Why a target operating model is important

Outlining how various elements like processes, technology, governance, and people should interconnect, a target operating model serves as a strategic framework to help organisations meet their business objectives. Project One expert Helen Baker explains why firms need a target operating model, and how it can help to shape transformational change.

Project One is a business transformation consultancy. Founded in 1998, the firm has led over 2,000 change initiatives for customers including AstraZeneca, BAE Systems, Rolls-Royce, Elgin Energy, Northumbrian Water Group, VMO2, Unilever and Government and Public Sector bodies.

According to Helen Baker, a transformational change leader at Project One, this has given the company particular insight into target operating models (TOMs). Explaining what that means via the firm’s website, she noted that a TOM

“captures the future vision for how an organisation (or part of an organisation) will operate in the future – all on one page”. This means “all the layers including organisational design, people and skills, data, technology, processes and governance” – and how they all fit together.

Noting why this is important, she added, “Without this, elements will develop in a disjointed way leading to inefficiency and future rework, and reduced probability of achieving the organisational targets – it’s like building the walls of a house without having an architecture diagram showing where the wiring and plumbing will go.”

TOM: What is it good for?

According to Baker, the central point of a TOM is “about communication”, as it helps to make complex information easy to understand in a single image. As a result, “reaching a consensus and avoiding mismatches in interpretation” between stakeholders becomes possible – increasing the functionality of a business.

She went on, “When asked, leaders often say they’re all clear on the vision and yet we find that each one would draw a somewhat different picture if asked to show how the future organisation would work - or in fact would not be able to articulate the vision in this form at all.  Those key stakeholders who need to will approve the TOM, and the others can be shown it as the target state to align behind.”

Ultimately, then, a TOM can help decrease ambiguity, and provide an opportunity to bring likely challenges to the table so that a company can agree around working assumptions. Building the firm around this picture therefore becomes like assembling a puzzle using “the front of the jigsaw box” for help.

At the same time, because TOMs support the leadership of the business with understanding priorities and focus areas of today, a key benefit is that they allow businesses to also build for the future successful delivery of the strategic goals.

Baker concluded, “Every team contributing to the final picture will be able to drive towards the final vision state with greater clarity and efficiency if there is an agreed TOM.  For example, it helps HR to recruit the right skills at the right time to the agreed framework Org structure - or release the right ones. It helps IT to know who else needs to be involved for the associated people, data and process changes as they implement systems, and it enables leadership to build new capabilities into the DNA of an organisation such as cyber-security. The list goes on.”