What is an Operating Model?

An Operating Model serves as the foundational framework through which an organization operates, dictating how resources, processes, and technology are structured and deployed to achieve business objectives. In multi-sectorial, diversified lines of business holding groups, where complexity and scale are significant, a well-designed Operating Model is essential. It not only supports operational efficiency but also ensures that customer interactions are seamless and aligned with the overall business strategy.

>> Operational Model for Success in 2024 <<

The concept of the Operating Model emerged from management theories in the mid-20th century, with academia and the business consulting world beginning to formalize different frameworks to address the growing complexities of large-scale operations. Initially, these models focused on improving productivity and optimizing workflows. However, as businesses shifted toward customer-centric strategies, the Operating Model evolved into a key driver of customer experience, allowing organizations to enhance satisfaction, trust, and engagement.

The evolution of the operating model

Operating Models have evolved significantly since their inception. The early focus on Business Process Reengineering (BPR) in the 1980s and 1990s brought attention to the need for restructuring internal processes to improve efficiency. Influential works such as Michael Hammer and James Champy’s Reengineering the Corporation emphasized the importance of rethinking traditional workflows to maximize productivity. This era also saw the emergence of Lean and Six Sigma methodologies, which focused on waste reduction and process consistency.

The initial objectives of Operating Models were to streamline operations, reduce costs, and enhance productivity. However, these goals often overlooked the importance of the customer journey. Over time, as markets became more competitive and customer expectations increased, the focus shifted to designing Operating Models that not only optimized internal efficiency but also improved customer experience.

Today, Operating Models are built with a customer-centric approach. They are designed to be agile, adaptable, and responsive, supporting organizations in delivering a superior customer experience while maintaining operational excellence. The constraints of legacy systems and rigid organizational structures are increasingly replaced by flexible models that can quickly respond to changes in customer behavior and market conditions.

>> The Critical Alignment of Business and Operating Models <<

Relationship between the operating model and business model

The Operating Model and Business Model are complementary frameworks that must work in tandem for an organization to succeed. While the Business Model outlines how a company creates, delivers, and captures value, the Operating Model provides the structure and processes required to execute that vision.

In essence, the Business Model is the “what,” and the Operating Model is the “how.” A well-defined Business Model may articulate a company’s value proposition, customer segments, and revenue streams, but without an aligned Operating Model, the delivery of that value can become inconsistent or inefficient. For example, a company with an innovative Business Model that offers fast delivery of products may fail to meet customer expectations if its Operating Model does not support efficient logistics and supply chain management.

A diversified holding group that operates across multiple sectors must ensure that its Operating Model accommodates the unique needs of each business unit while maintaining alignment with the overarching Business Model. This requires flexibility in processes, resource allocation, and technology, ensuring that the diverse demands of different industries can be met without compromising operational efficiency or customer satisfaction.

Operating model’s impact on customer experience

An effective Operating Model directly impacts customer experience by ensuring that services and products are delivered efficiently, consistently, and in line with customer expectations. A customer-centric Operating Model prioritizes the customer journey, focusing on reducing friction at key touchpoints and optimizing processes that support customer interactions.

The importance of this can be seen in industries such as banking and retail, where customer expectations for seamless, personalized experiences are high. For example, in retail, an Operating Model that supports omnichannel delivery—integrating online and offline channels—ensures that customers receive a consistent experience whether they are shopping in-store or online.

>> How to improve the Customer Experience? <<

The relationship between the Operating Model and customer experience is also critical in industries where service quality is paramount, such as healthcare and telecommunications. In these sectors, a well-designed Operating Model ensures that customer inquiries are addressed promptly, services are delivered without delay, and customer support is available when needed. By creating a seamless operational flow, the Operating Model builds trust, loyalty, and satisfaction among customers.

Designing an operating model to improve service delivery

Service delivery is a critical component of the customer experience, and a well-designed Operating Model ensures that it is executed efficiently and effectively. An Operating Model designed with service delivery in mind focuses on optimizing processes that impact the customer directly, such as order fulfillment, customer support, and after-sales service.

For instance, in industries such as e-commerce, the speed and accuracy of order fulfillment are key drivers of customer satisfaction. Amazon’s Operating Model is a prime example of how an organization can design its operations around customer needs. Amazon has built a global logistics network that enables rapid, reliable delivery, a key factor in its customer satisfaction and retention strategy.

Another example is Uber, whose Operating Model is designed to deliver transportation services on-demand, in real-time. By integrating technology, flexibility, and an extensive driver network, Uber has created a model that is highly responsive to customer needs, providing a seamless user experience and fostering customer loyalty.

>> Design Thinking & Customer Experience Design <<

Operating model as a growth engine by leveraging the customer experience

When properly designed and executed, the Operating Model can act as a growth engine by enhancing customer experience. Businesses that prioritize customer satisfaction in their operations often see increased customer retention, higher lifetime value, and greater market share.

Proven strategies for driving satisfaction and retention through an Operating Model include focusing on operational agility, integrating customer feedback loops into processes, and leveraging data analytics to anticipate customer needs. Companies like Apple exemplify how an Operating Model aligned with the customer experience can become a growth engine. Apple’s ecosystem of products, services, and retail experiences creates a cohesive, customer-focused Operating Model that encourages repeat business and builds long-term loyalty.

By continuously refining its Operating Model to enhance customer experience, Apple has maintained its position as a leader in consumer technology, demonstrating how an organization’s operational framework can drive sustainable growth.

Frictionless customer experience by design

Designing a frictionless customer experience requires an Operating Model that is purposefully aligned with the Business Model and enterprise strategy. A frictionless experience is one where customers encounter minimal obstacles at every stage of their journey, from initial interaction to post-purchase support.

To achieve this, organizations must eliminate operational inefficiencies that can lead to customer dissatisfaction. For example, in digital platforms, slow-loading pages or complicated checkout processes can create friction that drives customers away. An Operating Model that emphasizes process optimization, technological integration, and real-time responsiveness can help eliminate these barriers.

Netflix offers a prime example of a frictionless customer experience by design. Its Operating Model is built around delivering seamless, personalized entertainment on-demand. By leveraging data analytics and cloud computing, Netflix ensures that customers can access their preferred content without delays or interruptions, creating a smooth, enjoyable experience that fosters customer loyalty.

>> Importance of customer experience design <<

Touchpoints and buyer personas in the operating model

Understanding customer touchpoints and defining buyer personas are essential components of a successful Operating Model. In both B2B and B2C environments, customer interactions occur at multiple touchpoints throughout the journey, including digital platforms, physical stores, customer support channels, and post-sales services. An Operating Model must be designed to manage these touchpoints effectively, ensuring that each interaction contributes positively to the overall customer experience.

Defining buyer personas—representations of different customer types—allows organizations to tailor their Operating Models to meet the specific needs of various customer segments. In a B2B environment, buyer personas might include procurement managers or business executives, while in B2C, personas could range from budget-conscious shoppers to premium-seeking consumers. A successful Operating Model adapts to these different personas, delivering personalized experiences that enhance satisfaction and engagement.

>> Understanding your buyer persona: the good, the bad and the CEO <<

Extending the customer journey beyond the enterprise

The customer journey extends beyond the enterprise itself to include interactions with partners, suppliers, and external stakeholders. A well-designed Operating Model takes this into account, ensuring that the entire ecosystem involved in delivering value to the customer is aligned.

For example, in the automotive industry, manufacturers rely on a network of suppliers to deliver parts on time and at the required quality. A cohesive Operating Model that integrates these external partners ensures that production runs smoothly, ultimately leading to timely delivery of vehicles to customers. This extended customer journey requires close collaboration and communication across the value chain, a hallmark of a successful Operating Model.

Measuring the success of an operating model

To measure the success of an Operating Model, organizations must track both operational and customer-centric metrics. Key performance indicators (KPIs) such as process efficiency, time to market, service quality, customer satisfaction (CSAT), and Net Promoter Scores (NPS) provide valuable insights into how well the Operating Model is functioning and its impact on customer experience.

For instance, companies like Zappos, known for their exceptional customer service, use customer satisfaction metrics to continually refine their Operating Model. By tracking customer feedback and response times, Zappos ensures that its operations remain focused on delivering a superior customer experience.

Future trends in target operating models

The future of Target Operating Models (TOM) will be shaped by advancements in technology, including artificial intelligence (AI), machine learning, and automation. These technologies will enable more agile, data-driven Operating Models that can respond quickly to changes in customer behavior and market conditions.

For 2024 and beyond, trends in TOM will focus on omnichannel integration, where businesses deliver a consistent customer experience across digital and physical channels. Companies that can leverage AI to personalize interactions and optimize processes will have a competitive edge in delivering superior customer experiences.

Conclusion

To strengthen this conclusion, it is important to highlight that the Operating Model not only facilitates the delivery of services, but also acts as the core that enables the continuous adaptation and resilience of the organization in the face of market changes. An effective operating model not only responds to current customer needs, but also anticipates future requirements, adapting with agility through improvements in processes, technology and organizational structure.

In addition, an Operating Model aligned with the business model allows companies to implement strategies in a coherent and effective manner, ensuring that each area of the organization is oriented towards a common purpose: maximizing customer satisfaction. By adopting an approach that prioritizes the customer experience, companies can not only increase loyalty, but also turn their customers into brand ambassadors. This strategic approach helps to identify friction points, continuously improve efficiency and optimize resources for sustainable competitive advantage.

Documentary References:

1. Hammer, M., & Champy, J. (1993). Reengineering the Corporation: A Manifesto for Business Revolution. HarperBusiness.
2. Osterwalder, A., & Pigneur, Y. (2010). Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. John Wiley & Sons.
3. Prahalad, C. K., & Krishnan, M. S. (2008). The New Age of Innovation: Driving Co-Created Value Through Global Networks. McGraw-Hill.
4. Kaplan, R. S., & Norton, D. P. (2004). Strategy Maps: Converting Intangible Assets into Tangible Outcomes. Harvard Business Review Press.
5. Womack, J. P., & Jones, D. T. (1996). Lean Thinking: Banish Waste and Create Wealth in Your Corporation. Free Press.
6. McKinsey & Company. (2020). The Next Normal in Customer Experience: Future Trends and Strategies for Success. McKinsey Insights.
7. Forrester Research. (2021). The Future of Customer Experience: Predictions for 2024. Forrester Consulting.

This comprehensive set of references provides a strong foundation for further understanding how Operating Models intersect with customer experience across industries.