Target Operating Model (TOM)
A target operating model (TOM) is a desired future state of an organisation. In order to articulate the desired future state it is essential that many different components, or layers are considered. The diagram below outlines the TOM framework for Orbis. The following is an illustrative example of a roadmap for change from June 2015.
What is a Target Operating Model?
A Target Operating Model (TOM) is a strategic blueprint outlining an organization’s desired future operational state. It acts as a bridge between strategic intent and operational execution, encompassing processes, data, people, and systems orchestrated to achieve organizational goals. It defines how the organization will function, where it will operate, and when it will achieve its objectives. The TOM serves as a roadmap for transformation, outlining the steps needed to move from the current state to the desired future state. It provides a clear and concise vision for the organization, aligning all departments and functions towards a common goal.
A well-defined TOM helps organizations streamline processes, improve efficiency, and enhance their overall performance. It ensures that all operational aspects are aligned with the organization’s strategic objectives, leading to greater consistency and effectiveness in delivering products and services. It also facilitates communication and collaboration across different departments, ensuring everyone is working towards the same goal.
Why is a Target Operating Model Important?
A Target Operating Model (TOM) is crucial for several reasons. First, it provides a clear and concise vision for the organization’s future state, aligning all departments and functions towards a common goal. This alignment helps to ensure that everyone is working towards the same objectives, leading to greater consistency and effectiveness in delivering products and services.
Second, a TOM helps to streamline processes, improve efficiency, and enhance overall performance. By identifying and addressing inefficiencies in the current operating model, organizations can achieve significant cost savings and improve their competitiveness. Third, a TOM facilitates communication and collaboration across different departments, ensuring everyone is working towards the same goal. This improved communication and collaboration can lead to better decision-making and faster implementation of initiatives.
Finally, a TOM helps to manage risk and ensure compliance with regulations. By clearly defining the organization’s operational processes and controls, organizations can mitigate potential risks and ensure that they are meeting all applicable regulatory requirements.
Key Components of a Target Operating Model
A comprehensive Target Operating Model (TOM) encompasses multiple key components, each contributing to the overall effectiveness of the organization. These components are interconnected and work together to achieve the desired future state.
One crucial component is the organizational structure, which defines the reporting lines, roles, and responsibilities within the organization. Another essential element is the process model, which outlines the key business processes and how they are interconnected. The technology infrastructure plays a vital role, encompassing the IT systems, applications, and data that support the organization’s operations.
The people component focuses on the skills, knowledge, and capabilities of the workforce, ensuring that the organization has the necessary talent to execute its strategy. Finally, the performance management system is crucial for monitoring and measuring the organization’s progress towards its goals, ensuring that the TOM is delivering the intended outcomes.
Target Operating Model Development Process
Developing a Target Operating Model (TOM) is a systematic process that involves several key steps. The process begins with a thorough analysis of the organization’s current operating model, identifying its strengths, weaknesses, and areas for improvement. This analysis helps to establish a baseline and provides insights into the organization’s current capabilities.
Next, the organization must define its strategic objectives and translate them into specific operational requirements. This involves identifying the desired future state for the organization and outlining the key changes needed to achieve it. The development process then focuses on designing the TOM, incorporating the identified operational requirements and outlining the organizational structure, processes, technology, people, and performance management systems.
The final step involves implementing the TOM, which includes making necessary changes to the organization’s structure, processes, systems, and workforce. This implementation requires careful planning, communication, and change management to ensure a smooth transition.
Example of a Target Operating Model
A Target Operating Model (TOM) can be illustrated with an example from a retail company aiming to enhance its online presence and customer experience. The company’s current operating model is fragmented, with separate teams managing physical stores, online sales, and customer service. The TOM aims to consolidate these functions into a single, integrated team responsible for the entire customer journey, from online browsing to in-store purchases and post-sale support.
This TOM would involve restructuring the organization, integrating technology platforms, streamlining processes, and developing new skills within the team. The company would need to invest in a robust e-commerce platform, implement a centralized customer relationship management system, and train employees on omnichannel customer service practices. The TOM would also define key performance indicators (KPIs) to track progress, such as online sales growth, customer satisfaction scores, and operational efficiency.
By implementing this TOM, the retail company would be able to offer a seamless and personalized experience to its customers, regardless of their preferred channel. This would ultimately drive revenue growth, improve customer loyalty, and enhance the company’s competitive advantage.
Implementing a Target Operating Model
Implementing a Target Operating Model (TOM) requires a well-defined plan, clear communication, and strong leadership to ensure successful transformation.
Challenges of Implementing a Target Operating Model
Implementing a Target Operating Model (TOM) can be challenging due to various factors. One significant hurdle is resistance to change from employees who may be apprehensive about new processes, technologies, or roles. The complexity of the transformation process itself, involving multiple departments and stakeholders, can also pose a challenge. Lack of clear communication and buy-in from leadership can further hinder implementation. A successful TOM implementation requires a well-defined plan, clear communication, and strong leadership to address these challenges.
Benefits of Implementing a Target Operating Model
Implementing a Target Operating Model (TOM) brings numerous benefits to organizations. It helps align operations with strategic goals, leading to improved efficiency and effectiveness. By streamlining processes, reducing redundancies, and optimizing resource allocation, TOM can result in cost savings. It also enables organizations to respond more effectively to market changes, adapt to new technologies, and enhance customer experience. A well-defined TOM can attract and retain top talent, create a more agile and responsive organization, and ultimately contribute to long-term success and growth.
Best Practices for Implementing a Target Operating Model
Successfully implementing a Target Operating Model (TOM) requires a strategic and systematic approach. Start by defining clear objectives and a compelling vision for the future state. Involve key stakeholders from all departments and levels to ensure buy-in and participation. Prioritize change management to mitigate resistance and foster adoption. Develop a phased implementation plan with realistic timelines and milestones. Use data and analytics to track progress, identify areas for improvement, and demonstrate the value of the TOM. Regularly review and adapt the TOM as needed to ensure it remains aligned with evolving business needs and market dynamics.
Tools and Resources for Implementing a Target Operating Model
A variety of tools and resources can streamline the implementation of a Target Operating Model (TOM). Process mapping software facilitates the visualization and analysis of current and future processes. Data analytics platforms help identify areas for improvement and measure the impact of changes. Change management tools provide structured frameworks for managing the transition process. Consultancy firms specializing in TOM development offer expertise and guidance. Online platforms provide access to industry best practices, case studies, and templates. Leveraging these tools and resources can enhance the efficiency, effectiveness, and success of TOM implementation.
Target Operating Model Examples
Examples of Target Operating Models (TOM) can be found in various industries, including retail, technology, and healthcare.
Target Operating Model for a Retail Company
A retail company’s target operating model should focus on enhancing the customer experience, optimizing supply chain efficiency, and leveraging digital technologies. For instance, a retailer aiming for an omni-channel strategy would need a TOM that aligns all distribution channels into a single operating model. This model should facilitate customer access to different channels, ensuring a seamless and consistent experience across online, mobile, and physical stores. The TOM should also address aspects like inventory management, order fulfillment, and customer service, aiming for optimized processes across all channels.
Target Operating Model for a Technology Company
A technology company’s target operating model should prioritize innovation, agility, and rapid response to market changes. This requires a flexible organizational structure, efficient development processes, and a strong focus on data and analytics. For example, a technology company might adopt a product-centric operating model. This approach focuses on delivering value through specific products, aligning resources and teams around these offerings. This model fosters collaboration and innovation, allowing the company to quickly adapt to evolving market demands and technology trends.
Target Operating Model for a Healthcare Company
A healthcare company’s target operating model should be centered around patient care, emphasizing quality, safety, and efficiency. This requires a focus on integrated care delivery, robust data management, and a strong emphasis on technology adoption. For instance, a healthcare company might adopt a value-based care operating model. This approach focuses on delivering high-quality care at a lower cost, incentivizing providers to improve patient outcomes while managing expenses. This model often involves data-driven decision making, close collaboration between healthcare professionals, and a focus on preventive care.
A target operating model is a critical tool for driving organizational transformation and achieving strategic goals.
Key Takeaways on Target Operating Models
A Target Operating Model (TOM) serves as a strategic roadmap for future operations, outlining how, where, and when an organization should function; It acts as a bridge between strategic intent and operational execution, encompassing processes, data, people, and systems to achieve organizational objectives. The TOM ensures alignment between an organization’s strategy, capabilities, and resources, enabling it to deliver its value proposition effectively. It is a dynamic tool that evolves with changing business conditions and market trends, fostering agility and adaptability; Implementing a TOM involves a comprehensive approach, considering factors like governance, technology, and organizational structure. By aligning strategy with operations, the TOM empowers organizations to optimize their performance, enhance efficiency, and achieve sustainable growth;
Future of Target Operating Models
Target Operating Models (TOM) are poised for significant evolution as organizations navigate a rapidly changing landscape. The integration of Artificial Intelligence (AI) and automation will be central to future TOMs, transforming processes, enhancing decision-making, and optimizing operations. Data analytics will play a pivotal role, enabling data-driven insights and continuous improvement. The rise of cloud computing will further fuel the adoption of agile and scalable operating models. TOM will increasingly embrace a customer-centric approach, focusing on delivering personalized experiences and value. Organizations will prioritize building a culture of innovation and agility, empowering employees to adapt and thrive in a dynamic environment. The future of TOM will be characterized by a focus on sustainability, ethical considerations, and a commitment to responsible business practices. As organizations embrace these trends, TOM will become even more critical in achieving strategic goals and securing long-term success.