Key takeaways
- An operating model turns business strategy into consistent execution by aligning people, processes, governance, technology, and commercial capabilities.
- A target operating model provides a roadmap for future growth and helps organizations adapt to changing customer and market demands.
- Organizations that place customers at the center of their operating model are better positioned to improve collaboration, customer retention, and profitability.
- Modern operating models combine customer-centricity, product thinking, and agility to support long-term business transformation.
- Successful operating model transformation focuses on measurable commercial outcomes rather than organizational restructuring alone.
How to design an operating model for profitable growth
Businesses today operate in an environment defined by constant change. Customer expectations evolve quickly, new technologies reshape industries, and economic uncertainty requires leaders to make faster, more informed decisions. At the same time, organizations are managing increasingly complex commercial ecosystems, with multiple channels, expanding product portfolios, and growing demands for personalization. Under these conditions, even the strongest strategy can fall short if the organization lacks the ability to execute it effectively.
This is where an operating model becomes a critical competitive advantage. More than an organizational structure or a collection of business processes, it defines how strategy is translated into day-to-day execution. It determines how decisions are made, how teams collaborate, how technology enables performance, and how customers ultimately experience the business. A well-designed operating model allows organizations to respond to market changes while maintaining focus on sustainable, profitable growth.
The most effective operating models are designed with commercial performance in mind. Aligning pricing, sales, marketing, customer success, and product strategy creates stronger decision-making across the customer lifecycle while supporting sustainable, profitable growth.
What is an operating model and why does it matter?
An operating model describes how an organization delivers its strategy. While strategy defines where a company wants to compete and how it intends to win, the operating model establishes how the organization will make that ambition a reality. It provides the framework that connects vision with execution by defining how people, processes, technology, governance, and commercial capabilities work together to create value.
Because every organization has unique objectives, there is no universal operating model. A software company scaling a subscription business requires different capabilities than a manufacturer expanding into new markets or a healthcare provider redesigning patient services. Regardless of industry, however, every successful operating model answers the same fundamental questions: Who makes decisions? How do teams collaborate? Which capabilities should be prioritized? And how can the organization consistently deliver value to customers while achieving its financial objectives?
An effective operating model extends well beyond organizational charts. It encompasses governance structures, business processes, performance management, digital capabilities, talent, incentives, and data. These components should not function independently. Instead, they must reinforce one another to ensure that strategic priorities are reflected in everyday decisions across the organization.
This alignment has become increasingly important as businesses navigate digital transformation and rising customer expectations. Many organizations invest heavily in technology or redesign internal processes, only to discover that commercial performance remains unchanged because teams continue working in silos. Marketing pursues one set of priorities, sales another, while customer success and product teams operate with different objectives altogether. The result is fragmented decision-making and inconsistent customer experiences.
A modern operating model addresses these challenges by creating greater alignment across the commercial organization. Governance establishes clear accountability, shared data improves decision-making, and common performance metrics encourage collaboration instead of competition between functions. Rather than optimizing isolated departments, the organization becomes aligned around delivering customer value and achieving profitable growth.
Many organizations develop ambitious commercial strategies but continue operating with structures designed for a different stage of growth. Pricing decisions become disconnected from customer value, product launches lack commercial alignment, and customer success teams struggle to identify expansion opportunities because critical insights remain siloed across functions.
Operating models should never remain static. As markets evolve, customer expectations shift, and new technologies emerge, organizations must continuously refine how they operate. The strongest businesses treat their operating model as a strategic capability that evolves alongside the business rather than as a one-time organizational design exercise.
Building a target operating model for sustainable growth
While understanding the current operating model is important, organizations must also define how they want to operate in the future. This future-state vision is known as the target operating model. Rather than describing today's organizational reality, it establishes the capabilities, governance, processes, and commercial structure needed to achieve long-term strategic ambitions.
A target operating model provides direction during periods of growth and transformation. Whether an organization is expanding internationally, introducing subscription-based services, integrating artificial intelligence, or improving customer experience, these initiatives often require fundamental changes to the way the business operates. Without a clear target operating model, transformation efforts frequently become disconnected projects that improve individual functions without strengthening overall business performance.
Step 1: Define the commercial objectives
Developing a target operating model begins with understanding the organization's commercial objectives rather than redesigning organizational structures. Leaders should first identify where future growth will come from, which customer segments they want to prioritize, and how they intend to differentiate themselves in the market. These strategic decisions then shape the capabilities the organization must develop over time.
Step 2: Assess the current operating model and identify gaps
The next step is assessing the current state. This includes evaluating governance, technology, organizational capabilities, commercial processes, and customer journeys to identify gaps between today's operating model and future requirements.
In many cases, organizations discover that operational complexity stems less from inadequate resources than from unclear accountability, inconsistent decision-making, or duplicated activities across business functions.
Step 3: Design the future-state operating model
Once these gaps have been identified, organizations can begin designing a future operating model that aligns commercial priorities with operational capabilities. This often involves clarifying decision rights, simplifying governance, strengthening cross-functional collaboration, and ensuring that technology supports rather than complicates business processes.
Just as importantly, organizations should align performance metrics and incentives with desired business outcomes so that every function contributes to common commercial objectives.
Step 4: Align the operating model with profitable growth
A target operating model should ultimately support profitable growth rather than operational efficiency alone. Organizations that redesign their operating models solely to reduce costs often overlook opportunities to improve pricing, strengthen customer relationships, increase sales effectiveness, or accelerate innovation.
A commercially focused target operating model should therefore connect operational decisions to the areas that create and capture value across the business.
Step 5: Continuously review and refine the operating model
Building a target operating model is an iterative process rather than a single transformation project. Business priorities evolve, customer expectations change, and competitive landscapes shift. Organizations should therefore treat the target operating model as a living framework that is reviewed and refined regularly instead of a fixed destination.
This approach enables leaders to continuously improve execution while maintaining alignment between strategy and operations.
A successful target operating model ultimately creates an organization that is more agile, more collaborative, and better equipped to respond to future opportunities. Instead of reacting to disruption, businesses develop the capabilities needed to anticipate change and convert it into sustainable competitive advantage.
Combining product and agile working principles
As organizations become increasingly digital, operating models have evolved beyond traditional functional hierarchies. Many businesses are adopting product-led and agile ways of working to improve collaboration, accelerate innovation, and respond more effectively to changing customer needs. While these concepts are often discussed separately, they are most effective when implemented together as part of a broader operating model transformation.
A product operating model organizes cross-functional teams around products or customer solutions rather than projects or departments. Instead of assembling temporary project teams that disband once an initiative is complete, organizations establish dedicated teams with ongoing responsibility for developing, improving, and commercializing products throughout their lifecycle. This continuity enables faster learning, stronger ownership, and closer alignment between customer feedback and product decisions.
Successful product operating models extend beyond engineering or product management. Pricing specialists, marketers, sales leaders, customer success teams, and commercial analysts all contribute to shaping product strategy. By integrating commercial expertise earlier in the product lifecycle, organizations are better equipped to develop offerings that meet customer needs while supporting sustainable profitability.
An agile operating model framework complements this approach by creating the organizational flexibility needed to adapt continuously. Agility is often misunderstood as simply working faster or adopting Agile methodologies. It is about enabling better decisions through empowered teams, transparent governance, and continuous learning.
Organizations with agile operating models establish clear strategic priorities while giving teams the autonomy to respond quickly to customer feedback and market developments. Leadership shifts from directing every operational decision to providing guidance, removing barriers, and ensuring that teams remain aligned with broader business objectives. At the same time, strong governance ensures that flexibility does not come at the expense of accountability.
Technology and data play a critical role in supporting both product and agile operating models. Integrated customer insights, performance dashboards, AI-enabled analytics, and digital collaboration tools allow leaders and teams to make more informed decisions based on real-time information rather than assumptions or outdated reporting cycles.
For organizations pursuing business transformation, combining product thinking with agile principles creates a more resilient operating model. It enables faster innovation, improves collaboration across commercial and operational functions, and helps organizations adapt to evolving customer expectations without losing strategic focus. Rather than becoming an end, agility becomes a capability that supports sustainable commercial growth.
Turning operating model transformation into measurable business results
Designing a new operating model is only the beginning. The real challenge lies in embedding new ways of working across the organization and ensuring that structural changes translate into measurable business outcomes. Too many transformation programs focus on organizational redesign without addressing the leadership, governance, and capabilities required to make those changes successful.
Effective operating model transformation begins with a clear vision of the business outcomes the organization wants to achieve. Whether the objective is accelerating growth, improving profitability, increasing customer retention, or expanding into new markets, every design decision should support those strategic priorities. When organizations focus on structure before strategy, transformation efforts often lose momentum and fail to deliver lasting impact.
Leadership commitment is equally important. Executive teams must consistently communicate the purpose of the transformation, align incentives across functions, and reinforce the behaviors needed to support the new operating model. Employees are far more likely to embrace change when they understand how it contributes to both organizational success and customer value.
Organizations should also recognize that operating model transformation is a continuous process rather than a one-time initiative. Markets evolve, technologies advance, and customer expectations shift. Regular reviews of governance, commercial performance, and organizational capabilities help ensure that the operating model continues to support business strategy over time.
Success should ultimately be measured through business outcomes rather than project milestones. Metrics such as revenue growth, pricing realization, customer retention, customer lifetime value, sales productivity, speed of decision-making, and profitability provide a more meaningful picture of whether the operating model is delivering value. Monitoring these indicators allows leaders to identify opportunities for further refinement while maintaining alignment between strategy and execution.
The most successful operating model transformations are anchored in commercial impact. Aligning growth strategy, pricing, sales, marketing, and customer success within a single operating model enables organizations to improve execution while building capabilities that support long-term profitability.
Making your operating model work
A dynamic operating model enables organizations to move beyond strategy and execute with confidence. By aligning governance, technology, commercial capabilities, and organizational processes around customer value, businesses become more agile, more collaborative, and better equipped to navigate change.
Whether you're developing a target operating model, redesigning your commercial organization, or strengthening collaboration across pricing, sales, marketing, and customer success, the goal should always be the same: creating an organization that delivers sustainable, profitable growth.
At Simon-Kucher, we partner with organizations to design operating models that connect commercial strategy with execution and create measurable business impact. Contact our commercial advisors to explore how we can help you build an operating model that supports your growth ambitions.
FAQs around operating model
What is an operating model?
An operating model is the framework that defines how an organization executes its strategy. It aligns people, processes, governance, technology, and performance management to deliver value to customers and achieve business objectives.
What is a target operating model?
A target operating model describes the future-state capabilities an organization needs to achieve its long-term strategy. It provides a roadmap for aligning organizational design, governance, technology, and commercial functions with future business goals.
What makes an operating model customer-centric?
A customer-centric operating model aligns functions such as product, pricing, sales, marketing, and customer success around delivering consistent customer value. It uses customer insights to guide decision-making and encourages collaboration across the entire customer lifecycle.
How do you measure the success of an operating model transformation?
Organizations should evaluate both operational and commercial outcomes. Common metrics include revenue growth, profitability, pricing effectiveness, customer retention, customer lifetime value, sales productivity, and the organization's ability to respond quickly to changing market conditions.