An organization is a complex system for delivering value. An operating model breaks this system into components, showing how it works. It can help different participants understand the whole. It can help those making changes check that they have thought through all elements and that the whole will still work. It can help those transforming an operation coordinate all the different changes that need to happen.
An operating model is like the blueprint for a building. It is more dynamic than a building blueprint, with changes occurring regularly. Also, an operating model is not usually just one blueprint. There are likely to be blueprints for each element: processes, organization structure, decision making, software applications, locations and so on. There are also likely to be some integrating blueprints.
An operating model can describe the way an organization does business today – the as is. It can also communicate the vision of how an operation will work in the future – the to be. In this context it is often referred to as the target operating model, which is a viewpoint of the operating at a future state point in time. Most typically, an operating model is a living set of documents that are continually changing, like an organization chart or the capability model or functional model.
An operating model describes how an organization delivers value, as such it is a subset of the larger concept ‘business model’. A business model describes how an organization creates, delivers and captures value and sustains itself in the process. An operating model focuses on the delivery element of the business model.