If you have been reading this blog you will know that my definition of an operation model is PILOS – processes needed to execute the strategy, information systems needed to support the processes, locations and buildings to house the processes, organisation and people to do the work of the processes (I include goverance and culture under organisation) and suppliers and business partners needed to support the processes.
So I was interested to come across a similar definition from Wilson Perumal (apologies for edits). Not sure about the visual!
“An operating model is the coordinated collection of assets & capabilities, governance, vendors & partners, organization structures, processes and technology enablers a company uses to deliver its strategy. Each of the 6 Operating Model Design Elements cover unique areas of a company’s operations, but must be considered together when designing an operating model.
Assets & Capabilities
Company facilities (offices, factories/plants, warehouses, research labs, distribution centers, etc) that are owned/leased; patents and intellectual property used to generate revenue or manage operations; core, end-to-end capabilities required to succeed
Where & how operating decisions are made and who has the authority to make them; central v. local ownership; corporate policies establishing expectations for conduct and behaviors; audit & assessment functions ensuring compliance; performance reporting
Vendors & Partners
Skills, abilities and capabilities the company relies on outsiders to provide; insourcing v. outsourcing; supply chain partners used to provide raw materials and distribute finished goods
Operating & reporting structures needed to deliver the strategy; assignments of roles, responsibilities and expectations to each employee; skills & abilities for employees required for each role; relationships between departments/functions/subsidiaries
Business and production processes used to manage the company and generate revenue; process design principles; metrics to monitor and ensure process control & performance
Internal technology capabilities needed to manage the business or generate revenue
Taken as a group, the 6 Operating Model Design Elements cover all aspects of a firm’s internal strategy and providing a robust means of linking its market strategy and its ability to execute. We have found that our clearer operating model definition not only helps companies design better operating models, but working through the 6 Operating Model Design Elements is also a useful tool in diagnosing operating model misalignment contributing to poor performance.”
Some quick comments:
1. Brand does not appear – but probably a part of “assets”. It does not appear in PILOS either, and this is something I have been thinking about.
2. Capabilities as separate from processes or people seems odd to me. I prefer to integrate the concept of capability and process. For example if a step in the process is “buy ingredients” then you need a capability “buy appropriate ingredients at good prices”. I don’t see the benefit of separating these ideas.
3. My SPACI model under organisation includes Structure, People, Accoutabilities and governance, Culture and Incentives. The above model does not give much emphasis to Culture and Incentives. The latter is definitely something you can design … I am never sure whether Culture is an input or an output.
4. Capabilities appears again under the last item “Technology enablers” which is a little confusing. Why are Assets not Asset Enablers?
But, like all these frameworks, a useful contribution.