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.
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.
- Low Integration, Low Standardization – the Diversification Operating Model
- High Integration, Low Standardization – the Coordination Operating Model
- Low Integration, High Standardization – the Replication Operating Model
- High Integration, High Standardization – the Unification Operating Model
Nick Malik illustrated these models in this way (Based on research of J. Ross, MIT):
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