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What is a Business Operating Model?

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  • Written By: Osmand Vitez
  • Edited By: Kristen Osborne
  • Last Modified Date: 11 November 2016
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    Conjecture Corporation
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A business operating model is a representation of the characteristics a company will follow when completing the various tasks and activities related to its business. These models often consist of several different components, particularly in large or publicly held companies. Business owners and managers may design a workflow chart to present this information in a graphic or pictorial reference for training purposes. Operating models can include strategic plans, relationship development and internal guidelines or standards.

A strategic business operating model outlines the necessary tasks and activities companies need to follow in order to accomplish goals and objectives. Most businesses develop and use strategies so they have a plan for advancing their mission. The increasing use of business technology has altered how companies use a business operating model. Integrating the data from multiple business locations helps business owners and managers make decisions regarding operations or new business opportunities. Additionally, an operating model allows companies to create repeatable processes so they can avoid reinventing the wheel for each business opportunity.

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Business relationships occur between companies and other entities such as: consumers, government agencies, other businesses, and special interest groups. A business operating model dictates how a company will handle both positive and negative situations in regard to its business relationships. These model may link with the policies, procedures, and responsibilities found in the company’s corporate governance. Business owners, board members, directors, and managers create these models to ensure the company does not exacerbate negative situations or cause panic by engaging in relationships detrimental to the company.

Guidelines or standards are placed in a business operating model for quality controls purposes, among other things. Companies must ensure that each good or service meets specific standards and that employee productivity or performance meets certain expectations. The business operating model can also provide more information or clarification on the company’s mission, helping managers reinforce the values and behavior found most acceptable by the company. Large companies with multiple divisions may need these models to promote a working environment where each employee acts as a team member and understands that her role is to provide higher financial returns for the company.

Companies may use business operation models as individual components in their overall corporate or business-level strategies. These strategies are overarching processes that help companies create effective and efficient operations while adding the most economic value to the company coffers. Implementing individual modules can also help companies eliminate unnecessary tasks or activities that result in wasted economic resources, such as raw materials or labor.

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