Operating Models: Understanding Complex Organizations

Operating Model DiagramStandardization and Integration of Operating Models

The idea of an “organizational operating model” is the central concept discussed by Dr. Jeanne Ross, Peter Weill, and David C. Robertson in their seminal work,Enterprise Architecture as Strategy: Creating a Foundation for Business Execution. They contend that for companies to succeed, they must understand their operating model: in other words, the degree to which they must standardize business processes and/or integrate data to produce optimized business outcomes.

Higher standardization of processes is typically required where efficiency and predictability are the primary factors in delivery of the organization’s products or services. If an organization wants to present the same face to customers in diverse locations, or capitalize on efficiencies of scale in purchasing, for instance, a high degree of standardization is required. However, the higher the level of standardization the greater the cost to the overall organization in terms of flexibility and innovation.

Data integration effectively links the efforts of various organizational units through information sharing. Higher levels of integration encourage close working relationships between various areas of a business or agency, and more centralized decision-making. Also, the more integration, the more agreement is required on definitions, and this comes at the cost of local control and autonomous management of information resources.

Clearly, each organization will have different needs; even different divisions of the same company may have quite different objectives. As such, different operating models can maximize their individual potential. Once the Operating Model is determined, the Enterprise Architecture can be designed to meet the critical process standardization and integration requirements for delivery of the company’s products or services.

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