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OPERATING MODEL

GET OFF THE DRAWING BOARD
DESCRIPTION
• Describes relationships between these business
  operating units, decision and process flow for the
  units.
• Describes how an organization operates across
  both business and technology domains.
• Describes what is important for the organization.
• Describes how the organization does business
  today.
• Describes how the business co-operates across its
  business units.
COMPONENTS


 BUSINESS
             TECHNOLOGY       PEOPLE
PROCESSES


      OWNERSHIP     METRICS
REASONS FOR DEVELOPING OPERATING
              MODEL
• Build reusable Core Capabilities
• Guide IT Investment decisions.
• Drive the architecture and infrastructure
  foundation that enables the company to grow
  its business either organically or through
  acquisitions.
• Implementation of business processes and IT
  systems.
HOW IS OPERATING MODEL
     DIFFERENT FROM STRATEGY?
• Business strategy and priorities change
  frequently based on external factors.
• Operating model provides the foundation and
  flexibility required to execute the firm’s
  initiatives.
TARGET OPERATING MODEL
• Align all components to effectively
  evaluate opportunities to
  maximize customer value.
   •   Business drivers are translated into new
       requirements that leads to a new Target
       Operating Model.


• Target Operating Model
  represents the high level
  requirements, that drives the
  future Business and IT
  development.
    – Developing the Operating Model
      at a very detailed level requires
      substantial resources in both the
      business units and IT.
CAPABILITY MAPS

TARGET OPERATING MODEL
DEVELOPMENT
BUSINESS CAPABILITY MAP
• A model of the firm associating the business
  capabilities, processes, and functions required
  for business success with the IT resource that
  enables them.
                      - Forrester
EXAMPLE – CAPABILITY MAP
TARGET OPERATING MODEL - POSSIBLE
   ORGANIZATIONAL STRUCTURES
2009 EXAMPLES

TARGET OPERATING MODEL
SHELL CHEMICALS
•    The Operating Model expresses the direction being followed by Shell Chemicals in
     delivering bulk petrochemicals to large industrial customers, through standardized     STRUCTURE
     global processes and at the lowest possible total cost. With sustainable
     development (SD) at its heart, the model also emphasizes the need for adherence to
     SD principles in all business areas.                                                   1. Base chemicals (lower olefins,
                                                                                               aromatics)
                                                                                            2. Styrene monomer/propylene oxide and
    DIFFERENTIATING                           THRESHOLD FACTORS                                derivatives
                                                                                            3. Ethylene oxide/ethylene glycols
    FACTORS                                                                                 4. Solvents/phenol
                                                                                            5. Higher olefins and derivatives
                                              1. Essential for the competitive positions
                                                 of the Shell chemicals companies in the
    1. Build strong customer relationships       petrochemical sector to be secured. For
                                                                                            CORE PROCESSES
       and offering customers the                example, the portfolio of businesses
       products, services and ease of            has to be balanced in line with the goal
       doing business that fits their            of delivering bulk petrochemicals.         •   Operations and HSSE
       needs.                                 2. Each of the businesses in the portfolio    •   New Business Development and
    2. Adopt standard global processes to        also has to operate to world scale and         Ventures
       ensure quick decisions and clear          capture the resultant economies of         •   Strategy and Portfolio
       accountabilities.                         scale.                                     •   Human Resources
    3. Right people, and the right            3. Working with the right cost structures,    •   Finance and Business Systems
       processes to ensure success. -            an imperative that has led to              •   Innovation and Technology
       underlying emphasis on building           substantial cost reductions in recent      •   Communications
       the ‘attributes’ and ‘behaviors’          years.
       among all Shell chemicals
       companies employees
GLAXOSMITHKLINE
•     GSK is a complex organization which has recognized the need to simplify the operating
      model to deliver on it’s strategic priorities. The company is removing unnecessary
                                                                                                     EVOLVE COMMERCIAL MODEL
      processes and structures. The new, simplified operating model will release more
      resources for investment and higher returns to shareholders.                                   One single commercial structure to support Europe,
                                                                                                     Emerging Markets and Asia Pacific/Japan. In the US,
TRANSFORM                                      REDUCE WORKING CAPITAL                                pharmaceuticals business was restructured. This
                                                                                                     includes the transformation of the US sales force as
MANUFACTURING                                                                                        well as the decision to designate a single
                                               •    Current working capital requirement is           headquarters for US Pharmaceuticals, located at
                                                    around £7 billion. In September 2008 GSK         Research Triangle Park, North Carolina to reduce
•   Manufacturing is a key capability at            started a program which has successfully         complexity and streamline US operations.
    GSK. Across the world manufacturing             delivered cash flow benefits of more than
    operation is taking an ambitious                £500 million.
    approach to transformation -
    matching network capacity to volume
    and leverage network of sites and          CORE PROCESSES
    contractors to ensure the flexibility to
    sustain growth and adapt to changing
    business models. Also simplifying          1.   Simplifying organization to speed up decision-making and improve alignment to business
    operating model to clarify roles and            priorities. There are many different programs and initiatives across GSK including a
    responsibilities, improve prioritization        comprehensive program to simplify and reduce costs in IT. Through an innovative partnership
    and decision making and introduce               with Microsoft Online GSK will produce financial savings, improve productivity and enhance
    simpler, more efficient ways of                 collaboration internally and with our external partners.
    working.                                   2.   Striving to ensure simpler and efficient cross-business processes and structures. For example, in
                                                    Asia Pacific, GSK simplified the approval processes with Health Maintenance Organizations and
                                                    public health bodies, resulting in an improvement in the quality of internal controls and savings on
                                                    approval and collection times.
JOHN DEERE
•   Combines strengths of
    Agricultural Division and
    Commercial & Consumer
    Equipment Division into single
    Agriculture and Turf Division
•   Aligned regions represent
    geographies with shared
    customer characteristics
•   Five product platforms manage
    worldwide development,
    manufacture and delivery of
    equipment and solutions
CONTINUING TO DEVELOP…..

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Operating Model

  • 1. OPERATING MODEL GET OFF THE DRAWING BOARD
  • 2. DESCRIPTION • Describes relationships between these business operating units, decision and process flow for the units. • Describes how an organization operates across both business and technology domains. • Describes what is important for the organization. • Describes how the organization does business today. • Describes how the business co-operates across its business units.
  • 3. COMPONENTS BUSINESS TECHNOLOGY PEOPLE PROCESSES OWNERSHIP METRICS
  • 4. REASONS FOR DEVELOPING OPERATING MODEL • Build reusable Core Capabilities • Guide IT Investment decisions. • Drive the architecture and infrastructure foundation that enables the company to grow its business either organically or through acquisitions. • Implementation of business processes and IT systems.
  • 5. HOW IS OPERATING MODEL DIFFERENT FROM STRATEGY? • Business strategy and priorities change frequently based on external factors. • Operating model provides the foundation and flexibility required to execute the firm’s initiatives.
  • 6. TARGET OPERATING MODEL • Align all components to effectively evaluate opportunities to maximize customer value. • Business drivers are translated into new requirements that leads to a new Target Operating Model. • Target Operating Model represents the high level requirements, that drives the future Business and IT development. – Developing the Operating Model at a very detailed level requires substantial resources in both the business units and IT.
  • 8. BUSINESS CAPABILITY MAP • A model of the firm associating the business capabilities, processes, and functions required for business success with the IT resource that enables them. - Forrester
  • 10. TARGET OPERATING MODEL - POSSIBLE ORGANIZATIONAL STRUCTURES
  • 12. SHELL CHEMICALS • The Operating Model expresses the direction being followed by Shell Chemicals in delivering bulk petrochemicals to large industrial customers, through standardized STRUCTURE global processes and at the lowest possible total cost. With sustainable development (SD) at its heart, the model also emphasizes the need for adherence to SD principles in all business areas. 1. Base chemicals (lower olefins, aromatics) 2. Styrene monomer/propylene oxide and DIFFERENTIATING THRESHOLD FACTORS derivatives 3. Ethylene oxide/ethylene glycols FACTORS 4. Solvents/phenol 5. Higher olefins and derivatives 1. Essential for the competitive positions of the Shell chemicals companies in the 1. Build strong customer relationships petrochemical sector to be secured. For CORE PROCESSES and offering customers the example, the portfolio of businesses products, services and ease of has to be balanced in line with the goal doing business that fits their of delivering bulk petrochemicals. • Operations and HSSE needs. 2. Each of the businesses in the portfolio • New Business Development and 2. Adopt standard global processes to also has to operate to world scale and Ventures ensure quick decisions and clear capture the resultant economies of • Strategy and Portfolio accountabilities. scale. • Human Resources 3. Right people, and the right 3. Working with the right cost structures, • Finance and Business Systems processes to ensure success. - an imperative that has led to • Innovation and Technology underlying emphasis on building substantial cost reductions in recent • Communications the ‘attributes’ and ‘behaviors’ years. among all Shell chemicals companies employees
  • 13. GLAXOSMITHKLINE • GSK is a complex organization which has recognized the need to simplify the operating model to deliver on it’s strategic priorities. The company is removing unnecessary EVOLVE COMMERCIAL MODEL processes and structures. The new, simplified operating model will release more resources for investment and higher returns to shareholders. One single commercial structure to support Europe, Emerging Markets and Asia Pacific/Japan. In the US, TRANSFORM REDUCE WORKING CAPITAL pharmaceuticals business was restructured. This includes the transformation of the US sales force as MANUFACTURING well as the decision to designate a single • Current working capital requirement is headquarters for US Pharmaceuticals, located at around £7 billion. In September 2008 GSK Research Triangle Park, North Carolina to reduce • Manufacturing is a key capability at started a program which has successfully complexity and streamline US operations. GSK. Across the world manufacturing delivered cash flow benefits of more than operation is taking an ambitious £500 million. approach to transformation - matching network capacity to volume and leverage network of sites and CORE PROCESSES contractors to ensure the flexibility to sustain growth and adapt to changing business models. Also simplifying 1. Simplifying organization to speed up decision-making and improve alignment to business operating model to clarify roles and priorities. There are many different programs and initiatives across GSK including a responsibilities, improve prioritization comprehensive program to simplify and reduce costs in IT. Through an innovative partnership and decision making and introduce with Microsoft Online GSK will produce financial savings, improve productivity and enhance simpler, more efficient ways of collaboration internally and with our external partners. working. 2. Striving to ensure simpler and efficient cross-business processes and structures. For example, in Asia Pacific, GSK simplified the approval processes with Health Maintenance Organizations and public health bodies, resulting in an improvement in the quality of internal controls and savings on approval and collection times.
  • 14. JOHN DEERE • Combines strengths of Agricultural Division and Commercial & Consumer Equipment Division into single Agriculture and Turf Division • Aligned regions represent geographies with shared customer characteristics • Five product platforms manage worldwide development, manufacture and delivery of equipment and solutions