OPERATING MODEL
GET OFF THE DRAWING BOARD

DESCRIPTION
• Describes relationships between these business
operating units, decision and process flow for the
units.
• Describes how an organization operates across
both business and technology domains.
• Describes what is important for the organization.
• Describes how the organization does business
today.
• Describes how the business co-operates across its
business units.

COMPONENTS
BUSINESS
TECHNOLOGY PEOPLE
PROCESSES
OWNERSHIP METRICS

REASONS FOR DEVELOPING OPERATING
MODEL
• Build reusable Core Capabilities
• Guide IT Investment decisions.
• Drive the architecture and infrastructure
foundation that enables the company to grow
its business either organically or through
acquisitions.
• Implementation of business processes and IT
systems.

HOW IS OPERATING MODEL
DIFFERENT FROM STRATEGY?
• Business strategy and priorities change
frequently based on external factors.
• Operating model provides the foundation and
flexibility required to execute the firm’s
initiatives.

TARGET OPERATING MODEL
• Align all components to effectively
evaluate opportunities to
maximize customer value.
• Business drivers are translated into new
requirements that leads to a new Target
Operating Model.
• Target Operating Model
represents the high level
requirements, that drives the
future Business and IT
development.
– Developing the Operating Model
at a very detailed level requires
substantial resources in both the
business units and IT.

CAPABILITY MAPS
TARGET OPERATING MODEL
DEVELOPMENT

BUSINESS CAPABILITY MAP
• A model of the firm associating the business
capabilities, processes, and functions required
for business success with the IT resource that
enables them.
- Forrester

EXAMPLE – CAPABILITY MAP

TARGET OPERATING MODEL - POSSIBLE
ORGANIZATIONAL STRUCTURES

2009 EXAMPLES
TARGET OPERATING MODEL

SHELL CHEMICALS
• The Operating Model expresses the direction being followed by Shell Chemicals in
delivering bulk petrochemicals to large industrial customers, through standardized STRUCTURE
global processes and at the lowest possible total cost. With sustainable
development (SD) at its heart, the model also emphasizes the need for adherence to
SD principles in all business areas. 1. Base chemicals (lower olefins,
aromatics)
2. Styrene monomer/propylene oxide and
DIFFERENTIATING THRESHOLD FACTORS derivatives
3. Ethylene oxide/ethylene glycols
FACTORS 4. Solvents/phenol
5. Higher olefins and derivatives
1. Essential for the competitive positions
of the Shell chemicals companies in the
1. Build strong customer relationships petrochemical sector to be secured. For
CORE PROCESSES
and offering customers the example, the portfolio of businesses
products, services and ease of has to be balanced in line with the goal
doing business that fits their of delivering bulk petrochemicals. • Operations and HSSE
needs. 2. Each of the businesses in the portfolio • New Business Development and
2. Adopt standard global processes to also has to operate to world scale and Ventures
ensure quick decisions and clear capture the resultant economies of • Strategy and Portfolio
accountabilities. scale. • Human Resources
3. Right people, and the right 3. Working with the right cost structures, • Finance and Business Systems
processes to ensure success. - an imperative that has led to • Innovation and Technology
underlying emphasis on building substantial cost reductions in recent • Communications
the ‘attributes’ and ‘behaviors’ years.
among all Shell chemicals
companies employees

GLAXOSMITHKLINE
• GSK is a complex organization which has recognized the need to simplify the operating
model to deliver on it’s strategic priorities. The company is removing unnecessary
EVOLVE COMMERCIAL MODEL
processes and structures. The new, simplified operating model will release more
resources for investment and higher returns to shareholders. One single commercial structure to support Europe,
Emerging Markets and Asia Pacific/Japan. In the US,
TRANSFORM REDUCE WORKING CAPITAL pharmaceuticals business was restructured. This
includes the transformation of the US sales force as
MANUFACTURING well as the decision to designate a single
• Current working capital requirement is headquarters for US Pharmaceuticals, located at
around £7 billion. In September 2008 GSK Research Triangle Park, North Carolina to reduce
• Manufacturing is a key capability at started a program which has successfully complexity and streamline US operations.
GSK. Across the world manufacturing delivered cash flow benefits of more than
operation is taking an ambitious £500 million.
approach to transformation -
matching network capacity to volume
and leverage network of sites and CORE PROCESSES
contractors to ensure the flexibility to
sustain growth and adapt to changing
business models. Also simplifying 1. Simplifying organization to speed up decision-making and improve alignment to business
operating model to clarify roles and priorities. There are many different programs and initiatives across GSK including a
responsibilities, improve prioritization comprehensive program to simplify and reduce costs in IT. Through an innovative partnership
and decision making and introduce with Microsoft Online GSK will produce financial savings, improve productivity and enhance
simpler, more efficient ways of collaboration internally and with our external partners.
working. 2. Striving to ensure simpler and efficient cross-business processes and structures. For example, in
Asia Pacific, GSK simplified the approval processes with Health Maintenance Organizations and
public health bodies, resulting in an improvement in the quality of internal controls and savings on
approval and collection times.

JOHN DEERE
• Combines strengths of
Agricultural Division and
Commercial & Consumer
Equipment Division into single
Agriculture and Turf Division
• Aligned regions represent
geographies with shared
customer characteristics
• Five product platforms manage
worldwide development,
manufacture and delivery of
equipment and solutions

CONTINUING TO DEVELOP…..