It’s tempting to jump straight into the fun bits of starting a business, like naming your store, designing a logo, or perfecting your website. But before you can open your virtual doors, you need to understand how your business will run behind the scenes. That’s where your operating model comes in.
In a world where AI, automation, and digital transformation are reshaping entire industries, your operating model provides clear guidance. It turns big goals into day-to-day actions and helps you stay flexible when the market (inevitably) shifts.
In this guide, learn what an operating model is and the different frameworks you can use to implement one, and discover real examples you can draw inspiration from.
What is an operating model?
An operating model translates strategy into execution by defining how a business will achieve its goals. It sets the structure for how you work and organize your teams, how technology supports the business, and how you provide value.
A strong operating model spells out who owns what work, how people make decisions, what tools power the work, and how the business tracks results.
Most companies capture this on a single page—a high-level view that considers core components like organizational structure, key workflows, governance, and business metrics.
Rather than wading through dense manuals, teams and leaders can see at a glance how the business is built to run—and where it can evolve as strategy shifts.
Operating model vs. business model vs. business strategy
An operating model is not the same as a business model, although some may use the terms interchangeably. Nor is an operating model the same as a business strategy.
Here’s how to distinguish a business model from an operating model, versus a business strategy.
| Concept | Definition | Focus | Timeline | Key question |
|---|---|---|---|---|
| Business model | Explains what the business is and the core way it makes money, including value prop, customer segments, and revenue streams. | How the business creates and captures value. | Medium to long term (generally stable unless the business pivots). | How do we make money? |
| Business strategy | Outlines the long-term goals, market position, mission, vision, and competitive advantage the business wants to achieve. | Where the business is going and how it will get there. | Long term (evolves as markets shift). | What are we trying to become? |
| Operating model | Defines how the business will execute the strategy through organizational structures, management processes, tools, and day-to-day activities. | How the business runs to achieve its goals. | Short to medium term (more dynamic and frequently updated). | How do we deliver on the strategy? |
What is a business model?
A business model explains what your business is and how it makes money. It drills down into your value proposition, your customers, and your main revenue streams.
A business model is like a blueprint for how you create and deliver value. For example, you might say, “We’re a coffee retailer that makes money through monthly coffee subscriptions and direct-to-consumer sales.” This simple statement anchors all other decisions, like pricing, marketing, and business operations.
What is a business strategy?
Your business strategy outlines where you’re trying to go and the competitive advantage you want to achieve. It expresses your long-term ambitions, establishing priorities and helping you decide where not to focus.
The goal driving a business strategy might sound something like, “We want to become the leader in US coffee retailing.”
A solid strategy also highlights your business’s industry advantages, such as product quality, operational efficiency, or competitive price points.
How operating models differ
An operating model explains how you will turn your business strategy into reality. It translates ambitions into the day-to-day business processes and core capabilities needed to execute your big-picture plan.
For example, that same coffee business might say, “We will use a direct-trade buying model, eliminating the need for importers; we will use our subscription model to reduce our risk of holding unsold coffee; and we will invest in brand storytelling to highlight our values.”
A well-designed operating model shapes everything from the supply chain to customer service to marketing workflows. A strong operating model also solidifies decision-making, roles, tools, and performance measures. Basically, it shows how the business runs in order to reach its strategic goals.
Operating models are dynamic, flexible, and subject to change as the business evolves. Because they’re more abstract, business models and business strategies may remain in place longer.
Companies often think of an operating model in two ways: the current model, reflecting how the business is run, and a target model, reflecting how it could be run more efficiently.
7 key elements of an operating model
- Key priorities
- Work processes
- Business structure
- Workforce organization
- Technology
- Governance and decision-making
- Suppliers and partners
The business world is full of pep talk and buzz phrases about how your business can develop an operating model. Cut through the verbiage, however, and you’ll find that the right operating model typically has these seven elements:
1. Key priorities
Your operating model should lay out the measurable objectives you intend to meet and a timeline for achieving them. It should also detail your target customers, customer segments, and geographical scope.
Imagine an ecommerce business that sells bed and bath goods. Its strategic priorities might be to become a leading online retailer of mid-priced products for the bedroom and bathroom in the US, and to reach $100 million in annual sales in three years.
2. Work processes
It’s important to document how work is done in each part of the business and which systems are used in the workflow. For instance, the online bed and bath retailer above would have a work process for the merchandise team that specifies how the team contracts with suppliers and how it establishes systems to manage inventory.
3. Business structure
The organization’s structure is a breakdown of business teams, departments, or functions, detailing how the teams interact and collaborate, and how lines of authority and responsibility are formed.
4. Workforce organization
The workforce organization section of your operating model covers the types of workers to be hired, their team or department assignments, and their roles. The model can include ways to increase employee retention, such as opportunities for education and advancement, and explain the corporate culture the business wants to create.
5. Technology
Your technology could range from trucks to hand tools, although in today’s economy, this section will likely cover information technology, such as computer systems, software, telecommunication, websites, and data networks.
6. Governance and decision-making
Governance defines who has the authority to make decisions, how those decisions are made, and how the business holds people accountable.
It sets clear decision rights, including what gets decided at the leadership level, what’s delegated to teams, and what requires cross-functional alignment. It also outlines the frameworks used to evaluate any trade-offs and manage risk.
Strong governance keeps any bottlenecks at bay and helps ease any confusion over ownership.
7. Suppliers and partners
Suppliers and partners play a very important role in how value flows through the business, especially as companies rely more and more on external capabilities.
This component of the operating model defines who you work with, why you’ve chosen them, and how the relationships support your business. It covers everything from sourcing, logistics, and technology vendors to agencies and strategic collaborators.
Benefits of an operating model
An operating model can help a business in the following ways:
- Strategic alignment. A good operating model brings everyone onto the same page about how the business actually works and what matters most.
- Performance clarity. Clear business processes and expectations make it easy to track what’s working and what’s slowing you down. With the right measures in place, you can spot bottlenecks, improve workflow efficiency, and control costs, all of which directly improve margins and customer satisfaction.
- Scalable growth. An operating model helps you increase sales, streamline operations, and spot areas for improvement as you grow—rather than constantly patching problems when they crop up.
- Smarter investment decisions. It’s much easier to invest with confidence when you know how the business runs and where it’s headed.
- Clearer communication. A well-defined operating model makes it much easier to communicate business performance to employees, investors, partners, and even customers.
Operating model frameworks: key approaches
There are several adaptive operating model frameworks, and the one you choose will depend on the kind of business you run and howyou run it.
Here’s the lowdown on some of the most common frameworks:
- POLIST framework/POLISM model (Operating Model Canvas). This framework provides a holistic view of how to build an operating model. It can help your organization map out workflows, teams, and locations, information systems, suppliers and partners, and management, performance, and governance systems.
- McKinsey & Company’s Organize to Value system. McKinsey’s 12-element operating model emphasizes that operations must evolve in response to digital, social, and global disruption. Once mapped, its 12 components (which include leadership, governance, talent, and rewards) form a unique operating model “fingerprint” to help companies close the gap between strategy and performance.
- Bain & Company Operating Model Framework. Bain positions the operating model as the blueprint that turns strategy into execution, focusing on six core areas.Their approach emphasizes designing clear decision-making structures, removing unnecessary complexity, and ensuring that resources go toward the things that actually create value.
- PwC Operating Model Blueprint. PwC offers an iterative framework designed to bridge business strategy and operational resources. They emphasize an operating model that is consistent yet flexible, and guided by executive leadership, in other words, implemented from the top down.
How to develop an effective operating model
Business owners and consultants often use checklists to gather the information they need to implement an operating model. Each system, from McKinsey’s to Bain’s to PwC’s, has its own set of components. Here’s what the widely used POLIST approach includes:
The POLIST framework
P for processes
This operating model component covers the processes for making, marketing, and delivering a business’s product or service. For example, an ecommerce retailer’s operating model could explain in detail how it manages inventory and fulfills orders.
O for organization
In this section, operating model designers will outline the types of people doing the work and how they are organized—for example, by well-defined functions and departments, or loose, cross-functional teams and outsourced third-parties. HR management teams are a crucial resource here.
L for location
Even virtual businesses have some kind of physical presence. An operating model should specify where people and assets are located, and whether they’re concentrated in central offices and working in close quarters or dispersed and operating remotely.
I for information
Every business runs on information; this part of the operating model articulates how a company uses and shares technology. Businesses with specific departments and defined functions may share less information between teams than more loosely organized businesses that emphasize collaboration.
S for support
All businesses need administrative help, from payroll and human resources to customer support. Business partners and suppliers may also serve in support roles, and an operating model should detail these working relationships.
T for timetable
Most businesses have several important calendars or timelines to include in this section. For example, an operating model for an online retailer might set a three-day timetable from shipping to delivery. The business might also set a quarterly calendar for planning and budgeting conferences, and include monthly reviews for team and employee performance.
Implementation and change management
It’s important to have an implementation plan in place when you’re executing a new operating model. Start with a clear transition road map that outlines what’s changing, when it’s happening, and how each team will support—and be supported—along the way. The goal is to move from the current state to the future state with minimal disruption to daily business operations. Here are some essential components of an operating model implementation plan:
- Stakeholder communication. Leaders need to explain not just what is changing, but why, and how those changes connect to business goals, team workloads, and customer outcomes.
- Pilot testing. Before rolling out new organizational structures or processes across the business, it’s smart to test them with a smaller team or region. This lets you validate assumptions, identify friction points, and refine workflows without risking major disruption. Pilots also give you real feedback from the people who will be using the new model every day.
- Rollout. Once pilots are complete, the rollout phase begins. This typically happens in waves to keep the transition manageable. Businesses should provide training, updated documentation, and ongoing support to make sure the new operating model sticks.
-
Analysis. It’s important to measure performance while the rollout is happening to confirm the changes are working—or to adjust as necessary.
Successful operating model examples
Here, five operating model examples show how well-known brands, from direct-to-consumer disruptors to global giants, turn strategic ambition into action. Each of these operating model transformations highlights a different way of organizing people, processes, and technology to deliver value and stay competitive.
1. Glossier
Glossier built its business by skipping the middlemen and going straight to customers. Everything (from product development to marketing to packaging) is done in-house, giving the brand total control over the look, feel, and quality of every product. Its community-driven approach—where customers help determine what comes next—has become a key part of how Glossier runs and grows.
2. Society6
Society6’s operating model allows creators to upload designs, pick the products they want to put them on, and set their own markups. After that, Society6 takes over by printing, shipping, handling returns, and overseeing basically everything that happens post-sale.
The marketplace platform doesn’t hold inventory, doesn’t manage a giant warehouse of prints, and doesn’t employ an army of designers. Because it relies on a community of artists to refresh its product catalog, Society6 can focus on logistics.
3. Jeff de Bruges
Jeff de Bruges is a great example of how a franchise can blend a strong physical presence with a modern ecommerce setup. It has more than 500 stores, which it ties together with a centralized online experience.
The model works because each store operates independently, while the brand uses Shopify to keep everything like branding, customer experience, and its product catalog aligned.
4. PepsiCo
PepsiCo used to be all about beverages, but it reworked its operating model to include snacks and food, which has massively paid off. Today, nearly half of its profits come from brands like Lay’s, Doritos, and Quaker. Its strength lies in a flexible setup that combines powerful distribution channels, ecommerce, and semi-independent business units. That mix keeps PepsiCo agile, dominant in snacks, and able to grow across global markets.
5. Dollar Shave Club
Dollar Shave Club made waves by turning razors into a subscription business. Customers sign up and get products delivered straight to their doors. Behind the scenes, Dollar Shave Club’s smart logistics and fulfillment systems keep things running smoothly and predictably. The brand also sells business to business (B2B) to Walmart and Target to diversify its revenue streams.
Operating model FAQ
When should an operating model be updated?
You may need to update your operating model if your business isn’t hitting its goals or if it has outgrown its original model.
How can operating models align with business strategy?
Imagine a company that grew rapidly and is now having problems with customer satisfaction and rising product returns—either because customers received the wrong merchandise or they disliked the quality.
Low customer satisfaction can drag on business goals, which might include winning a specific market share. In this case, the company needs to revise its operating model by updating its order-fulfillment team and sales-processing software, or by changing suppliers and producing better products.
What are the main operating model frameworks?
Some of the most common operating model frameworks include:
- POLIST (or POLISM), which maps out processes, organization, locations, information, suppliers, and management systems
- McKinsey’s 12-element model, which focuses on aligning structure and culture to strategy
- Bain’s operating model framework, built around decision rights and accountability
- PwC’s operating model blueprint, which connects business capabilities to value delivery
What's the difference between current and target operating models?
The current operating model shows how your business runs now, including its existing structure, processes, tools, and culture. The target operating model describes how you want it to run in the future. The gap between the two helps leaders plan transformation projects and track progress over time.
How long does an operating model redesign take?
It depends on the size and complexity of the business, but most operating model redesigns take from three months to over a year. Smaller teams can move quickly, while larger organizations may need phased rollouts, pilot programs, and change management efforts that stretch the timeline. The key is balancing speed with thoughtful execution so the new model actually sticks.
