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Home > Services > Strategy > Target Operating Model
A Target Operating Model (TOM) very often forms the bridge between a strategic direction set by leadership and a roadmap of change initiatives to establish new business activities, services, behaviours and outcomes.
We help our clients solve some of their toughest strategic problems through our structured and robust approach to strategy development whilst also having the practical delivery experience to know how to successfully implement the associated changes to ways of working. The result is a well thought-through operating model, aligned to your business strategy that you can be confident will be deliverable and successful in the ‘real world’.
The phrase ‘Target Operating Model’ means many different things to different organisations and people. The truth is that there is no right or wrong answer – the context of any particular business will determine the components that, when assembled together, make a useful and valuable TOM.
For us, a Target Operating Model simply describes how a business will operate at a point in the future. Broadly speaking, we’d usually expect a TOM to cover the processes, controls, systems and organisation (roles and responsibilities) required to fulfil the strategic objectives. Its purpose is to describe the key changes required in sufficient detail that the impact and levels of investment required to deliver the new strategy can be assessed. The TOM is also a critical element in engaging and communicating with key stakeholders the shifts required to achieve the desired strategic outcomes.
Whatever the content of your TOM, the watchword is alignment.
The real value of designing an operating model is in ensuring that the business is aligned to its strategic ambitions and goals, and that all sub-components, however many or few you have, are aligned and working together in harmony to make the business succeed. Without making a conscious effort to develop a cross-functional operating model design, it can sometimes be easy for functional silos to develop and grow, resulting in a lack of alignment with strategic goals across the organisation.
Developing a winning TOM will often challenge functional boundaries, requiring a good level of open-mindedness and collaboration across the business. Cross-functional working can sometimes come with a little friction. This is more likely to be a challenge in organisations which have operated in discrete functional silos for some time and there is now a need to challenge that and achieve greater alignment between functions.
In such cases, it is critical that leaders and decision-makers are aligned on the strategic goals of the business, that time is invested in bringing stakeholders on a journey, and that the overall sponsor has the authority to set direction and mediate as necessary.
Our independence and collaborative style lend themselves nicely to helping you involve and engage the right stakeholders, in the right way, to develop an operating model that has the support of your cross-functional leadership team.
Our extensive delivery experience can help you to avoid the common pitfalls that can result in a beautifully-crafted TOM being undeliverable or unadopted and reduced to expensive shelf-ware.
Involving representation from across the business, people with real operational knowledge and experience of your current business reality, rather than designing in isolation, will improve the quality and utility of your TOM.
Designing the operating model with implementation in mind will help to bring tangible benefit to the business sooner. For example, considering quick wins that can be implemented in the short-term and transition states that can be achieved gradually over the medium to long-term to bring phased change to the business.
Once you’ve invested the time and effort to design and implement a new operating model, you will want to know how well it’s performing, how well it is supporting your strategic objectives, and what business results it’s helping you to attain.
Considering the key drivers of business success alongside your operating model design will allow you to build-in the information and measures which will you will use, via your decision-making and leadership arrangements, to steer the business towards its strategic and operational goals. Practically, this often takes the form of KPIs, management reporting dashboards and balanced scorecards aligned to your strategic objectives.
Creating a target operating model represents a disciplined approach to really thinking through how you are going to drive strategic change across your business. It is essential that all aspects of your operation are aligned and work in concert. Developing a Target Operating Model is however challenging, as it involves a cross functional, cross business programme that has to be driven from the very top of the organisation.
Neil McClumphaPartnerContact Neil McClumpha