Operating model design: what it is, what it is not, and when you need it

An operating model review is one of the most frequently requested engagements at Daily Summit Lab, and one of the most frequently misunderstood. Leaders often arrive with a structural problem framed as a strategic one, or a strategic problem framed as a structural one, and the distinction matters enormously before any redesign work begins. This article sets out what an operating model actually is, where its boundary with strategy sits, and the specific conditions that tell you a redesign is the correct intervention rather than a distraction from a harder conversation. The aim is to give you enough clarity to diagnose your own situation before you commission anything.

What an operating model is, and what it is not ¶

An operating model is the set of choices an organisation makes about how it will deliver its strategy: how work is structured, how decisions are made, how resources are allocated, and how the different parts of the organisation coordinate with one another. It sits between strategy — the choice of what to do and for whom — and execution — the daily activity of people doing their jobs. A company can have a sound strategy and a capable workforce and still perform poorly because the operating model connecting the two is incoherent.

The model has several interlocking components. Organisational structure is the most visible, covering reporting lines, spans of control, and the grouping of functions. Governance covers who has authority to make which decisions, at what level, and through what process. Process covers the sequencing of work across functions. People and capability covers where specialist skills are held and how they are developed. Technology and data covers the systems that enable or constrain the above. Change one component without adjusting the others and you typically produce new friction rather than less of it.

What an operating model review does not cover is the validity of the strategy itself. If the business is targeting the wrong customers, pricing incorrectly, or competing in a market that has structurally deteriorated, no restructure will correct that. This is the most common category error in redesign projects: treating poor commercial performance as evidence that the organisation is badly designed, when the organisation may be delivering its current strategy efficiently and the strategy is simply the wrong one. The diagnostic question that separates the two is whether the problem is a delivery problem or a direction problem.

The difference between structural and strategic problems ¶

Structural problems have recognisable signatures. Decisions that should be straightforward escalate repeatedly to senior leadership. Teams that need to collaborate work from conflicting mandates and no clear mechanism for resolving them. A new product or service took eighteen months to reach the market not because of regulatory complexity or technical difficulty but because accountability was unclear and approvals multiplied. Talented people leave citing confusion about their remit rather than dissatisfaction with the work itself. These are operating model problems, and they are amenable to operating model solutions.

Strategic problems look different in practice. Revenue is declining across all business units simultaneously, not in one. Customer feedback points consistently to the value proposition rather than to service quality or responsiveness. Competitors are winning on dimensions the organisation does not currently compete on and has made no decision to compete on. The business is in a market that is consolidating and scale is becoming a prerequisite for viability. In these situations, clarifying decision rights or redrawing reporting lines will not move the needle. The leadership team needs to resolve the strategic question first, and the operating model work follows from whatever answer emerges.

In practice, the two problems are often entangled. A strategy that was sound five years ago may have been the right basis for the operating model that was built to deliver it, and both are now misaligned with a changed market. In that case the sequence matters: strategy is revisited first, the operating model is then redesigned to serve the revised strategy. Attempting to redesign the model before the strategy is settled produces a structure optimised for a direction that may itself change within twelve months.

The diagnostic question that separates structural from strategic problems is whether you have a delivery problem or a direction problem.

The conditions that make redesign the right intervention ¶

Three conditions, present together, reliably indicate that an operating model redesign is the correct next step. The strategy is stable and agreed at leadership level. The performance gap is measurable and has been traced, through structured diagnosis, to how the organisation is designed rather than to the strategy itself or to individual capability. And the organisation has the leadership bandwidth and change capacity to implement a redesign without destabilising the operations it depends on for current revenue. When all three are present, redesign is appropriate and typically urgent. When one or more is absent, the prior work needs to happen first.

The most common situation in which redesign is premature is a leadership team that has not yet aligned on strategy. In that circumstance, different parts of the organisation are effectively executing different strategies simultaneously, and the operating model reflects that incoherence. No structural intervention resolves a disagreement that exists at the top. Similarly, organisations that have undergone significant change in the previous twelve to eighteen months — a merger, a major system implementation, a significant leadership transition — often need a period of stabilisation before another redesign is productive. The organisation needs time to absorb previous changes and produce reliable data about where the remaining friction actually sits.

When the conditions are right, a well-scoped operating model redesign typically runs over three to five months for a business unit or division, and six to twelve months for an organisation-wide engagement. The work involves structured diagnostic interviews, process mapping, decision-rights analysis, and options development, followed by a design phase and an implementation plan with sequenced workstreams. The output is not a new organogram. It is a set of coordinated design decisions across structure, governance, process, and capability, with a clear rationale for each choice and a plan for managing the transition. That plan is as important as the design itself, because the best operating model on paper produces nothing if the organisation cannot make the shift from the current state to the new one.

Operating model work is precise by nature: it requires a clear problem statement, a stable strategic foundation, and a realistic assessment of the organisation's capacity to change. If you are trying to work out whether your situation calls for this kind of engagement, we are glad to have that conversation.