What is a Target Operating Model?
TOM - Understanding the Basics
Overview
What is a Target Operating Model and Why Does it Matter to My Business?
A Target Operating Model (TOM) is a framework designed specifically to bridge the gap between an organisation’s strategy and its daily functions, guiding every team, process, and resource towards shared objectives. Unlike a high-level strategy document, a TOM is highly actionable, providing structure and clarity across functions to make the organisation’s goals a practical reality.
This article explores the core components of TOM, what makes it unique compared to other business frameworks, and its practical applications across industries. By examining the TOM from all angles, we can understand how this model becomes a blueprint for creating consistent, scalable, and efficient operations that stay true to an organisation’s purpose.
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Table of Contents
In this guide you will learn about:
Defining a Target Operating Model
A Target Operating Model (TOM) is a structured approach to operational alignment that translates strategic intent into defined, actionable elements across the organisation. While strategies may outline objectives or desired outcomes, TOM offers the “how” – it clarifies roles, responsibilities, and processes, enabling each team and resource to work in sync with the organisation’s larger goals.
TOM is particularly effective for organisations at pivotal stages, such as expansion, digital transformation, or post-merger integration, where clarity of function and purpose can mitigate risks and drive more efficient scaling. It is not a temporary strategy but an adaptable, enduring framework that can evolve along with organisational needs, continuously refining how resources and processes are aligned to the company’s purpose.
most people create a target operating model, TOM, because they want to convert their fairly concise strategy document into something to inform the people that have actually got to do the transformation, and what they need to build. So it's an intermediate fleshing out, taking the strategy and turning it into meaningful things that need to be done"
How TOM Differs from Other Frameworks
Operating Frameworks
Operating frameworks typically focus on governance and decision-making structures, clarifying how authority is distributed within an organisation.
While these frameworks establish governance roles, they do not cover the complete operational blueprint provided by TOM.
A TOM integrates these governance principles with tangible processes and workflows, defining how each function and role contribute to strategic objectives.
When combined with detailed frameworks like CCPOLDAT+ (Customers, Capabilities, Processes, Organisation, Location, Data, Applications, Technology, and Security) and POLISM (Process, Organisation, Location, Information, Sourcing, Management), TOM can provide a flexible yet structured model that meets an organisation’s unique needs across departments and functions.
Business Model Canvas (BMC)
The Business Model Canvas (BMC) is a high-level, visual tool for mapping an organisation’s components – such as customer segments, value propositions, and revenue streams.
However, BMC is more concerned with what an organisation aims to accomplish than with the specific steps needed to get there. TOM provides this operational detail, bridging the gap between strategic vision and day-to-day execution.
Key Components of a Target Operating Model
Business Processes
Processes define how workflows are executed to ensure reliable, predictable results. Effective process design aligns with strategic objectives, ensuring that every function supports the organisation’s mission.
For instance, a logistics company might streamline its supply chain processes to improve delivery speed and service consistency.
Technology
Technology acts as an enabler within TOM, supporting scalability and adaptation. By clarifying the role of technology, TOM ensures that digital tools and infrastructure meet operational needs.
For example, a retail company may use TOM to integrate advanced analytics into its marketing processes, enhancing customer insights and personalisation.
People and Culture
Aligning people and organisational culture with strategic goals is fundamental to TOM. This component includes defining roles, responsibilities, and skills needed to achieve strategic objectives.
A TOM helps instil a shared purpose across the organisation, fostering collaboration and accountability.
A healthcare provider, for instance, may emphasise a patient-first culture, prioritising staff training and technology that support high-quality care.
Organisation Structure
An effective TOM provides a clear organisational structure, detailing reporting lines and role assignments. This reduces overlap, clarifies accountability, and streamlines communication.
In a tech company, for instance, a well-defined structure might separate R&D from operational functions, allowing each to focus on its specific contributions to innovation and customer support.
Location Strategy
TOM’s location strategy focuses on the strategic positioning of resources – whether physical or digital. This is critical for organisations with distributed operations.
For instance, a manufacturing company may use TOM to determine production sites based on logistics and proximity to customers, reducing costs and delivery times.
Performance Management
Performance management provides metrics and KPIs that measure how effectively the TOM is operating. This component supports continuous improvement, as organisations can use metrics to assess and refine processes.
For example, a financial services firm implementing TOM might track client satisfaction, service delivery time, and compliance as indicators of operational alignment with strategy.
Advantages of Implementing TOM
Enhanced Operational Efficiency
A Target Operating Model (TOM) improves efficiency by streamlining workflows and roles, helping organisations identify and fix gaps for better speed and quality. For example, a retail company can enhance supply chain processes to cut costs and respond to demand.
TOM is essential during expansion, digital transformation, or post-merger integration, providing clarity that reduces risks and supports scaling. It is an adaptable, ongoing framework that evolves with organisational needs, aligning resources and processes to company goals.
Adaptability and Scalability
A well-designed TOM provides a flexible structure that can evolve with the organisation. As companies adapt to market changes, TOM can be refined to meet new demands without disrupting core operations.
For example, a tech company might adjust its TOM as it adopts cloud infrastructure, ensuring seamless integration of new technology.
Strategic Alignment
Every component in TOM, from processes to performance management, is designed to support strategic objectives, ensuring consistency across the organisation.
This alignment helps organisations act with purpose and coherence, which is especially valuable during growth or transition.
Common Misunderstandings About TOM
Despite TOM’s broad applicability, misconceptions can lead to underutilisation. Here are some common misunderstandings:
Misconception 1: TOM is Only for Large Corporations
Misconception 2: TOM is a Static Framework
Misconception 3: TOM Only Focuses on Processes
Case Studies: TOM in Different Industries
Finance
Retail
Healthcare
Conclusion: TOM as a Framework for Strategic Consistency
A Target Operating Model provides organisations with a comprehensive, adaptable framework to align their operations with strategic goals.
By clearly defining components like processes, technology, and structure, TOM helps organisations create an efficient, cohesive model that supports sustained growth and operational success.
Whether during expansion, technological adaptation, or structural change, a well-designed TOM ensures that each part of the organisation operates in harmony with the broader mission. This clarity, efficiency, and adaptability make TOM a valuable tool for any organisation aiming to achieve both strategic and operational excellence.
About the author
Barry Eustance CMgr MCMI
Barry has over four decades of senior leadership experience. He has operated globally, and has successfully led very high value and successful negotiations.
Barry is Kotter Advanced Change Leader Certified, has been chartered by the Chartered Management Institute (ChMgr MCMI) and has been awarded the CMI Masters’ level Diploma in Professional Consulting.
Barry Eustance CMgr MCMI
Principal Change & Transformation Consultant
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