In our previous article, we introduced you to the Target Operating Model, its core content and its objectives. In this article, we would like to complement this more theoretical perspective with a practical one and guide you through the process of conceptualising a TOM.
But first the question arises: "Who needs a Target Operating Model at all?"
The answer is simple:
whoever starts something new,
who changes strategy,
who has performance problems,
who are having difficulty implementing plans, and
who is facing major change
Once you have decided to set up a Target Operating Model, the journey can begin:
Step 1 - Determine the scope:
Should the model apply to the entire company or just to a single unit?
Step 2 - Bring the stakeholders together:
Identify the stakeholders involved and get a picture of the situation: Are there any conflicts of interest that need to be resolved? Is there general agreement on the scope and objectives of the project? If everyone is on the same page, you can move on to the next step.
Step 3 - Define the strategic objectives of the unit under consideration:
The main input to the model is the operational objectives from strategy development. If the scope is limited to a single unit, it is necessary to break down the corporate objectives to the unit and, if necessary, formulate separate divisional objectives. Once these have been defined, it is clear what to work towards and the actual work on the target operating model can begin.
Step 4 - Define your target processes:
Your processes form the value chain and have the greatest impact on achieving your goals, so they are designed first. All subsequent design decisions should be based on them. It is also beneficial to define design principles at this stage. These serve as guidelines and facilitate the subsequent design work.
Step 5 - Create the necessary structures:
To create the right conditions for achieving the goals, the organisation is now designed to support the processes in the best possible way - "form follows function". The four design areas are IT architecture, organisational structure, supplier relationships and corporate management / governance.
Step 6 - Optional:
Depending on the company, it may make sense to discuss the role of each location.
Outlook: In our next article on the Target Operating Model, we will examine the difference between the business model and the Target Operating Model.
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