Operating Model

1. Methodology/Approach - Operating Model
Presented By –
Mohammad Mujeeb Beg
EPGP, IIM Indore

2. • An operating model bridges the gap between
and organization’s business strategy and it’s
operations.
• To implement the operating model, there are
certain value drivers that needs to be
identified and need to be taken care of.
Approach - Formulating an Operating model
Operating
Model
Business
Capabilities
Governance
and decision
rights
Organization
Model
Process and
Technology
Talent
Strategy

3. Business
Strategy
Operating
Model
Organization
Strategy
•What is organization’s strategy (Differentiator or Low cost leader)
•Decision making authority? Country level Or Global level
•Core focus of organization? Product, Geography, Customer or function?
Organization
Capabilities
•Importance of building experts across products, geographies, customers or functions?
•Talent strategy - Build, Buy, or Outsource (Rent)
•Importance of product innovation?
Business
performance
objectives
•To what extent is the overall organization strategy focused on profitability vs growth?
•To what degree is operational excellence emphasized as a competitive advantage?
•To what extent, cost reduction is a priority?
Culture and
management
practices
•How much power does employees has in making decision power?
•To what degree is the organization culture consistent throughout the organization
•What are the inconsistencies in management practices that should be addressed?
Key Questions - To formulate the Operating Model
 Business
Capabilities
 Governance and
decision rights
 Organization
Model
 Process &
Technology
 Talent Strategy

4. Diagnose Design Build Implement
 Define/Refine Strategy
 Define Core Business
Capabilities
 Establish and test operating
model hypothesis
 Diagnose operating model
effectiveness for-
• Business Capabilities
• Governance
• Organizational Model
• Process and Technology
• Talent Management.
 Establish Organization
baseline
 Identify Pain points, root
causes, and improvement
opportunities
 Develop recommendations
and business case
 Define design principles
 Develop operating model
options, including:
• Market orientation
(product, customer, and
geography)
• Dedicated vs. shared
functions
• Shared services vs.
center of excellence
• Governance/decision
rights (P&L ownership
and decision making
committees)
 Evaluate and select preferred
operating model
 Define balanced scorecard
 Refine organization baseline
and business case
 Define and build consensus
around key operating model
structures, business priorities, and
potential benefits
 Define and build organization
structure
 Confirm headcount
requirements
 Align with
governance/decision rights,
business processes, and talent
strategy
 Develop implementation
roadmap and delivery timeline
 Develop internal support
structures to guide transition
while maintaining core business
 Refine business case
 Develop organization and
workforce transition plan
 Reorganize key business
units/functions around the new
operating model
 Develop a dashboard of key
performance indicators to assist
management with refining the
new operating environment
 Implement change impact
plan
 Transition workforce,
including defining and executing
staffing and selection process
 Continuously monitor, evolve,
and manage risks
Once we have the answers of the key questions then an operating model can designed by using below methodology

5. CEO
Country A Country B Country C
Existing Organization Model
Description: Each region has full control of all activities within its geographic
boundaries
Advantages:
• Heightened responsiveness to region/ country requirements.
• Increased ability for local talent sourcing and management.
Disadvantages:
• Inability to serve global/regional customers.
• Global business strategy more difficult to implement.
• Conflicts between countries, regions, and global.
• Duplication of functions

6. Organization Model - Functional Driven
CEO
Human
Resource
Sales Manufacturing R&D IT
Description: Functional expertise supports core competencies and can be based on
company value chain
Advantages:
• Enables consistent global management practices.
• Enables economies of scale
• Enables deployment of talent on a global basis.
• Enables end-to-end global process ownership.
Disadvantages:
• End-to-end model difficult to construct.
• Limits organization flexibility.
• Conflicts between functions and products.

7. Organization Model – Product Driven
CEO
Business
Unit 1
Business
Unit 2
Business
Unit 3
Description: Each unit is responsible for the entire value chain relating to a product/suite
of products.
Advantages:
• Adaptable to present and future business extension (Product/Service extension)
• All resources support the same product
• Consistent across geography
Disadvantages:
• High-cost structure due to poor economies of scale.
• Missed opportunities for cross-selling.
• Global business strategy more difficult to implement.

8. IT Roadmap –Key Steps
Review Current IT functions Develop Alternatives Implement
 Conduct a IT process review to
understand the link to the
organization’s structure and
approach.
 Interview key stakeholders to
identify pain
points/constraints/challenges
with current IT process
 Requirement Gathering
 Generate hypotheses to identify
new, inefficient, or redundant
processes and technology
elements.
 Perform opportunity analysis
(benefits), quantify associated
costs, and build business case
and framework for
improvement
 Analyze whether to develop the
new IT process in house or
Outsource to IT consultancy
market leaders (TCS, Infosys
etc.)
 Develop refined business
processes.
 Establish enabling
infrastructure, applications,
tools, and data required to
execute processes.
 Develop implementation plan
and align IT systems with the
plan.
 Launch and monitor new IT
system.

9. • Previous slides provided a framework which the manufacturing firm can follow in order to
identify the ‘BEST’ Operating Model
• The framework identified various value drivers that need to be analyzed while formulating an
operating model.
• Case mentioned the challenges faced by the Organization while operating on the Country-
Driven Operating model. The framework analyzed the two Organization model – Functional
Driven and Product Driven - that can cater to the new needs (Globalization) of the
Organization.
• Framework also identified the Key steps that are needed to create an IT roadmap.
• This framework can be put in front of the Organization and based on the responses of the
organization, a sound operating model can be created which will cater to organization’s future
needs.
Summary

10. Thanks!!