Operating model vs business model

Often ‘operating model’ and ‘business model’ are used interchangeably, however there is a slight difference.

Commercially, a business model is the overarching vision as to how an organisation generates value. Value is highly subjective and is determined by the customer.

An operating model refers to the tangible processes and channels that deliver on the business model.

To demonstrate, we look at two different established companies – fast food conglomerate McDonald’s and health and home care product business Amway.

McDonald’s business model provides value through taste and experience in aiming to be the customer’s “favourite place and way to eat and drink” while Amway’s business model generates value by their products “helping people lead healthier lives”.

In looking at their operating models, both companies have adopted unique systems that they believe best deliver the endeavoured value for their respective customers.

McDonald’s operating model

  • Primary operating model is through its customer channels in-dining, takeaway, drive through and home delivery.
  • Secondary operating models include its franchise offering, nationally recognised staff training systems and best practice supplier program.

Amway’s operating model

  • Primarily works on a direct selling or a social marketing distribution model, enabling individual customers to on-sell Amway’s products to their personal networks which removes the need (and associated cost) for physical shelf space in a retailer.

Attributes of an effective operating model

  • Aligns to the business model: If the value proposition is convenience, the operating model would consider automation, e-commerce and supply chain optimisation. If its luxury, the model will emphasise shop front presence, visual merchandising and social influencing.
  • Customer centric: The customer is at the heart of the operating model.
  • Actively captures continuous improvement: Customer feedback, employee surveys and regular reviews.

What will operating models look like for the hospitality industry?

Here are some ideas of how the industry’s operating models may change post-pandemic.

  • Increased emergence of ‘dark kitchens’ for takeaway-only businesses.
  • Venue space mobilisation through food trucks, vans or similar replications of a Cafe2U model.
  • Diversification of offering through adding consignment pantry items, cooking classes or providing pop-up dinner experiences at people’s homes.
  • Move towards direct delivery and away from third-party delivery platforms.

For more information and guidance of how you can re-model your business, visit Sabella Consulting.