In 2017, a fast-growing global software firm launched a bold strategic plan to become a top-tier provider of AI-driven solutions. The leadership team unveiled a sleek new vision, energised their sales force, and invested heavily in marketing. But a year later, results lagged. Confusion reigned over product priorities. Teams duplicated work. Customer complaints spiked. Despite the clarity of vision, the company failed to bridge the gap between strategy and execution.
This is not a one-off tale. It’s a recurring pattern in business: strong strategy, poor follow-through. And it usually boils down to a neglected or misaligned operating model—the often-invisible framework that translates ambition into action, and vision into value.
What Exactly Is an Operating Model?
At its simplest, an operating model explains how a business runs. It orchestrates people, processes, technology, and structure to deliver a company’s strategic goals. Think of strategy as the destination, and the operating model as both the GPS and the engine that get you there. Without it, even the sharpest strategic intent risks stalling.
Some liken it to a human nervous system—linking and coordinating every part of the business to respond to internal and external stimuli. Others prefer the GPS metaphor, emphasising direction and navigation. Either way, an operating model isn’t just a flowchart or structure—it’s how the business thinks, works, and evolves.
Core Components of a Resilient Operating Model
Strong operating models vary in design, but they tend to revolve around a handful of universal components, each critical to consistent performance.
Guiding Principles
These set the tone for how decisions are made and what trade-offs are acceptable. For example, if speed is a priority, processes might favour rapid iteration over exhaustive approvals. Amazon’s customer-first ethos is a classic illustration—it informs everything from hiring to product roadmaps.
Organisational Structure
Whether a company uses a traditional functional setup, cross-functional pods, or a matrix approach, structure must support its strategy. A fast-scaling startup might adopt agile squads to encourage autonomy, while a mature manufacturer might opt for more hierarchical control.
Processes
The heartbeat of daily operations, processes should be categorised as core (e.g., product development, customer support) or support (e.g., finance, HR). The best models strike a balance between standardisation for consistency and flexibility for innovation.
People
No model works without the right roles, skills, and leadership. Operating models that prioritise people consider not just organisational charts, but also capability development, role clarity, and cultural alignment. Change champions—those who model new behaviours—are essential to embed any transformation.
Technology
Technology acts as both a lever and a lubricant. From workflow automation to enterprise systems and collaboration tools, it underpins scale and agility. The key is ensuring technology serves people, not the other way around.
Culture
Often underestimated, culture can either amplify or undermine execution. It’s the unwritten code of behaviour that drives how decisions are made, how conflicts are resolved, and how teams respond under pressure.
Business Model vs. Operating Model: Same Team, Different Roles
The two terms are often confused, but their functions are distinct. The business model defines how a company creates and captures value—think pricing strategy, customer segments, and revenue streams. The operating model defines how the company delivers on that promise day in and day out.
Take a fictional digital fitness startup. Its business model might be a subscription-based app for personalised training. Its operating model, however, determines how trainers are onboarded, how content is produced and updated, how tech support is managed, and how user data informs updates. One defines the what; the other, the how.
Why You Should Care: The Competitive Edge of a Cohesive Operating Model
An optimised operating model isn’t just a back-office concern—it’s a frontline differentiator. Companies with well-aligned models benefit from:
- Faster time to market, by reducing friction in decision-making and delivery.
- Stronger customer experiences, due to consistent standards and coordinated touchpoints.
- More efficient resource use, minimising duplication and waste.
- Tighter internal alignment, enabling teams to pull in the same direction.
Netflix, for instance, didn’t scale its global content empire on content strategy alone. Its operating model—built around localised production, data-driven decision-making, and platform adaptability—enabled that strategy to flourish.
Transforming the Operating Model: A Practical Roadmap
Reimagining an operating model is no overnight feat. It requires a methodical journey:
- Clarify Strategic Objectives – Anchor the transformation in business priorities.
- Assess the Current State – Use interviews, maturity models, and mapping to understand today’s reality.
- Design the Future State – Co-create options with cross-functional leaders; model different scenarios.
- Build a Realistic Roadmap – Phase the rollout with room for quick wins and course correction.
- Implement and Manage Change – Invest in communication, training, and leadership role modelling.
- Monitor, Measure, Adjust – Track KPIs and listen for qualitative signals of success or friction.
- Foster Continuous Improvement – Cultivate a habit of questioning, learning, and iterating.
Real-World Tips for Making It Stick
Even the best plans fail without execution. Here are a few battle-tested practices:
- Assign a process owner for every core capability.
- Hold retrospectives not just on products, but on the model itself.
- Automate smartly—start with high-volume, low-complexity tasks.
- Use storytelling to bring abstract model changes to life for employees.
Design Is Just the Beginning
A great operating model is not an endpoint—it’s a living framework. It must evolve as your business grows, your market shifts, and your strategy adapts. Leadership must continuously reinforce and refine it through action, not just slides.
So, where to begin? Don’t boil the ocean. Start small. Pick one critical process. Map it. Ask if it aligns with your strategy. Then improve it. That one step can start the chain reaction from strategy to execution—and ultimately, to impact.