How to Improve Operational Business Models Part 1

The worlds of business and technology have converged. Automation is replacing manufacturing work, artificial intelligence is replacing service work, and devices are replacing healthcare workers for chronic care. The world of work is changing from task work to knowledge work. And while this shift brings innovation and new possibilities, it also requires a different approach.

We met with top leaders at the 2021 CoS Summit to discuss how we can improve operational business models for scale in the context of modern business needs. The conversation centered largely around fostering communication in organizations and how the needs change as the companies grow.

What is an Operational Business Model?

Before we get too far into the do's and don'ts of scaling your operational business model for growth, let's take a moment to define what we're talking about. Michael Davis, Head of Strategic Services at Ally.io, hit the nail on the head with his definition. "An operating model is a series of activities, steps, and processes that you use to remain aligned against a broader mission." Every business works a little differently. 

Some companies dole out job duties to different departments, all working together to serve a common customer. Other companies create a series of self-contained departments that each operate independently under a larger umbrella. And there are a few iterations in between where departments may have more or less autonomy or a mix of shared and independent customers.

Working within a defined operational model is important. It helps the organization maintain alignment as it grows. In other words, it helps build organization and efficiency instead of reinventing the wheel every time there is a new acquisition or client onboarding. 

Stephenie Young, Advisor & Chief of Staff at Spectrum Health West Michigan, says that her organization uses a proprietary operational model they designed in-house that stages the deployment of new initiatives over a 10-week period with oversight from the organization's President. 

Sherrod Davis, Chief Operating Officer at EcoMap Technologies, says that his organization uses an alignment plan that reflects the organization's values. "It's an artifact that is representative of the business model at the top, vision at the bottom." Everything that goes into deploying a new initiative at EcoMap Technologies is tied back to the organization's values and that's how they maintain alignment.

At this point, you may be wondering what the difference is between an operational model and a business model. While both important, an operational model and a business model aren't the same thing. They serve different purposes. A business model lays out how a company makes money. It focuses on products and services, value proposition, customers, and business partners. An operational model lays out how a company operates in terms of systems and structure, serving as a workable blueprint for how to get things done. This blueprint defines what people, processes, and technology are needed to accomplish each business goal.

Four Steps to Create an Operational Business Model

In order to put together a functional operating model, you'll need to gather some information for alignment and spend some time putting ideas down on paper. Look at these areas as your building blocks for bringing everything together and then build a model that fits your needs.

Business Strategy: List a handful of clear and concise strategic goals for your organization, like "standardizing the customer experience across all channels" or "transitioning to digital-first interactions."

Systems and Processes: Drill down into your workflows and processes to gain a complete understanding of how and why things happen—documenting standard operating procedures as appropriate.

Organizational Structure: Understand how your company is organized and lean into that structure. While linear business structures have typically been favored, we're seeing a rise in agile, cross-functional structures in modern business. Take into consideration if it's time for a change.

Technology: Communication is a big opportunity for technology, but it's not the only one. In our panel discussion, Michael pointed out that a CRM is a really valuable tool for logging and tracking customer feedback. Consider what tools your organization is currently using and what they might benefit from. 

Your Team: Don't overlook the human element in your operational model. Understand the key roles in your organization and how those roles will evolve as the business grows. Also, look at the workplace culture in your organization and question if it is serving your operational goals or if there is room for improvement.

Once you have explored your organization from all these angles, you can begin to use this information to build functional organizational business models. Essentially, your model is a unique set of steps that are taken in the planning and deployment phases of every new initiative to ensure operational efficiency. 

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