Understanding the Power of An Effective Operating Model

Apr 19, 2017

What do you think is more important for the success of your business: your business model, or your operating model?

Many will say business model.

But we’re here to let you know that your business model won’t mean much if you don’t operate effectively. Indeed, your business may never even get off the ground. There’s really only so much your business model can do all on its own.

What is an operating model?

An operating model is the design you put in place to make sure that you deliver on your business plan.

It’s the brass tacks. It’s what keeps you and everyone involved in your business honest day in and day out.

Why does my business need an operating model?


So you can…


Turn your business ideas into action.

You can’t truly get started without an operational plan, so you might as well make one that is purposeful.

What does your business promise? What work needs to be done? How will you divide up that work? What will a typical workday look like?


Discover the true spirit of your business.

Sure, team meetings and brainstorming sessions are important. So have them.

The systems that all come together to keep and grow your business are also important.

What is each team responsible for? Each person? How do all the pieces fit together?

Empowered workers know their role and goal, and how they’re helping the whole team.


Track your business challenges and failures.

So you can learn from them, and fix them – swiftly, even on the spot.

A good operating model will define all product and service scenarios imaginable. And it will include the requirement to track employee and customer issues and complaints so that there is real data for reflection and to inspire improvement.

Tracking will also let you isolate where the problems are. If you’re having lots of problems, take a look at your records and see where your process is breaking down? Is there a pattern? Now you know where to dig in and make a better operational design.

You need to know how every aspect of your business functions, so you’ll recognize when something isn’t going as it should.


Take better care of your employees and customers.

If your customer service agents know how they’re expected to respond to various client needs, they’ll help your business avoid crises. They’ll keep your reputation sound.


Protect against over-promising and under delivering.

Without an operating plan in place…

Your sales team might get really good at selling something you haven’t finished building yet, or don’t know how to implement yet.

Your sales team might sell more than your implementation and customer success teams can manage right now.

If your sales team doesn’t have a strong sense of what services they can promise and which they can’t, they could make promises that make for bad client relationships.

Do you want to be signing deals that you can’t deliver on?

No. Because that’s the sort of thing that gets you a reputation that you might never mend.

It might feel good to close deals, but those good feelings will be fleeting if you don’t have a plan in place to make good on those promises. It’s exhausting to over promise and under deliver, and eventually it will catch up with you.


Scale your business with confidence.

Business plans almost always include an intention to scale.

But how can you expand your business if you don’t have a plan for running it?

Expanding sounds fun, and it can be. But only if you’ve got your current operation working like a well-oiled machine.

If you’ve got visions of a franchise, remember that when someone buys into your franchise they’re not simply buying your brand. They’re buying how you do business, how you run your business. They don’t want to re-invent. They’re expecting you to hand over the manual.

Why didn’t I know that I needed an operating model for my business until now?

Don’t sweat it.

Most entrepreneurs are passionate and eager-to-launch. They think they’ll figure out how to operate when it’s time to operate.

Don’t be the entrepreneur whose ego gets in the way of building the system that will enable your ideas to come to fruition.

If you’re already years into your business, don’t let your ego keep your business from its potential. If you’ve scraped by on a shoddy operation, let now be the time to make that change.

How do I create an operating model for my business?

It’s true that there’s no amount of preparation that can take the place of on-the-job learning.

But that doesn’t mean that it’s a good idea to launch a business without any plan for how you will operate. Operational planning will make for a better launch, and you can (and should) always adjust your operations as you learn more about your business once you’re underway.

The basic idea is: Design an operating model before you need it. Then, grow into it. And keeping growing it as you grow, too.

In other words, dream up the problem before it becomes one.


To create your operating model from scratch…


Keep a record.

Your aim is clear and concise notes about how your business runs – that all members of your business can rely on. Simple wins the day. Don’t leave room for interpretation or confusion.


Work with others.

Reach out to your business community – employees, early adopters, customers, investors, incubators, competitors.

Ask them about their experiences with your business and with businesses of their own. Listen to what they tell you.

What can you glean? What mistakes can you avoid by learning from others?


Don’t rush.

This takes time to get right. So give it the time it deserves.


Think big.

Don’t think about what you are now. Think about what you hope to be. Then, think even bigger.

If you make an operating model to support now, it won’t last very long.


Build a process, and stick to it.

Everyone in your business is working in a shared system toward a shared goal.

This isn’t about personalities, it’s about process. There’s room for unique personalities, so long as they’re all sticking to the model.


Be tech smart.

If there are aspects of your business that can be supported by technology, make sure to support them that way.

If you’re sending lots of emails, can you automate the sending?

If you need to keep to a strict social media posting schedule, can you build ahead and use a tool that will post with the schedule you set?

Do as much “set and forget” as you can, so you can focus on the work you can’t automate.


Check your work.

From time to time, check in with how it’s going.

If something isn’t working, make a change.

Ask employees to re-read the manual periodically, and to add whatever is missing. Make sure they’re helping you capture all that’s been learned since their last read.

Ask new employees to read the manual, and find out what isn’t clear enough yet. They’ve looked with brand new eyes.

Institutional knowledge is your friend. Get it down on paper. Weave it into your process.

If the founders leave, the rest need to know how to go on.


Get help from an expert.

If this is the first time you’re building a business, you might want help from an expert.

Make sure you choose someone who has experience designing operating models for the industry you’re in, or you won’t be getting your money’s worth.

And, remember, the way you operate will make or break your business. So don’t launch without a plan in place – even if it’s just a starting point.

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