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What does your Business Operating Model look like?

Updated: Dec 31, 2023

How your business operates in principle is your business's operating model.  It is a visual representation of your systems and processes, how you value your customers, and how you utilise your employees.


Documenting your business operating model can help you identify strengths and weaknesses, opportunities and threats, but equally document (i.e. give you clarity) on what needs to change if a system or process needs to be refined.


In this article, we answer the following question “What is a business operating model”, describe how it works, and explain how you can document it for your business.


What is a business operating model?


Your business operating model is a visual representation of your strategy.  There is no right or wrong approach, just what is right for you and your business. 


You might use words, or graphs, charts or pictures.  It might represent your whole business concept or just one division. 


So what is the benefit to you, your team, and your customers?

  • Having a roadmap, a visualisation of what your vision is.

  • Having a guide for understanding how your business uses resources and needs to use resources.

  • Provides insight as to where value is being delivered and where its not.

  • Provides a mechanism upon which you can measure outpusts against ideals, budgets, or targets.

  • Is a great tool to communicate the intentions of the company to stakeholders, lenders, and employees.

  • Is a tool to communicate intended change.

  • Helps improve performance and target cost management.

  • May provide a model for you to scale your business.

  • Helps prioritise where you focus the discretionary cash of your business.


What are the components of your business operating model?

Your operating model is a visual representation of how your strategy is executed through your operational processes and structure.


When documenting your model you are weighing up the competing priorities of:



Strategy

For some of us, our business is the mechanism by which we earn a pay-cheque, for others it is an aspirational vision or mountain. 


A strategy is a plan for achieving your vision or aspiration over a specific period of time.  It may be a set of intentions, actions, or decisions to guide an orgaisation to achieve specific goals and objectives.


A strategy balances the expectations of employees, customers, investors, and shareholders.


Operational Processes

Our business operates with systems and processes, sometimes well, sometimes poorly, sometimes out-dately, and sometimes innovatively.

 

Taking the time to review these periodically, is how we build efficiency, how we growth, and how we build the capability of our employees.

Documenting our systems and processes within our business operating model, provides the opportunity to identify what additional resources, technologies, and employees may be required to transform or deliver the vision.

 

Structure

Defining your structure as it is now, and as you intend can help you define where gaps may lie, and what additional financial resources may be required.  Identifying gaps in your financial resources can help you decide the timeframe for growing your business.  If you are in a hurry you may choose to bring on financial investors as shareholders, if not, it gives you insight as to how much working capital “cash” you will need to accumulate before you can increase the size of your team.

 

People

Having the right people on your team is a key success factor.  Defining how your teams work, what technology and tools they use, and what success looks like provides the pathway by which you achieve the business strategy, but also by which you can measure the growth of each team member.


Understanding your management style and the impact of that style (likewise each team's manager) can give you insight into what’s working or not working. 


It is important to be objective about assessing your style performance and how it affects your direct reports.  There are two distinct styles hands-off and hands-on. 


A hands-on leader likes to work with your employees and you will feel on top of your teams day to day operations.  You are likely to provide coaching and career progression and have a culture of collaboration.  While directly connecting with your team, you are unlikely to be on the tools per se.  A successful hands-on manager will avoid micromanaging, falling into the "being a friend" trap, and will focus on performance outcomes as opposed to constraining the team by over-management.


The hands-off leader has a philosophy that they have hired the right person for the job, so they leave the hire to get on and do their job with limited supervision.  The hands-off leader will expect that the team has everyone’s back, this results in the leader being more strategic.  Employees can feel more fulfilled and can be more effective at troubleshooting.  But equally, the leader may have over-estimated the team’s abilities, or under-estimate the ability of employees to problem solve.  Likewise, employees may feel like their skill sets are not expanding.


We have seen businesses where the culture is for the employee to not think outside of the box, and the consequence is a culture of blindly following the process that they were trained on, which may be some six employees and ten years later. Things change over this timeframe. Do some or all of your employees have the ability to have an impactful and positive change in your business?

 

Technology

Technology in business is changing frequently.  Equally, the cost of technology has been reduced, the availability of employees has been reduced, and the expectations of how an employee will contribute or perform tasks within a business have changed.


In many instances, identifying what tasks your team are performing repeatedly, or asking them what task in their opinion is of no benefit to the business will help you claw back time which can be better utilised elsewhere.


Understanding how to write a business case as to the financial cost of not utilising technology is essential to a business continuing to meet the market, not to mention expanding or transforming. 


We do not recommend giving the responsibility for an evaluation of a new technology or the writing of a business case to a technology-phobic employee (even if they are the CFO). It should be tasked to someone who is open-minded to technology and is an early adopter or innovator of new technologies or processes. Any financial impact should include the evaluation of the financial impact of not implementing the change.


Finance & Compliance

Businesses which set targets are statistically more likely to grow their business.  Targets can be production-based or financial, or both.  What is important is the momentum, to generate either change or growth. 


Understanding the level of working capital “cash” for “business as usual” as opposed to your needs during a period of change can assist in helping you manage your stress levels and your ability to be reactionary if needed.


Equally, having the confidence as to when to take a risk, i.e. assuming customers will make payments on time, may make the difference between winning an opportunity or being ahead of your competitors. 


How to document your business operating model?

There is no right or wrong way to document your operating model.  The success factors include:

  • Understand what it looks like now.

  • Identifying what you want it to look like.

  • What are the quick wins?

  • What are the long-term changes required?

  • What are the additional financial resources required?


The best models I have seen working are when you have a brainstorming, time-pressured, whiteboard session.  Then go away and have your team develop one or two impact areas.  You can develop the broader areas for change.


Where possible focus on limiting your words, take advantage of using diagrams, and flowcharts.  For significant intended changes develop a more detailed plan.


You may find you need or want to bring in either a specialist or someone who has experience with the change you are looking to implement, but equally, you may want to keep the change “in-house” to not bring the impact of the proposed change to your competitors’ attention.


How Business Studio Innovators can help you?

Business Studio has developed a new approach to the traditional accounting service model. 


We bring together technology, growth advisory, and valuation concepts. Creating an environment where you can tap into an advisor who can talk about your stage in business, your aspirations, and how to deal with the challenges that result from such changes. We provide insights and experience as to how technology and process efficiency are key factors in driving successful outcomes.


Business Studio provides a platform and service for you to embrace the sometimes uncomfortable and unpredictable journey of growing, transforming, and maturing in a supportive environment.



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