In today’s competitive and rapidly evolving market landscape, organizations must not only deliver high-quality products and services but also ensure that their internal processes are streamlined and resilient. This brings us to the concept of an “operating model.” The term encompasses an organization’s strategic design for delivering value, defining its unique approach to how teams, resources, and systems work together. It’s more than a theoretical structure; an operating model directly impacts a company’s agility, efficiency, and alignment with business goals. As businesses adapt to digital transformation, understanding the elements of a robust operating model and re-evaluating ways of working have become essential for sustainable growth and innovation.
But what exactly does an operating model entail, and how do ways of working complement it? In this article, we’ll dive deep into the components of a successful operating model, explore best practices, and discuss how it has transformed traditional business structures. Additionally, we’ll examine how new approaches to work, fueled by digital advances and remote work, are impacting the strategies companies employ. Whether your business focuses on traditional models or modern e-commerce strategies, including trending categories like fashion items or seasonal products, optimizing ways of working has become indispensable.
What Is an Operating Model in Business?
An operating model represents the structural blueprint that guides how a company delivers its value proposition to customers. It covers various components, such as process frameworks, decision-making structures, core activities, and resource allocation. The model ultimately outlines the company’s approach to achieving its strategic objectives, covering everything from organizational structure and core activities to digital tools and workforce policies. Simply put, an effective operating model is a roadmap for an organization to efficiently and effectively turn its strategy into outcomes.
Today, operating models are diverse and tailored to suit a range of business needs and industries. Some models prioritize efficiency and streamlined processes, especially in industries where operational costs must be minimized. Others prioritize customer-centricity, building every aspect around maximizing customer satisfaction and loyalty. For instance, companies in the digital retail space focus on quick fulfillment, seamless customer interactions, and data-driven personalization. Categories like socks for Christmas can see considerable sales with the right approach to supply chain management, personalization, and digital marketing strategies.
The Core Elements of a Successful Operating Model
To understand what makes an operating model successful, it’s helpful to examine the core elements that support it. Each of these elements works together to create a cohesive, efficient, and purpose-driven structure that allows organizations to scale, respond to market changes, and drive sustainable growth. Here are some of the core aspects:
1. Structure and Governance
The structure defines how a business’s divisions, departments, and teams are organized. This includes creating clear lines of reporting, decision-making authority, and role definitions. Governance is closely related and involves the principles and policies that ensure all activities align with the company’s objectives and regulatory requirements. With a well-designed governance model, companies can ensure that each department functions efficiently, making well-informed decisions that contribute to overarching goals.
2. Processes and Workflows
Workflows outline the series of steps needed to complete essential tasks and processes. Streamlining workflows minimizes redundancy, reduces delays, and enhances quality. Having optimized workflows is critical, especially for organizations managing complex supply chains or high volumes of customer interactions. For example, in a digital-first company, setting up processes to enable swift inventory updates, real-time customer support, and personalized user experiences can be instrumental in capturing and retaining customers.
3. Technology and Tools
In modern business models, technology plays a foundational role. The tools and software that a company employs to support its operations—such as data analytics, project management platforms, and CRM systems—directly impact efficiency and customer satisfaction. For organizations transitioning to more agile ways of working, selecting the right technological stack can enable real-time collaboration, improve productivity, and support informed decision-making. Embracing digital tools also helps companies better understand customer preferences and market trends.
Ways of Working: The Culture and Approach Driving Execution
While an operating model establishes the structural aspects of an organization, “ways of working” refer to the culture, values, and practices that guide day-to-day operations. They influence how employees communicate, solve problems, and make decisions. With the rise of flexible work arrangements, especially after the pandemic, ways of working have come under renewed focus, often guiding how digital transformation initiatives are executed. This includes adapting to remote collaboration tools, setting clear communication protocols, and fostering a culture of continuous learning and adaptation.
One notable shift has been the emphasis on desk research definition, where in-depth data collection and analysis inform strategies rather than relying solely on intuition. This helps businesses make data-informed decisions that better align with customer needs and emerging market trends. The integration of data-driven practices into daily workflows allows companies to react swiftly to changing conditions, ensuring that customer-centric approaches remain feasible and effective.
Types of Operating Models and How They Impact Ways of Working
Different types of operating models serve distinct business functions, often shaped by the sector, company size, and core objectives. Some models are traditional, focusing on hierarchical decision-making, while others prioritize agile or customer-centric approaches. These models can affect everything from productivity and communication styles to the quality of customer interactions. Here are a few of the common types:
1. Centralized Model
In a centralized operating model, decision-making is consolidated within a core leadership team. This model is beneficial for maintaining consistency and ensuring compliance with organizational standards. However, it can limit responsiveness and innovation due to longer decision-making times. Companies with complex regulatory requirements or industry-specific standards might lean toward this model.
2. Decentralized Model
A decentralized model grants individual teams or departments greater autonomy, allowing them to make decisions suited to their needs and circumstances. This model fosters a culture of innovation, empowers teams, and allows organizations to adapt to market changes quickly. Startups and tech companies often favor this approach due to the increased flexibility and reduced bureaucracy it offers.
3. Customer-Centric Model
The customer-centric model prioritizes customer needs and satisfaction across all activities. Every decision, from product development to marketing, is guided by the goal of delivering the best possible customer experience. This model relies heavily on real-time customer feedback, user experience metrics, and data-driven personalization. A customer-centric model can be especially valuable in e-commerce settings, where understanding buying behaviors and personalizing recommendations is key to driving conversions.
How Digital Transformation Is Shaping Operating Models
The rise of digital transformation has led to new operating models designed to support agility, data-driven decisions, and rapid adaptation to market trends. Organizations are embracing hybrid work environments, cloud-based collaboration tools, and real-time analytics, which enable them to be more responsive and efficient. This transformation is revolutionizing ways of working, fostering a culture of continuous improvement and cross-functional collaboration.
Companies are recognizing the importance of incorporating customer insights directly into decision-making processes. This shift toward data-driven strategies allows organizations to better understand their markets and create more relevant experiences. For further insights into the influence of digital transformation on business practices, explore our guide on how digital marketing is changing business.
Creating an Effective Operating Model for the Future
As markets become increasingly competitive and customer expectations evolve, businesses must build flexible and responsive operating models. Start by identifying core objectives, structuring governance for efficient decision-making, and incorporating technology that aligns with your business’s unique needs. Operating models are not static—they should evolve in response to new technologies, market conditions, and shifts in customer preferences. Regularly assessing and refining your model ensures that it continues to support your strategic goals.
Ultimately, a well-constructed operating model provides a strong foundation for scalable growth, effective resource management, and improved customer satisfaction. By aligning it with adaptive ways of working, companies can create an environment that fosters innovation, resilience, and continuous improvement.
