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Opinion

Operational model typologies

Companies make two important choices in the design of their operations. How standardized their business processes should be across operational units (business units, region, function, market segment) and how integrated their business processes should be across those units.

Companies make two important choices in the design of their operations:

  1. How standardized their business processes should be across operational units (business units, region, function, market segment) and
  2. how integrated their business processes should be across those units.

That’s two variables. Assuming each has two values: Low and High, and you get four possible combinations. Ross gave these four types of models different names.

  1. Low Integration, Low Standardization – the Diversification Operating Model
  2. High Integration, Low Standardization – the Coordination Operating Model
  3. Low Integration, High Standardization – the Replication Operating Model
  4. High Integration, High Standardization – the Unification Operating Model

Nick Malik illustrated these models in this way (Based on research of J. Ross, MIT):

operational-models_1

Or as one of my colleagues put it:

Coordination

Seamless access to shared data:
  • Shared customers, products, or suppliers
  • Impact on other business unit transactions
  • Operationally unique business units or functions
  • Autonomous business management
  • Business unit control over process design
  • Shared customer/supplier/product data
  • Consensus processes for designing IT infrastructure services; IT application decisions made in business unit

Unification

Standardized integrated processes:
  • Customers and suppliers maybe local or global
  • Globally integrated business processes often with support of enterprise systems
  • Business Units with similar or overlapping Marketing & Procurement operations
  • Centralized management often applying functional/process/business unit matrix
  • High level process owners design for standardized processes
  • Centrally mandated databases
  • IT decisions made centrally

Diversification

Independance with shared services:
  • Few, if any shared customers or suppliers
  • Independent transactions
  • Operationally unique business units
  • Autonomous business management
  • Business unit control over process design
  • Few data standards across units
  • Most IT decisions made within business units

Replication

Standardized independance:
  • Few, if any shared customers
  • Independent transactions aggregated at a high level
  • Operationally similar business units
  • Autonomous business unit leaders with limited authority over processes
  • Centralized (or federal) control over business process design
  • Standardized data definitions but data locally owned with some aggregation
  • Centrally mandated IT services
Shared customers, products, or suppliers
Impact on other business unit transactions
Operationally unique business units or functions
Autonomous business management
Business unit control over process design
Shared customer/supplier/product data
Consensus processes for designing IT infrastructure services; IT application decisions made in business unit

By rick

I solve digital problems.