Operating Models For Business: Meaning, Examples & Frameworks
Every business has a strategy. But strategy alone does not move the needle. What determines whether your plans succeed or fail is how your organisation is set up to execute them, day after day. That is exactly what an operating model does.
Whether you are a startup trying to scale or an enterprise looking to stay competitive, understanding your operating model and getting it right is one of the most consequential decisions you will make as a leader.
What is an Operating Model?
An operating model is the link between your business strategy and your day-to-day operations. If strategy answers the "why" and "where," and the business model answers the "what," the operating model answers the "how."
It describes how your organisation structures its people, processes, technology, and infrastructure to deliver on its business plan. Think of it as the operating system your entire company runs on, covering everything from reporting lines and workflows to physical facilities and the tools your teams use every day.
According to our observations, a clearly defined and articulated operational model is - the link between strategy and day-to-day operations that directs the team, gives context and encourages behaviors that will help the strategy and vision be realized.
As Jeanne W. Ross, Peter Weill, and David C. Robertson established in their foundational work Enterprise Architecture as Strategy[1], research from MIT's Center for Information Systems Research (CISR) found that organisations with a clearly defined operating model reported:
- 31% higher operational efficiency
- 33% higher customer satisfaction
- 34% advantage in new product development
And the cost of not having one is enormous. 67% of well-formulated strategies fail due to poor execution, and 61% of executives admit they were not prepared for the strategic challenges they faced upon being appointed to senior leadership roles, according to Ron Carucci's 10-year longitudinal study on executive leadership, published in Harvard Business Review[2]. It is no surprise then that 50% to 60% of executives fail within the first 18 months of being promoted or hired. An operating model exists to close that gap between ambition and execution.
Why Your Business Needs an Efficient Business Operating Model
Most organisations know what they want to achieve. They want to be faster, leaner, more customer-focused, and more profitable. The challenge is that the vision rarely trickles down into daily operations without a clear structure connecting the two.
The result is predictable:
- Programs that produce only short-term benefits and fail to sustain gains
- One-off initiatives in different departments that never create enterprise-wide impact
- Improvement techniques that get adopted but rarely used consistently
A business operating system changes that by making deliberate choices about how your organisation integrates shared data, standardises processes, and allocates resources, so your entire team works toward the same outcomes.
The shift toward digital business operating models has made this even more urgent. 89% of large companies globally have a digital and AI transformation journey underway, but they have captured only 31% of expected revenue lift and 25% of expected cost savings, according to McKinsey. The gap between effort and result almost always comes down to operating model maturity.
McKinsey's research makes it clear: companies need to increase revenues, lower costs, and delight customers, and doing that requires reinventing the operating model.
This evolution, often called the next-generation operating model, is characterised by an ongoing effort to accelerate customer journeys and company processes by integrating cutting-edge technologies and smart operational methods. The benefits of getting this right include:
- Supporting strategic initiatives more effectively across the organisation
- Improving automation and workflows to reduce manual effort and errors
- Enabling financial transparency at every level of the business
- Reducing costs and improving profitability through deliberate process standardisation
- Enhancing decision-making by giving leaders real-time operational visibility
At GrowthJockey, we help businesses build efficient operating models designed around their specific context, connecting operations to a larger strategic purpose so that growth becomes systematic, not accidental.
Key Components of an Operating Model
Most businesses get operating model design wrong for one reason: they treat components in isolation. Technology gets upgraded without changing processes. Structure gets redesigned without rethinking governance. An effective operating model requires all components working as one integrated system.
| Component | What It Covers |
|---|---|
| Business Capabilities | Functional skills needed to execute strategy |
| People and Culture | Structure, talent, capacity, and cultural alignment |
| Process | Workflows, systems, and operational infrastructure |
| Technology | Tools, platforms, and agentic AI systems |
| Geographical Presence | Where you operate and how you show up in those markets |
| Workplace | Physical, remote, and hybrid working environments |
| Governance and Cadence | Decision-making forums and management rhythm |
| Behavioural Expectations | How people work, not just what they do |
Business Capabilities
This is the collection of functional skills and responsibilities required to carry out your business strategy. It defines what your organisation is genuinely capable of delivering and where the real gaps are. Without an honest audit of capabilities, every other component of the operating model is built on assumptions rather than reality.
People and Culture
The people component covers your organisation's structure, capacity, and culture. It is not just about headcount. It includes how talent is developed, how leadership is supported, and whether the culture reinforces or quietly undermines the strategy. People are not just a resource in an operating model. They are the mechanism through which every other component either works or fails.
Process
Process covers the workflows, systems, and operational infrastructure that keep the organisation running. A well-designed process layer is what turns strategy from a document into a daily habit. Standardising procedures minimises overlapping efforts, enhances service quality, and increases productivity. It is also the component most likely to expose where the operating model is out of sync with the business strategy.
Technology
Technology increases the efficiency of systems, products, and services. Intelligent operating models today are beginning to integrate autonomous systems including agentic AI to independently execute tasks, learn from data, and refine workflows without constant human intervention. The important distinction is that technology should follow process design, not precede it. Automating a broken process only produces broken results faster.
Geographical Presence
Where you operate and how you show up in those markets is a core design decision, particularly for businesses operating across multiple regions with different regulatory environments and customer expectations. Operational and market presence must align with business capabilities, not just commercial ambition.
Workplace
With hybrid and remote work now mainstream, workplace design has expanded well beyond the physical office. According to LinkedIn's Global Talent Trends report[3], workers are 2.6 times more likely to report being happy and 2.1 times more likely to recommend their employer when they can choose their location and work schedule. Flexibility is no longer a perk. It is a structural design requirement.
Governance and Management Cadence
Governance forums enable cross-group decision-making and ensure leaders are aligned on priorities. Without a governance layer, even the best-designed operating model drifts from its intended purpose within months. The cadence of how decisions get made is just as important as the structure of who makes them.
Behavioural Expectations
An effective operating model defines not just what people do but how they do it. Behavioural expectations establish how accountability is built into the way work gets done, shifting decision-making from slow and centralised to fast and empowered. This is the component most organisations define last but should define first.
4 Types of Operating Models Explained
The 4 types of operating models were developed by Jeanne W. Ross, Peter Weill, and David C. Robertson at MIT CISR and remain the most widely used framework for operating model design globally. The MIT CISR Operating Model is a simple but powerful 2x2 framework that helps leaders choose the enterprise-wide degree of process integration and process standardisation needed to execute their strategy.
Each type sits on a matrix defined by two axes: standardisation (how similar processes are across business units) and integration (how tightly units share data and coordinate work).
| Operating Model | Standardisation | Integration | Best For |
|---|---|---|---|
| Diversification | Low | Low | Independent business units, diverse markets |
| Coordination | Low | High | Shared customers, unique operations |
| Replication | High | Low | Franchises, replicated business units |
| Unification | High | High | Single enterprise experience at scale |
Coordination Operating Model
The coordination operating model requires high levels of integration but low standardisation. Multiple important business components relate to one another because they share clients, data, and processes. However, each team or business unit operates uniquely within that shared environment.
Think of it as shared data access with local operational autonomy. This model works well for organisations where business units serve the same customers but through differentiated offerings. The challenge is maintaining coherent data standards without imposing uniform processes on units that operate in genuinely different ways.
Unification Operating Model
The unification operating model is built on regionally distributed business operations that are globally interconnected. Business units carry out similar functions, and processes and data are designed centrally for sharing. Centralised administration typically uses a matrix approach to monitor business unit composition.
This is the most powerful model when strategy demands a single enterprise experience and scale efficiency. High-level business process owners work to standardise processes across all business units. Unification is built on a standard set of procedures and shared information, dynamically adjusted to work within each unit's context. It is powerful when strategy demands one enterprise experience and scale efficiency, but it can reduce responsiveness in heterogeneous markets.
Diversification Operating Model
Companies with few or no shared customers or suppliers frequently use the diversification operating model. This approach helps organisations diversify their offerings to various clients without creating a central hub that would restrict authority over individual business divisions.
Each department conducts business independently. There is little need to standardise corporate practices across units. The key characteristics are:
- Products and services are the only common thread between departments
- Each department maintains its own operations and IT architecture
- Business units conduct separate transactions with independent management
The diversification model suits large conglomerates and holding companies where the strategic value comes from the portfolio, not from operational synergies between units.
Replication Operating Model
The replication operating model is autonomous but with significant standardisation. Independent business units use a syndicated approach to process integration and standardisation. Both IT services and business process design are centrally governed, but actual data is held locally.
Business units execute operations in a very similar manner, like a franchise model. Key characteristics include:
- Few or no shared clients or vendors between departments
- Standardised data owned locally by a non-governmental body
- Department heads run their teams independently using centrally developed IT solutions
Types of Business Operating Models Across Industries
Understanding the types of business operating models in practice makes the theoretical framework far more useful. Here is how different industries apply these models.
Customer-Centric Operating Model
Consumer needs are constantly evolving, and organisations that build their operating model around the customer have a structural advantage. The pandemic accelerated this, and the companies that adapted their operating models quickly succeeded in retaining customers while others lost ground.
A customer-centric operating model is defined by five characteristics:
- Superstructure designed around customer segments, not internal functions
- Talent aligned to where customer value is created
- Governance that prioritises customer decisions over internal efficiency
- Behavioural norms that make customer responsiveness a cultural default
- Flexibility to pivot when customer needs shift overnight
According to McKinsey, investing in digital transformation and improving customer experience[4] can increase customer satisfaction by 20 to 30% and increase economic gains by 20 to 50%.
Finance and Banking Operating Model
The finance operating model has undergone significant transformation. India's banking deregulation in 1992 expanded service portfolios dramatically, forcing institutions to rebuild operating models that were designed for a simpler era.
Today, the finance target operating model typically covers four domains:
| Domain | Focus |
|---|---|
| Strategy Alignment | Mapping short and long-term goals to defined outcomes and metrics |
| Process Optimisation | Standardising banking processes to minimise duplication |
| Technology Integration | Combining new technologies into customer-facing and backend processes |
| Change Management | Managing cultural and structural transitions without disrupting operations |
FinTechs like Paytm, Razorpay, and MoneyTap have intensified competitive pressure by building intuitive interfaces and innovative analytical models that traditional banks struggled to match. Banking operating model transformation now requires integrating operation research models that use AI, predictive analytics, and simulation modelling to make faster, better decisions.
Challenges facing financial operating models today include:
- Compliance and regulatory hurdles as government frameworks evolve continuously
- Cybersecurity threats that require significant investment to manage
- Competitive pressure from FinTechs that are structurally more agile
- Rapidly changing consumer behaviour that traditional institutions find hard to respond to at pace
The future of banking operating models will be defined by blockchain-enabled security, AI-driven decision-making, machine learning personalisation, and quicker-paced innovation cycles.
Operating Model Design Principles That Actually Work
An operating model design is only as good as the principles it is built on. McKinsey's next-generation operating model research identifies five shifts that separate organisations that execute well from those that merely plan well.
1. Shift in Point of Sale and Digital Channels
The most commonly cited objective for digital transformations is digitising the organisation's operating model, A key dimension of this is rethinking where and how transactions happen.
Businesses that transition from fixed, traditional points of sale to flexible, cloud-based, and digital-first models gain a structural advantage. Amazon Go is the landmark example: customers scan an app on entry, products are automatically added to their basket, and payment is processed on exit. No friction. No queues. No manual checkout.
2. Simplified Product Design
Complexity kills conversion. Businesses that simplify their products for digital and remote sales consistently outperform those that carry over legacy complexity into new channels. Products designed for simplicity sell better through digital channels, are cheaper to support, and create better customer experiences.
3. Digital Remote Service
Each company's path to a new operating model is unique, but successful transformations are all constructed with the same set of building blocks. Digital remote service is one of those foundational blocks. Singapore-based DBS Bank provides customer service through kiosks and virtual teller machines rather than physical offices, reducing costs while improving accessibility. McKinsey's Global Survey of executives found their organisations accelerated the digitisation of internal processes and supply-chain connections by three to four years during the pandemic alone.
4. Flexible Workforce
As noted above, flexible workforce design is a strategic asset, not just an HR policy. Dell saved $12 million annually through its formalised flexibility approach. Data from the General Social Survey[5] shows that working from home significantly boosts job satisfaction while reducing stress, and scheduling flexibility reduces job stress by 20% while improving job satisfaction by 62%.
5. Collaborative Partnerships
Operating model design increasingly depends on the quality of external partnerships, not just internal structures. The collaboration between Jio and WhatsApp is a strong Indian example: JioMart and WhatsApp combined their respective strengths in commerce and communication to create mutual value that neither could have created alone. Supply chain resilience, co-innovation, and coordinated procurement are all stronger outcomes of well-designed partnership models than either party achieves independently.
Operating Model vs Organisational Structure: What is the Difference?
This is one of the most commonly confused distinctions in business design.
| Operating Model | Organisational Structure | |
|---|---|---|
| Scope | How the entire organisation works | How people and teams are arranged |
| Focus | Processes, technology, data, governance | Reporting lines, roles, hierarchy |
| Purpose | Executes strategy | Enables coordination |
| Changes when | Strategy shifts | Business grows or restructures |
The operating model shapes the organisational structure, not the other way around. A company that picks its org chart before defining its operating model is building a house before drawing the plans. The operating model first defines what level of integration and standardisation is required; the organisational design then follows from that.
To Conclude
For your organisation to stay relevant and competitive, you must continuously evaluate and improve your operating model. Only 77% of successful companies have an established mechanism to translate their strategy into operational terms and evaluate it on a day-to-day basis, which means the majority of organisations are still operating with a strategy-execution gap they have not yet addressed.
Your organisation's operating model should always be in line with a customer-focused strategy. Redesigning it is not always appropriate or necessary, but it must be treated as an option whenever the environment shifts faster than your current model can accommodate.
At GrowthJockey, we are committed to developing customised operating models that effectively address the critical challenges faced by our clients across diverse industries. Whether you are a small-scale enterprise or a large corporation, our team helps you select the right operating model type, design the components that matter for your context, and implement with the discipline that makes the difference between a plan and a result.
Get in touch with us today to build an operating model that actually works.
FAQs
Q1. What is an operating model in simple terms?
An operating model is the blueprint for how your organisation actually runs day to day. It defines how people, processes, technology, and data work together to deliver on your strategy. If your business strategy is the destination, the operating model is the engine that gets you there.
Q2. What are the 4 types of operating models?
The four types of operating models, as defined by MIT CISR researchers Jeanne W. Ross, Peter Weill, and David C. Robertson, are Coordination (low standardisation, high integration), Unification (high standardisation, high integration), Diversification (low standardisation, low integration), and Replication (high standardisation, low integration). Each suits a different kind of business strategy and organisational structure.
Q3. What are the key components of an operating model?
The core components of an operating model include business capabilities, people and culture, processes, geographical presence, workplace design, and technology. Advanced operating models also include a governance and management cadence layer, talent reallocation strategy, behavioural expectations, and flexible workforce design.
Q4. What is the difference between an operating model and a business model?
A business model defines what value your organisation creates, who it creates it for, and how it generates revenue. An operating model defines how the organisation is set up internally to deliver that value. The business model is the what; the operating model is the how.
Industries
Growth
Operations
Technology