Fundamentals of the operating model

I wanted to circle back around and quickly talk about operating models because I’ve recently had some questions from people. I think giving a conceptual understanding of it might be helpful so I’d like to bring up one of my favorite books on this topic. It’s called Enterprise Architecture As Strategy: Creating a Foundation for Business Execution by Jeanne W. Ross and it’s an absolutely phenomenal book. If you haven’t read it you should go out and buy it. It’s a great book for anyone who is trying to understand how technology integrates with the business to support the organization.

A few chapters in is where she begins to talk about the operating model. For her, the operating model can be boiled down into the degree of integration and standardization necessary to support the business. If you think about it, it’s a really succinct way of characterizing how the technology within your organization needs to work with the business in order for the business to succeed. Organizations that have very distributed management, ones that have a lot of projects with their own ROI, businesses that are growing fast by acquisitions; all of those are examples of organizations that are probably less standardized and less integrated by design because that’s how they perform best. On the other end of the scale are businesses that are very tightly standardized and integrated. Think of very large web retailers; organizations where economy of scale is everything. They’re just fundamentally different in how they’re organized, managed, and how technology supports them and they should be recognized as such.

Too often as a planning organization within the enterprise there’s a temptation to get caught up in everything. Standardization is not always good. If you’re not careful you could end up fighting what’s best for the business in the pursuit of small incremental achievements in terms of savings or other types of efficiencies that don’t really add to the business as a whole. The same can be said on the other side where organizations can, by virtue of not investing in planning for integration and standardization, miss out on opportunities in the name of saving dollars. In pursuit of the savings part of their planning effort they never realize the types of efficiencies that they’ll need to be successful in the marketplace. So that’s a very fundamental sort of talk about how the operating model concept works. I’ve just covered the two extremes of the four square model. I talked about the diversification model and the unification model. I didn’t talk about the two other quadrants simply because once you get the two extremes the other two are fairly straightforward. They are the Coordination Model with is low standardization and high integration and the Replication Model which is high standardization and high integration model. So again if you want to learn more about operating models definitely check out the book, it’s worth a read.