What is the difference between a business Model and an Operating Model?

I have recently championed the development of a business model for a Revenue authority that I am working with (This is most likely the first business model developed in Africa, to the best of my knowledge). The business Model has been developed with guidance from the Business Model generation book.

It is now clearly laid out in our business model canvas.

We now want to more to the next step and have the Model broken down for the different departments in the organisations.
Would I be right to call those departmental operation models?
What components would make up the departmental operating model? (Are they still the 9 building blocks)?
If they are not operating models, what is the correct name?
Which book can guide me in drilling down further once I have my canvas.

 

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There are a couple of pertinent points in your question.

Operating Model: The difference between a business model and an operating model is the level of abstraction.

The business model is a blueprint of the strategy of the business. It looks at interaction with the customer segments - what value is created for which segments and how they are connected via strategies and channels. It looks, at a strategic level, at the required infrastructure - capabilities and assets as well as partnerships for the business to be successful. Lastly the business model considers the sustainability / profitability of the business.

An operating model is a consideration of a deeper level of detail on how the business works. The operating model is focussed on how the business is put together to deliver on the business strategy. It considers elements such as organizational structure, processes, business rules and business information, and performance metrics.

Departmental business models

These are not operating models but represent the business models of individual business units. Business models can be derived for each business unit, for product lines or even down to individual products and services. That is the intrinsic strength of the BM Canvas approach. It can be applied at all levels of a business. In this case you are asking each department to fundamentally understand their business strategy and how their business unit operates (for whom they create value and what value they deliver). Each business unit should build a complete canvas for its part of the business.

What is the difference between  a e-business model and business model?

Well, a business model is the general term for the statement of the rationale by which an organization creates and delivers a value that is important to its target customer, and captures value in return. There are various ways to describe a business model - the business model generation approach using the business model canvas tool is a powerful and adaptable approach.

An e-commerce business model is a type, or pattern of business model specifying how one uses, integrates or innovates the components of the business model, in particular in this case the channels, activities, and resources of the business.

thank you so much

Hi Stella -

The operating model is the how (tactical) and the business model is the what (strategy). However, in stead of having each departments develop their own business model, I'd suggest identifying how each department connects to the others and then develop a view of the process that each will follow to contribute to the overall efforts. So what will marketing do for sales, how will sales enable marketing to do its work by providing feedback on what is working in market and what customer are saying etc. So think of the operating model as the lines between each aspect of the business model.. and note that the best organization uses a model that enable seamless communication and information sharing to enhance the vision and values of the company over all.  

I don't know any book that covers this, but you might be able to find some ideas by searching for "operating model design" relevant to your industry.

warmly,

Thanks so much for getting back to me. 

Do you have any sample business Model canvas from which operating models have been developed. Kindly share so that I see the relationship and develop ours as well, Blue prints would will help out a lot. We are in the Tax (Revenue) administration Industry.

Regards

what are you trying to accomplish with an "Operational model"?

  1. show conceptually how each sub-unit creates value
  2. help drive implementation of the business model you created?
  3. some other reason

If [1], consider just creating a canvas for each department (actually I'd just skip department and go to the team level since thats the closes unit to execution)

  • Customer Segments = other departments/teams or some external customer (for outside facing teams)
  • Key Activities = processes or process steps each team does
  • Value Proposition = a bit tricky since this concept doesnt translate directly
  • Revue Streams = as is or in it's an internal team, KPIs of 

If [2] you might want to consider using something like OKRs to define what each department needs to do to make the entire business model work

Thank you so much Mukom.

Our objective is to to realize a hybrid of your submission of 1 and 2. We want to cascade the Business model down to the departments or functional units so that they get a feel of their contribution to the BMC.  This will point out what they must focus on to have the business model implemented.

Please share any Business model and corresponding Operating Model that you have worked on so that I get a view of how you represented it diagrammatically.

I'm unable to share those in a public forum. However, we can do a skype call and discuss how you might go about that and I'll walk you through some examples.

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