Leading with Strategy

12Business Models and Operating Models: The Blueprint for Success

The words “strategy,” “strategic plan,” “business model,” and “operating model” are highly interrelated and interdependent concepts. Here I want to explore these questions: What exactly is an operating model? How does it relate to the business model? And why does this distinction matter?

The reason why the distinction matters is simple yet profound: Understanding the relationship between these two concepts is essential for building a company that doesn't just have a great idea but actually can execute it at scale. A strong business model defines the opportunity, but an effective operating model ensures it can be delivered consistently and efficiently.

The Business Model: The “What” of a Company's Strategy

At its core, a business model is a company's way of generating revenue. It answers fundamental questions:

• Who are our customers? (customer segments)
• What value do we create for them? (value proposition)
• How do we make money? (revenue streams)

Think of the business model as the architectural design of the value creation of the company. It sets the vision, the product offering, and the way the business interacts with its market.

For example, Netflix operates on a subscription‐based business model. It delivers value by offering unlimited, on‐demand streaming content in exchange for a recurring monthly fee. ...