Target Operating Model (TOM), is not used universally across industries just yet. But what exactly is it and why bother with it?
Well imagine building a house or doing an extension, would you do it without doing any planning or design work? Would you go on a whim and just make it up as you go along? Of course not, well a TOM is like a blueprint but instead of a house it is a blueprint for your business.
There are different approaches towards defining such a blueprint, I however tend to use a two step approach:
1) Operating Model analysis- quite often there is no Operating Model to begin with, what i mean by this is there is no definition of a business on a few pages recorded anywhere. It is captured in detailed organisational models and IT architecture diagrams, but there rarely a higher level documentation that states this is how our business works and how we interact with our suppliers/partners/customers/clients. Therefore the first step is to document the current state and identify where the key challenge areas are. This, along with strategy, helps to identify focus areas for the organisational design that highlight how the organisation will need to transform
2) Target Operating Model design – based on all of the inputs, operating model needs to be tweaked, it is usually to do with streamlining communications or at certain times merging or de-merging business units to fit with the new strategy or address any specific business challenges.
Once you have your initial TOM defined, you can map organisation (people), processes and technology on top of it to add complexity depending on the depth of analysis required, however you are always able to bring it back to the core TOM, which is easily accessible to everyone within the organisation from Senior Management to people on the ground that face customers every day.
Despite all of the documentation and complexities around designing a TOM, the true beauty of it is its simplicity as a good TOM sets a framework for the rest of the organisation to operate within and helps address key pinch points that stop organisation from expanding.