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Let's all get clear on Target Operating Models

Posted 06 February 2020
by Caroline Mills

What is a Target Operating Model?

A future view of where your organisation is headed in all its components. For example, capability, processes, structure, culture, governance – all the parts that make up the operating model of the organisation in the future.

Why we need it?

For any organisation creating something new, transforming or changing something, it is critical to ensure they understand their future state Target Operating Model.  Through our consulting work at Allegra we regularly see projects/programs/transformations fail to achieve their goals because they have not done the groundwork on getting clear, at an appropriate level of detail, about how they want their future state to look.

Generally, an operating model is centred around how the organisation delivers value to its customers. Two important points in that sentence – one is that it is all about CUSTOMER VALUE and the other is about the DELIVERY of that value, in all its parts. Let me unpack this some more.

It is not an Organisational Structure

We often see organisations thinking they defined their Target Operating Model work because they have an Organisational Structure. An Organisational Structure is just one of the component parts of the overall Target Operating Model.

The operating model is a vital feed into doing great Change Management and specifically the Impact Assessment piece of work. As Change Practitioners we are often trying to “imagine” the future and do our change planning based on this future, with the organisation thinking they have already defined their desired future state or simply do not understand the need to do so.

Defining your Target Operating Model goes beyond having defined your visions, mission, strategic goals and creating an organisational structure – these are just some components of the overall picture.

Component

Your Target Operating Model might have components, such as, Capabilities, Processes, Systems & Technology, Organisational Design & Structure, Governance, Communication & Information Flow, Metrics/Reporting, Culture, Customers, Channels, Products, Policies and so on.

These components are different for all organisations, however, defining your Target Operating Model ensures you are clear about all the parts and what they look like in the future. Then you can assess how these components are impacted by the change or transformation program you are leading.

Let me give you an example

Let’s say we were going to build a house together. We are a community of people that are going to live in that house together when it is done – and we all think we are clear on what the finished house looks like. But when I sit down and talk to each of you, it turns out we have different views of the detail – you think it has four bedrooms and three bathrooms; however, Mary thinks it has five bedrooms and two bathrooms. Paul thinks we have dimmer lights and Clare thinks it will run on solar energy. This is a simple example yet in organisations executives often have entirely different ideas on how the various components of the operating model are set up and managed – with the assumption other executives have the same view as them.

Following on from our example, we now want to refurbish the house. Mary organises the new bathroom on the left side, but the plumbing is on the right side.  Clearly defining and agreeing on your Target Operating Model is about diving into the detail, so you know where the organisation is going and how it will fit with what you currently do.

Then what?

Now you have done the groundwork to ensure a consensus. The next step is to develop and put in place some great change management plans to move the organisation from that Current Operating Model to the Future Operating Model… but that’s for another blog!

If you want to learn more about Target Operating Models and perhaps how to facilitate your organisation in building one or at least know how to talk the lingo with your Business Sponsors/Owners and Product Owners, then come along to our Masterclass – Tracey and I would love to see you there!

You can find out more information or register for the masterclass here.

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