A Sound Operating Model Is Key To Delivering Value With Your Business

Desy Papper

John Knotts | President and Owner of Crosscutter Enterprises — Your Success Incubator. getty As a fractional chief operating officer and business coach and consultant, I often end up discussing what value my client’s business delivers and how they deliver it. Most businesses are pretty clear as to the value they think […]

John Knotts | President and Owner of Crosscutter Enterprises — Your Success Incubator.

As a fractional chief operating officer and business coach and consultant, I often end up discussing what value my client’s business delivers and how they deliver it. Most businesses are pretty clear as to the value they think they deliver. In fact, many are adamant about the value they deliver. However, the question about how they deliver value is often a showstopper.

Think about your business. Do you really know how you deliver value to your customers? I bet some of you are saying to yourself, “It just happens.” The “how” is codified in your company’s operating model. An operating model is always present, even when you cannot see it. Like a culture, a brand or a process, an operating model always exists. The problem is — like cultures, brands and processes — if you do not focus on it, you will be totally unaware of what is really happening.

Identifying Your Operating Model

In a recent Forbes article, “How To Scale Your Business To Meet Growth Demands,” I wrote about how the first step in scaling your business is thoughtful business organizational design. To scale your business, you need to examine and adjust your operating model.

This stumps many business owners because they do not know how the organization actually operates. In The Concept of Corporate Strategy by Kenneth Andrews, four different operating models were identified:

1. A single line of business in which most of the revenue comes from a single activity

2. Several related, yet diversified businesses all converge on a theme or business purpose

3. Several unrelated businesses are combined to serve unrelated customers in different industries that benefit from each other

4. A conglomerate of related and unrelated businesses, often operating separately from one another

Whether you are a solopreneur or a Fortune 500 company, your operating system is very complex. Think of it as the blueprint of your company. If you do not know how your company delivers value, how do your people know how they deliver value? How do you measure, manage and improve something you do not understand?

Defining Your Operating Model

This is somewhat of a chicken and the egg situation. When defining your operating model, you are looking at your strategy and your customers at the same time.

If you do not have a formal strategy and you do not know who your customers really are, then you have to start there.

Since your operating model outlines how your business delivers value to customers, it is important to understand who your customers are and what value you provide to them. This might take a little effort to fully understand how what you do really meets the needs of your customers. Many businesses do what they do every day without really understanding this.

When it comes to your strategy, your operating model should be designed to support what your business does (mission), why it does it (purpose), how it behaves (values) and where it is going (vision). The basis of your operating model must be rooted in these four foundational strategic elements.

Creating The Structure For Your Operating Model

Once you have examined your strategy and customers, the next step in creating your model is to define the structure. This is how things, at a high level, are done to deliver value to your customer.

The first question to answer is which of the four business models listed earlier fits your company. This identifies the complexity of your operating model before you start putting anything down on paper.

Then, put yourself in the shoes of the products and services of the organization. Consider every step of their journey through your company.

This is typically referred to as the “value chain.” There are, however, many different ways to depict and visualize it. Some operating models end up looking like a high-level process diagram, while others look more like an infographic describing the organization. Go with whatever makes the most sense to you.

Next Steps

With your operating model defined and understood, everything else in your business should align with it. Your organizational structure, people, processes, technology, systems — everything. Everything and everyone in your company should be focused on how they fit into the strategy and how they contribute to the value delivered to customers.

Have you looked at your operating model lately? If not, now is the time.


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