Target operating model

Target operating model (TOM) is a description of the desired state of the operations of a business. Typically a TOM also includes the roadmap over time that specifies what the company needs to do to move from the "as is" to the "to be".[1] A TOM will describe any or all of the following:

  1. processes and capabilities;
  2. the people that are needed to run the processes or deliver the capabilities, and the organisation structure, accountabilities, incentives and culture that will support and nurture these people;
  3. the information systems needed to support the processes and capabilities, especially the software applications that are needed to process the information;
  4. the locations, buildings, infrastructure and other assets and resources needed inside the organisation to support the processes and capabilities;
  5. the suppliers and business partners needed outside the organisation to support the processes and capabilities and the types of agreements between this organisation and these partners.

A frequently used shorthand for TOM work is process, people and technology.[2]

Target operating models provide the vision for organisations undergoing change. The reason for any new TOM is likely to be a new strategy or new business model or a significant failure in the performance of the existing operations for one or more stakeholders. Hence TOM work should be closely linked to strategy work. Form follows function; in other words TOM follows strategy.

A good place to start is with a value-chain map.[3] First identify the product/market segments that the organisation is serving. Clarify the offer being given to each segment. Then define, for each segment separately, the value chain of activities that is needed to deliver the offer. Different value chains can then be compared side by side in order to identify steps in the chain or activities that can be "aggregated" to gain economies of scale or "standardised" to gain consistency or "separated" to gain local adaptation. These choices then lead directly to organisational implications.

TOM work can be done at different levels of detail. At the highest level is the strategy or the design principles. Then comes a rough sketch, probably in the form of a value chain map or organisational model. Then comes more and more layers of detail arriving finally at job descriptions for every job, floor layouts for offices or factories, KPIs for every department, draft contracts for every supplier, data input and output specifications for every software application, etc.

See also

References

  1. ↑ Said Business School & University of Oxford – Strategic Consulting Projects - viewed on January 16th 2014
  2. ↑ http://www.ashridge.org.uk/dom viewed on September 10th 2015
  3. ↑ http://www.ashridgeonoperatingmodels.com viewed on September 10th 2015

Further reading

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