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Target Operating Model: Definition, Value and Approach

Target Operating Model

This Capstera article provides an overview, approach, and benefits of a Target Operating Model.

Target operating model (TOM) is a blueprint of a firm’s business vision that aligns operating capacities and strategic objectives and provides an overview of the core business capabilities, internal factors and external drivers, strategic and operational levers, organizational and functional structure, technology, and information resources of a company.

How is Target Operating Model different than a strategy?

Business strategy and priorities change frequently based on external factors whereas a TOM provides the foundation and flexibility required to execute the firm’s initiatives. A strategy is an integral part of helping achieve the target operating model and the TOM, in turn, influences the strategies.

Why should one develop a Target Operating Model?

  • Provides a big picture of what the future steady state business may look like across business and technology domains
  • Focuses on both hard and soft skills – structures, systems, staffing, style and shared values
  • Showcases how an organization or a business unit can deliver value and the value drivers thereof
  • The fundamental constructs of a TOM will help provide the building blocks to define business architecture and systems architecture

Target operating model (TOM) is a blueprint of a firm’s business vision that aligns operating capacities and strategic objectives and provides an overview of the core business capabilities, internal factors and external drivers, strategic and operational levers, organizational and functional structure, technology, and information resources of a company.

What is the Value derived from a Target Operating Model?

  • A vision is an abstract dream whereas a target operating model is a simple construct of a future steady state business model and value drivers
  • A Target Operating Model helps with internal consistency, vertical integrity, and horizontal fluidity
  • Brings everyone on the team to the same page and will engender a sense of purpose and a shared mission
  • Detailed work derivatives from a TOM can help optimize resources, maximize effectiveness and accelerate the path forward

What is a potential approach to crafting a Target Operating Model?

  • In general, a TOM is a result of several weeks of a bottom-up effort of data gathering, analysis, interviews, workshops and envisioning sessions. However, in the interest of time, one may want to adopt an accelerated and simplified methodology to design the TOM.
  • The team should collect existing information from the envisioning sessions, business case, and other program level artifacts to compile a straw model.
  • Essential program personnel can validate the model
  • Then conduct a facilitated workshop to work on refining the straw model to build the TOM

For more information on how Capstera consulting services can assist firms in the construction of a target operating model, please contact Capstera by completing this form.

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