Understanding Target Operating Models

One of the services I offer businesses is to help them design and implement a target operating model - but what does that actually mean?

Target Operating Model or TOM as its commonly referred to is one of those phrases that’s banded around by management consultants, strategists and senior leaders and I’m sure a lot or people nod along, but are sat thinking what does that actually mean?

I suspect the major consultancy brands will all have various descriptions on what a TOM is and what it enables, but what does it mean for me and the clients I work with?

In simple terms it’s a model that allows businesses to turn their strategy into action - it’s a tool that can be used to operationalise the strategy, taking the strategy and thinking through what that means for:

🕸️ How the business is organised in terms of structure

🔁 What processes exist and where they are undertaken

💻 The technology that’s deployed

👮 The governance that exists

👥 The people capabilities - the number, skills / capabilities, remuneration and reward, culture

Whilst it’s simple to describe, designing a target operating model takes time and often benefits from an external perspective - someone who’s seen different models in action and can provide a view of the pro’s and con’s of the various options available.

So now you know a bit more about them, why do you need one, or why should you change your current operating model?

Change in business is inevitable; regulations change, customer behaviours change, new products are launched, new technology is introduced, leaders change, reduce costs and in the main as a result of all of these things processes change. But do businesses use these changes as an opportunity to revisit their operating model or do they get on with delivering the change and then move on to the next item on the list?

As a result the organisation evolves over time, cultures emerge, customer journeys become complicated and cumbersome, hand-offs occur, multiple-touch points, skill gaps emerge, people don’t feel connected to the strategy. At best you become inefficient, at worst you’re off course and not aligned with the strategy anymore.

I recommend that businesses take time to assess whether their operating model is fit-for-purpose; optimised for efficiency and aligned with the strategy. But, it’s one of those tasks that takes some time to complete and is often a distraction from the day job for busy executives - it can also bring internal politics and tension - especially as it can result in change to reporting lines, which is often a reason why businesses put it off.

This is where utilising an external consultant can really help - the assessment can be done without disrupting trading, you get the benefit of a fresh pair of experienced eyes and a dispassionate view of what needs to be done.

Of course once you’ve designed your TOM, the next phase is implementing it…that’s not so simple, but the good news is, I can help with that too!

If this resonates, or you want to know more, get in touch.