Let's all get clear on Target Operating Models

What is a Target Operating Model?

A Target Operating Model is a strategic framework for a future view of where your organisation is headed in all its components. For example, capability, processes, structure, culture, and governance all make up the organisation's operating model in the future.

In other words, it manifests an organisation's vision and strategy by defining HOW a business functions, including the capabilities, processes, data, people, and systems required to keep itself running.

Why do we need it?

For any organisation that is creating something new, transforming or changing something, ensuring they understand their future state Target Operating Model is critical. Through our consulting work at Allegra Consulting, 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. That sentence makes two important points - one is that it is all about customer value, and the other is about delivering that value in all its parts. Let me unpack this some more.

Learn about how a Target Operating Model can become the blueprint of your organisation's vision

Allegra Consulting hosts regular Target Operating Model workshops. If you want to learn more about Target Operating Models, facilitate your organisation in building one, or at least know how to talk the lingo with your Business Sponsors/Owners and Product Owners, keep an eye out for a workshop near you here. 

It is not an Organisational Structure

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

The operating model is vital to excellent Change Management, specifically the Impact Assessment work. As Change Practitioners, we often try 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 do not understand the need to do so.

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

Components

Your Target Operating Model might include components such as:

• Capabilities
• Processes
• Systems and Technology
• Organisational Design and Structure
• Governance
• Communication and Information Flow
• Metrics/Reporting
• Culture
• Customers
• Channels
• Products
• Policies

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 will 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, we have different views of the detail. For example, you think it has four bedrooms and three bathrooms; however, Mary believes it has five bedrooms and two bathrooms. Paul thinks we have dimmer lights, and Clare believes 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, assuming that other executives have the same view as them.

Continuing with 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?

You have done the groundwork to ensure a consensus. The next step is to develop and implement great change management plans to move the organisation from that Current Operating Model to the Future Operating Model, but that's for another blog!