Introduction
In today’s rapidly evolving technological landscape, defining a clear Target Operating Model (TOM) is crucial for organisations striving to bridge the gap between strategy and execution. For IT leaders - be it CIOs, CTOs, or CISOs - a well-constructed TOM offers a blueprint that ensures operational structures support business goals effectively, optimising resources while managing risks.
This article outlines the practical steps and considerations required for developing a Target Operating Model, drawing on over 25 years of UK IT leadership experience.
What is a Target Operating Model?
A Target Operating Model describes the desired future state of an organisation’s operations. It encompasses people, processes, technology, data, and governance arrangements with the aim of delivering value consistently and efficiently. Unlike a strategy document, which sets out the ‘what’ and ‘why’, the TOM details the ‘how’ - the structural and operational changes necessary to execute strategy.
Core Components of a Target Operating Model
Developing a TOM requires a holistic approach to the following components:
- Organisation and Governance: Defining roles, responsibilities, and decision-making processes.
- Processes and Workflows: Streamlining operations to reduce complexity and enhance agility.
- Technology: Mapping out systems and tools that underpin service delivery.
- People and Skills: Addressing workforce capabilities and culture aligned with future needs.
- Data and Information: Ensuring data quality, accessibility, and governance for informed decisions.
Developing the Target Operating Model: Practical Steps
1. Understand the Business Strategy and Environment
Before designing the TOM, it is imperative to gain a deep understanding of the organisation’s strategic objectives, market context, and regulatory environment. This understanding informs what operational capabilities need to be enhanced or introduced.
2. Assess the Current State
A comprehensive assessment of existing operations identifies strengths, weaknesses, and gaps. This includes process mapping, technology audits, skills inventories, and reviewing governance structures.
3. Define Principles and Design Criteria
Establish guiding principles for the TOM based on values such as customer-centricity, resilience, scalability, and cost-efficiency. These principles ensure design decisions remain aligned with the broader organisational context.
4. Design the Future State
Detail the future operating model by specifying:
- Organisational structure and roles
- Process flows and performance metrics
- Technology architecture and integration points
- Skills and workforce planning
- Data management and governance frameworks
5. Develop the Implementation Roadmap
Translate the future state design into a phased roadmap prioritising quick wins, resource allocation, risk mitigation, and change management activities. The roadmap should balance ambition with pragmatism to ensure sustainable transformation.
Considerations for Effective TOM Development
- Engagement: Involve stakeholders across the organisation early and continuously to secure buy-in and uncover practical insights.
- Flexibility: Design the TOM to accommodate evolving business needs and emerging technologies.
- Measurement: Define clear KPIs linked to strategic objectives to track progress and course-correct as needed.
- Risk Management: Embed security and compliance considerations throughout the design, especially from a CISO perspective.
- Communication: Maintain transparent, consistent communication to manage expectations and support cultural change.
Conclusion
Developing a Target Operating Model is a foundational activity for IT leaders aiming to align technology delivery with business strategy effectively. By adopting a structured and practical approach - grounded in comprehensive analysis, clear principles, and stakeholder engagement - it is possible to design a TOM that drives operational excellence, agility, and sustainable growth.
While the journey demands significant effort, the payoff is a coherent operational framework that enables organisations to adapt confidently and innovate continuously in an increasingly complex environment.