Operating models

This is an article in the series “Enterprise architecture – plain and simple” that I published on LinkedIn Pulse last year. In the article on elements of the description of current or intended architectures, I referenced a number of key models that I use. The first and primary model is the business model, described in another article in the series.

Whereas the description of business models seems to have become more consistent through the application of the ontology developed by Alex Osterwalder, I am not so confident that there is a clear ontology or framework for operating models.

There is research and thinking which has occurred in the area of operating model design. Andrew Campbell of Ashridge Business School runs courses on operating model design and publishes a blog on the topic – Ashridge on Operating Models. He and I have exchanged views and explored the relationship between enterprise architecture and operating model design. We have already published one article on the topic of enterprise architecture – see Why business managers should understand enterprise architecture. We have only a little further to go before we could confidently say that we have shared views in this domain. That represents for me, an interesting challenge and a great learning opportunity!

As I have explored the high level models that different practitioners develop, it has become evident that different frameworks (whether individual or commercial) adopt different ways of conceiving of the primary systems of which an enterprise is comprised. The highest level abstraction of the systems of which an enterprise is comprised, then “sets the tone” for all subsequent elaborations.

In this article, I will simply share some of the patterns and models which I have used quite successfully with a variety of clients. I do not pretend that the framework that I use is any better than any others. I will outline the rationale for the framework and leave it to readers to ascertain whether it seems to provide a satisfactory basis for further development to reflect the operating model for enterprises with which they are engaged.

Purpose

The primary purpose of an operating model is to express the means by which an organisation:

  • pursues its enterprise
  • realises its goals and aspirations
  • achieves and sustains viable operation

Enterprise system

There are four key systems forming the expression of any enterprise-as-system that I consider:

  1. Operations management system
  2. Resource management system
  3. Governance and management system
  4. Development management system

For many years, I have only addressed systems 1 to 3. Typically, I have not addressed the development management system, because:

  • I was usually part of this system
  • the development management system was usually embedded in the other systems

However, with the increasing degree of change, I am finding that more enterprises are recognising the development management system as a distinct system. This can be seen in John Kotter’s article – Accelerate! – where he outlines the case for a dual operating system. It can also be seen in the increasing profile of Program Management in enterprises and in enterprises where they have established a Chief Operating Officer and a Chief Change Officer.

Operations system

This system is the core system which produces the products and/or services of the enterprise. It is most commonly represented as a value stream, reflecting the core capabilities by which the enterprise transforms inputs into outputs and delivers value to its customers and consumers.

This system may also include support systems which are not part of the primary value stream. These may be systems which require specialist capabilities and are required by different systems in the value stream and deliver internal products and services beyond those provided as part of resource management.

Resource management system

This system manages each of the resource types required for successful operation of the enterprise. At a minimum, this will encompass:

  • Human resource management
  • Financial management
  • Information management

It may also include:

  • IT management
  • Asset management
  • Procurement, contract and materials management
  • Record management

Governance system

All enterprises require governance and management.

With respect to governance, I have drawn on the Tricker Model which is one of the models covered within the Company Directors Course run by the Australian Institute of Company Directors. By drawing on this model, I know that there are many Directors and Boards who will be familiar with the model and therefore comfortable with the subsystems that I include:

  • Accountability and reporting
  • Strategy
  • Policy
  • Performance reporting
  • Strategic risk management

To date, I have not modeled the management system. It seems to be adequately covered by the management embedded in each of the systems that I consider. I have included reference in this area – governance and management – to allow for inclusion of additional capabilities that become evident and require attention beyond those evident in all other areas.

Development system

This system supports the development of an enterprise and effects change in any of the systems. Change may derive from strategy, as the means by which strategy is executed, or from individual systems as part of continuous improvement. It includes:

  • Architecture management
  • Program management
  • Project management
  • Change management
  • Program and project support

I view change through a lifecycle lens taking change from idea to realisation. Key steps include:

  • Initiative formation
  • Investigation
  • Acquisition
  • Design, build and test
  • Implement
  • Review and close

Conclusion

Overall, this conceptualisation of an enterprise-as-system has enabled successful:

  • development of architectural models
  • formation of program strategies, plans and roadmaps

It seems to prompt reasonable coverage of the activities of any enterprise and it seems to be easily understood by stakeholders with whom I engage.  Further elaboration has been provided in relation to:

  • Enterprise resources
  • Enterprise development

 

Since initially publishing this article, Andrew Campbell has published Operating Model Canvas which provides a clearer articulation of operating models.  In due course, I will publish an update which outlines the elements of my thinking and practices that extend beyond the approaches outlined in Operating Model Canvas.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s