defines the human resource strategy, the people hierarchy of your organisation, the roles and responsibilities of the various job functions, the performance measurement and reward systems as well as the process for hiring, firing, starting, inducting, training, motivating and managing the people resources in your organisation.
  5. Infrastructure Model
  6. :
    This is the place to define your technology, I.T., computers, telephony, web and other systems as well as the legacy systems and system migration requirements and the requirements for management information.
  7. Management Model
  8. :
    This includes the Organisational Strategy showing the vision and targets of the organisation as well as the governance and leadership responsibilities within it. It includes the proposed direction of the organisation as represented by its three to ten year plans (or other planning schedule). It includes the management structure, their responsibilities, levels of control and authority as well as the escalation routes and mandate.
  9. Process Model
  10. :
    This includes the rules and processes for risk management, compliance and quality assurance as well as the inputs to production, the Production process itself, the outputs from it and the interface activities to the other models.
As we described before, the target operating model is delivered by a series of programmes and projects. Let us look at this now in a little more detail.

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What is an Operating Model






   


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