"Generating Business Value from IT" I: Operating ModelsLast spring Jeanne Ross, director of the MIT Sloan School's Center for Information Systems Research, taught a noteworthy course on "Generating Business Value from Information Technology," for which many of the materials are available online as part of MIT's OpenCourseWare program.
A central premise of the course is that companies need to define an operating model in order to be able to optimize their IT investments. Ross explains (pdf):
An operating model is the necessary level of business process integration and standardization for delivering goods and services to customers. By identifying integration and standardization requirements an operating model defines critical IT and business process capabilities ... [and thus] guides IT investment and enhances business agility. (emphasis in original)The graphic below lays out the four types of operating model that are determined by a company's integration and standardization choices.
As Ross outlines in the opening session (pdf):
- A company using the Coordination model operates unique business units with a need to know each other's transactions. Its key IT capability is providing access to shared data through standard technology interfaces. MetLife is an example.
- A company using the Unification model operates as a single business with global process standards and global data access. Its key IT capability is providing enterprise systems that reinforce standard processes and provide global data access. UPS is an example.
- A company using the Diversification model operates independent business units with different customers and expertise. Its key IT capability is providing economies of scale without limiting independence. Johnson & Johnson is an example.
- A company using the Replication model operates independent but similar business units. Its key IT capability is providing standard infrastructure and application components for global efficiencies. Marriott is an example.