Operating model terminology

The term operating model has many definitions. This intro article establishes terminology associated with operating models. To understand an operating model as it relates to the cloud, we first have to understand how an operating model fits into the bigger theme of corporate planning.


Business model: Business models tend to define corporate value ("what" the business does to provide value) and mission/vision statements ("why" the business has chosen to add value in that way). At a minimum, business models should be able to represent the "what" and "why" in the form of financial projections. There are many different schools of thought regarding how far a business model goes beyond these basic leadership principles. However, to create a sound operating model, the business models should include high-level statements to establish directional goals. It's even more effective if those goals can be represented in metrics or KPIs to track progress.

Customer experience: All good business models ground the "why" side of a business's strategy in the experience of their customers. This process could involve a customer acquiring a product or service. It could include interactions between a company and its business customers. Another example could center around the long-term management of a customer's financial or health needs, as opposed to a single transaction or process. Regardless of the type of experience, the majority of successful companies realize that they exist to operate and improve the experiences that drive their "why" statements.

Digital transformation: Digital transformation has become an industry buzzword. However, it is a vital component in the fulfillment of modern business models. Since the advent of the smartphone and other portable computing form factors, customer experiences have become increasingly digital. This shift is painfully obvious in some industries like DVD rentals, print media, automotive, or retail. In each case, digitized experiences have had a significant impact on the customer experience. In some cases, physical media have been entirely replaced with digital media, upsetting the entire industry vertical. In others, digital experiences are seen as a standard augmentation of the experience. To deliver business value ("what" statements), the customer experience ("why" statements) must factor in the impact of digital experiences on the customers' experiences. This process is digital transformation. Digital transformation is seldom the entire "why" statement in a business strategy, but it is an important aspect.

Operating model: If the business model represents the "what" and "why", then an operating model represents the "how" and "who" for operationalizing the business strategy. The operating model defines the ways in which people work together to accomplish the large goals outlined in the business strategy. Operating models are often described as the people, process, and technology behind the business strategy. In the article on the Cloud Adoption Framework operating model, this concept is explained in detail.

Cloud adoption: As stated above, digital transformation is an important aspect of the customer experience and the business model. Likewise, cloud adoption is an important aspect of any operating model. Cloud adoption is a strong enabler to deliver the right technologies and processes required to successfully deliver on the modern operating model.

Cloud adoption is "what we do" to realize the business value. The operating model represents "who we are and how we function on a daily basis" while cloud adoption is being delivered.

Next steps

Leverage the operating model provided by the Cloud Adoption Framework to develop operational maturity.