Target Operating Model
Achieve a step change in terms of what you do or how you perform. Translate your strategic objectives into a target operating model that identifies and communicates a vision of what the future looks like in terms of people, organisation, process and technology
Transformation is fundamentally about delivering strategy through a step-change in what your organisation does or how it performs. Typically that will be about achieving some form of competitive advantage through a new or enhanced customer offering or through superior performance through more efficient or more effective operations.
Whatever strategy, there needs to be an internal conversation about what the desired should look like – a vision the future state. An organisation has multiple aspects or layers, such as its ; people and culture, organisation and structures, systems, data and infrastructure, policies and processes. All these layers need to work together and so the future vision needs to reflect how each of these layers will be and how each layer impacts the others. This is the essence of a Target Operating Model (TOM).
Without a TOM, there is a tendency to jump into re-structuring without the necessary skills, systems support, facilities or ways of working to make the restructuring a success. As the restructure approaches the gaps become apparent and line management pick-up a damage limitation exercise. Tactical work-rounds often become embedded long term and many of the benefits are never realised.
TOM design approaches and formats vary and reflect the strategy driving the transformation. For competitive advantage, a common approach is to describe how things should work from a customer viewpoint and use that to define the underlying capabilities to support the customer proposition. For efficiency, the approach may be to look at the value chain and use that to inform how processes can be re-engineered to be more cost effective – or alternatively, a more radical zero-base approach may be taken.
The TOM is built top-down with the integrity of each level across all layers checked before going into more detail. This continues to the minimum level at which where we are able to agree, communicate and plan change meaningfully. More detailed design work can then proceed in implementation programmes and projects with the TOM used as a reference guide throughout. This ensures that individual functions can take accountability for the way they operate while ensuring the integrity of the whole.
Things will change and the TOM should be reviewed, challenged and updated both during and after implementation. Responsibility for this should lie with a cross-functional change board or Design Authority.