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A target operating model (TOM) represents the operating model that businesses want to achieve in the future and helps them to build a roadmap around it to make the necessary changes.
A strong TOM which aligns with your businesses goals is a great tool to ensure your business is moving in the right direction. But how can you ensure that your future vision is realistic, achievable, and commercially viable?
In this article, we share 6 tips for designing a target operating model that really works for your organisation, including pointers to ensure that there’s a realistic plan for the necessary transformation.
Let the data lead
The most important pointer for any business working on a TOM is to let data lead their decisions, both in terms of where they need to get to and the journey they’ll take to get there.
This may involve scrutinising client journeys, reviewing cost analysis across the business or a deep dive into the supply chain, based on their needs. Using data as a guide will ensure that assumptions aren’t being made about the business and is the biggest safeguard to ensure that any changes implemented answer a genuine need, and won’t cause future problems.
Formulate based on outcomes
When designing a TOM, it’s important to ensure that the specific needs of the company are being met. A clear understanding of the outcomes the business wants to achieve is crucial.
One way to ensure clarity around the desired outcomes is to ask specific questions, framed in the right way, e.g. ‘What does this process need to achieve?’ as opposed to ‘How should this process run?’.
Leading with change rather than outcome can often mean that you end up with an overcomplicated system or enter an unnecessary and costly transformation, that doesn’t truly answer a problem.
It’s important to be specific when defining these outcomes and highlight specific variables that should or should not be subject to change.
For example, ‘We need to achieve cost savings of x across the manufacturing process, without compromising on material quality or extending timescales’ as opposed to ‘We need to cut costs in our manufacturing process’.
Build in agility
For start-ups and small businesses, TOMs tend to be built on shorter timescales and with more flexibility built in, to cater to the rapid change these companies commonly undergo.
However, agility in the TOM has benefits for larger businesses as well, as the last few years have highlighted. This agility can help them respond to market changes and widespread disruption, take advantage of emerging trends, and respond to customer demand.
Designed for phased delivery
There’s nothing wrong with an ambitious TOM if it’s truly the right path for a business to take, but when extensive transformation is required to achieve it it’s important that there is a clear plan for phased delivery to ensure it’s achievable.
Not only should the plan clearly set out what needs to be achieved in each phase, but it should also ensure that each phase creates a viable operating model in its own right and won’t create additional vulnerabilities within the business.
Define KPIs and measure success
Clearly defined KPIs are an essential part of any business transformation. A TOM which has been created based on outcomes should naturally include KPIs that help the business to measure success and make any adjustments.
Allow realistic timescales
Based on the size or the organisation scale of transformation needed to implement the TOM, timescales could vary drastically – from a few months to several years.
Being realistic when setting timescales means the business will be able to plan its resources, budgets and growth better and will prevent a situation where transformation is being rushed.
Do you need help designing a robust target operating model? We help our clients develop a framework that optimises the business and improves cost efficiencies to deliver the business strategy.
You can read more about how we can help with your TOM here or get in touch to find out more about what our operating strategy experts can do to support your business.
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