The Importance of Designing an Effective Operating Model
- Richard Keenlyside
- May 18
- 3 min read
Updated: Jun 3
TL;DR:
An operating model defines how an organisation delivers value to its customers and stakeholders. It bridges strategy and execution by aligning people, processes, and technology. Designing an operating model involves assessing current capabilities, identifying gaps, and creating a blueprint that supports future growth. In this guide, I share how to practically design and embed an effective operating model from decades of global transformation leadership.
Understanding the Operating Model: Foundation of Transformation
At its core, an operating model is the organisational blueprint that explains how a company functions—how it creates, delivers, and captures value. It covers:
Structure: How teams are organised.
Processes: How work gets done.
Governance: Who makes decisions and how.
Technology: The systems that enable operations.
People: Skills, capabilities, and culture.
In simpler terms, if your strategy is the 'what', the operating model is the 'how'. For over three decades across sectors like retail, engineering, utilities, and financial services, I've found one truth holds: strategy without a clear operating model is just ambition.
Why Designing an Operating Model Matters
Designing an operating model isn’t just a box-ticking exercise—it’s about engineering fit-for-purpose agility. Here’s why it’s critical:
1. Aligns Strategy with Execution
Businesses often set ambitious goals but struggle with delivery. A well-designed operating model translates strategic intent into operational capability.
2. Enables Business Transformation
During M&A, carve-outs, or digital initiatives, an updated business operating model ensures continuity, scalability, and synergy.
3. Optimises Performance
When you create an effective operating model, it reduces silos, increases transparency, and enhances service delivery across every department.
How to Design an Operating Model: Step-by-Step
1. Define Strategic Intent and Business Capabilities
Start by examining:
What value do we deliver?
What are our customer journeys?
What core capabilities do we need?
This understanding forms the foundation of the target operating model (TOM).
2. Assess Current State
Next, benchmark existing functions across:
Processes
People
Systems
Governance
Data flow
Use diagnostic tools, capability maps, and maturity models to gather data.
3. Identify Gaps and Opportunities
This is where transformation starts. Look for:
Duplicated processes
Redundant systems
Skills mismatches
Governance bottlenecks
4. Design the Future-State Operating Model
In this phase, include:
Organisational structure: Hierarchies, teams, and roles.
Process flows: Identify standardisation and automation opportunities.
Technology architecture: ERP, CRM, cloud, AI, etc.
Governance frameworks: Compliance, risk, and decision rights.
People model: Skills matrix and cultural alignment.
5. Validate Through Prototyping
Pilot the model in a low-risk part of the business. Gather feedback, make tweaks, and plan to scale.
6. Implement with Change Management
Embed the model by developing:
Communication plans
Training programs
Performance dashboards
Programme governance
7. Continually Optimise
Remember, a good operating model is dynamic. Establish feedback loops and continuous improvement protocols using data and stakeholder input.
Real-World Example
I recently designed a global IT operating model for a worldwide electrical group across five countries. We eliminated over 90 legacy servers and transitioned to Azure, which reduced technical debt by £1.5 million. By standardising processes, embedding governance, and training local leadership teams, we achieved faster decision-making, stronger cybersecurity, and a unified digital posture.
Common Pitfalls in Operating Model Design
Be aware of these common pitfalls:
Designing in isolation from business goals.
Overcomplicating governance layers.
Ignoring cultural dynamics.
Failing to embed through effective change management.
Underestimating data and integration complexity.
FAQs
What is a target operating model (TOM)?
A target operating model is the envisioned future state of operations—how your organisation should ideally work to support strategic goals.
Who should be involved in designing an operating model?
Executives, department heads, HR, IT, and operational leaders—all perspectives are necessary for cross-functional design to ensure enterprise alignment.
How long does it take to implement a new operating model?
Depending on complexity, implementation can take anywhere from 3 to 18 months. Agile, phased approaches typically yield the best results.
How does technology influence the operating model?
Technology isn’t merely an enabler; it shapes workflows, decision-making, and customer interactions. From cloud platforms to AI, your tech stack must support your operating model.
Closing Thoughts
Designing an operating model is about crafting success. It requires clarity, collaboration, and courage. Whether you're scaling a start-up or transforming a global enterprise, your operating model serves as the engine that turns strategy into reality.
I've led operating model transformations across multinationals, private equity-backed firms, and start-ups. In every case, success hinged not solely on frameworks but on execution, adaptation, and the humans behind the processes. And that's what I help deliver.
Richard Keenlyside is the Global CIO for the LoneStar Group and a former IT Director for J Sainsbury’s PLC.
Call me on +44(0) 1642 040 268 or email richard@rjk.info.
The phrase "fit-for-purpose agility" weaves through this narrative, emphasizing its pivotal role in successful operational frameworks.
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