Is a Target Operating Model Right for My Organisation?
When to Implement a Target Operating Model
Is a Target Operating Model Right for Your Organisation? Assessing the Key Indicators
Overview
How to Decide, Is This the Right Time?
Choosing to implement a Target Operating Model (TOM) is a significant decision, requiring a clear understanding of the organisation’s needs and objectives. TOM offers structure, alignment, and operational consistency but is not a one-size-fits-all solution. Organisations in various stages of growth or transformation may benefit from a TOM, yet understanding when to apply it is crucial. By assessing organisational goals and current operational pain points, leaders can determine if a TOM is the right next step.
This article explores scenarios that commonly indicate the need for a TOM, covering unique requirements across sectors and organisational stages. We will also look at how frameworks like CCPOLDAT+ and POLISM support the adaptation of TOM to fit the specific operational demands of any business type.
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Introduction
Introduction to TOM Suitability
Implementing a Target Operating Model can help organisations achieve alignment, consistency, and improved efficiency, yet it’s essential to assess whether a TOM aligns with the organisation’s goals and timing. TOM is particularly beneficial during periods of growth, operational restructuring, or post-merger integration, when alignment and structured guidance are most needed.
Assessing key indicators like expansion plans, operational challenges, or strategic goals can provide a clear signal of when TOM may be beneficial. By understanding these signs, organisations can approach TOM implementation with clarity, maximising its effectiveness.
Most organisations create a strategy, don't they? And that will usually consist of a view of what they think they need to do to adapt to the external environment and use the internal capabilities they have within the organisation to deliver that strategy.
However, quite often it's written in consultancy type jargon really, and they throw it over the fence, they walk away, this is the strategy people in the strategy team or external consultants they bring in.
They give some very nice PowerPoints of what the strategy actually is. And then the poor program managers and project managers and people have to make it happen, look at it and say, well, what does that actually mean? And that's where the Target Operating Model comes into play really.
It's taking a strategy and saying, well, you know, this is where we are today.
- What do we need to build or change to make this strategy happen?
- What do I need to get rid of?
- Is there anything new we need to do?
- Is there anything we need to amend or adjust? And it's basically designed to communicate what that strategy means in real terms.
- What is this place going to look like at that future date that's been prescribed that the strategy wants to deliver?
- And it needs to come from all different perspectives. And we call these views. So it's a communication exercise, really
Indicators That a TOM May Be Needed
Here are some common organisational scenarios where implementing TOM can drive substantial value:
Post-Merger or Acquisition Integration
Mergers and acquisitions bring new systems, people, and cultures that need to be unified. A TOM creates a common framework that aligns these elements with the merged entity’s strategic direction, minimising disruptions and supporting a smooth transition. By providing a consistent operating structure, TOM ensures that both organisations contribute effectively to the new goals.
Digital Transformation
Many organisations today are adopting digital tools and processes to stay competitive, yet integrating these systems effectively can be challenging. A TOM provides an operational foundation to guide digital adoption, ensuring that new technology aligns with strategic goals without disrupting current workflows. For example, a healthcare provider might use TOM to integrate electronic health records (EHR) systems, aligning them with clinical workflows for improved patient care.
Scaling or Rapid Expansion
As organisations grow, existing processes and structures often struggle to keep up. TOM offers a scalable framework that can handle increased demands, helping teams work effectively within the new scale. For a tech startup entering multiple new markets, TOM can ensure consistent service delivery and customer experience across regions.
Compliance and Regulatory Change
Industries such as finance, healthcare, and insurance face stringent regulatory standards that can change frequently. TOM helps these organisations structure compliance efforts within an adaptable operational model. For instance, a financial services firm undergoing regulatory shifts might use TOM to build compliance into core processes, ensuring seamless alignment with new rules.
Operational Inefficiencies or Fragmentation
If an organisation experiences inconsistencies across departments or persistent inefficiencies, TOM can offer a path to address these issues. By mapping out processes, structures, and technologies, TOM identifies misalignments and inefficiencies, providing a clear plan to improve them.
Benefits of TOM for Different Organisation Types
A well-designed TOM provides unique benefits based on an organisation’s type and growth stage. Here’s how TOM supports various organisational needs:
Startups
For startups, establishing an adaptable yet structured foundation is essential for growth. TOM helps new businesses map out scalable operations, setting up processes, roles, and technology that support rapid scaling without compromising quality. By defining clear processes early, startups can avoid the pitfalls of disorganisation as they grow.
Medium-Sized Enterprises
For organisations that are already established but face operational inconsistencies, TOM can provide a structured approach to improve performance and support future growth. TOM helps these businesses optimise existing processes and reduce redundancies, ensuring that resources are aligned with strategic priorities.
Large Corporations
Larger organisations benefit from TOM by ensuring consistency across complex, multi-site operations. TOM establishes a standardised operating model that adapts to local requirements while maintaining global alignment. For instance, an international manufacturing firm might use TOM to standardise production processes, reducing variations across facilities and ensuring quality.
Adapting TOM Using CCPOLDAT+ and POLISM Frameworks
Two popular frameworks—CCPOLDAT+ and POLISM—provide structured, adaptable approaches to TOM. Each offers specific focus areas that help organisations design TOM according to their unique needs.
CCPOLDAT+
The CCPOLDAT+ framework includes critical elements such as Customers, Capabilities, Processes, Organisation, Location, Data, Applications, Technology, and Security. By addressing these elements, CCPOLDAT+ helps organisations design TOM that aligns with both operational and strategic requirements. For example, focusing on Technology and Security within CCPOLDAT+ allows businesses to ensure that new technology aligns with compliance requirements, such as data security standards in financial services.
POLISM
POLISM is structured around Process, Organisation, Location, Information, Sourcing, and Management, focusing on flexibility and operational alignment. This framework is ideal for organisations undergoing rapid transformation. For instance, POLISM’s Sourcing component helps companies align vendor partnerships with their operational goals, ensuring third-party services support TOM objectives effectively.
Practical Applications Across Sectors
A well-designed TOM adapts to the specific requirements of each industry. Here’s a look at how TOM benefits various sectors:
Financial Services
Financial institutions often need to align complex regulatory requirements with efficient operations. TOM provides a model to structure compliance workflows while maintaining service quality, enabling these institutions to respond swiftly to regulatory changes without compromising customer experience.
Retail
Retail businesses face challenges like inventory management, supply chain optimisation, and customer service consistency across multiple locations. TOM enables retail chains to align these functions, providing a structured approach that supports expansion and enhances customer satisfaction. A retail chain undergoing rapid growth might use TOM to streamline its supply chain, reduce delivery times, and improve service.
Healthcare
In healthcare, TOM is often used to standardise patient care protocols, improve data integration, and enhance service quality. By aligning clinical workflows with administrative processes, TOM supports a consistent standard of care across locations. For example, a hospital network may use TOM to improve data sharing across sites, ensuring that patient information is readily accessible and up-to-date.
Conclusion: Deciding If TOM Fits Your Organisation
Deciding to implement a Target Operating Model is a strategic choice that can reshape an organisation’s operations, bringing alignment, scalability, and efficiency. By understanding the key indicators and assessing whether TOM aligns with the organisation’s current needs, leaders can make informed decisions that maximise TOM’s effectiveness.
Whether addressing rapid growth, integrating new technology, or improving compliance, a TOM provides the foundation to meet complex operational challenges with structure and clarity. For organisations aiming to achieve a balanced, adaptable approach to growth and efficiency, TOM serves as a valuable framework, especially when supported by frameworks like CCPOLDAT+ and POLISM that ensure every aspect of the model aligns with strategic goals.
Further Resources
Want to explore how a TOM could transform your operations?
- Useful Links
- Chris Fox , of StratNavApp, our Strategic Partner, explains how TOM fits into a strategy
- Take a look at The Sixsess Consultancy’s “Insights” Blog
- Join us on one of our residential courses or call us to arrange your own organisation’s bespoke in-house Target Operating Model course
Barry Eustance CMgr MCMI
Principal Change & Transformation Consultant
