26/02/2024

Boost your digital transformation strategy with a target operating model (TOM)

Author: Sunayana Mathur

Companies are facing ever-evolving challenges in digital transformation: operational inefficiency, untethered legacy systems, and outdated organisational frameworks. The target operating model by IBM iX is built around a clear and proven methodology that enables businesses to determine where they want to be – and how to get there. The result: transparency in roles and responsibilities, rapid decision-making processes, higher operational efficiency, and customised services for customers.

What is a Target Operating Model and why is it important?

Much as nature is made up of mountains, rainforests, deserts and coastal plains, the business landscape is rich, varied and in a constant state of flux. Organisations are growing rapidly, business processes are evolving, technologies are changing, and clients have ever-increasing demands. In today’s world, an enterprise’s growth journey succeeds or fails based on whether it can align its internal and external processes, its employees, and its technologies in pursuit of digital transformation. This, in turn, allows the enterprise to respond to trends in the market, improve its services and boost operational performance

However, digital transformation does not happen on its own. Studies by academics, consultants and analysts show that a massive 70% to 95% of digitalisation trajectories fail to meet their original objectives. At the same time, fewer than half of all restructuring efforts are considered successful. The main reason is that organisations often try to push through change processes based on complex, outdated and ineffective organisational frameworks. This can lead to the following:

Operational inefficiency due to poor allocation of resources among the workforces.
A lack of transparency regarding roles, responsibilities, and accountability, leading to delays in decision-making processes.
Minimal interaction and/or integration between business units and service units, resulting in silo mentalities.
No clear transformation guidelines, prompting increased or sustained operating risks.

This is where a target operating model (TOM) enters the picture. Designed to help organisations get the most out of their digital transformation strategy, a TOM is a framework that outlines a company’s desired future state (the target) and sets it on the path towards becoming an agile, customer-focused, innovative, and socially responsible business. Not only that, but a TOM sets the tone for an organisation’s efforts in terms of boosting operational efficiency, enhancing the customer experience, supporting ongoing digital transformation initiatives – and remaining competitive in a fast-paced market environment.

There are two key reasons why a TOM is important for your business:

1. Your company is evolving all the time

A target operating model allows a company to better understand the abilities and limitations of its systems and processes while identifying the requirements of customers and internal staff across key business areas. This allows you to introduce agile practices, which are the catalyst for flexibility, speed and innovation in operations. This fosters collaboration and iterative development while disrupting the very models on which traditional industries are built.

2. Transformation calls for a suitable operating model

Your digital transformation journey must be based on a model that can handle everything thrown at it. The benefits are myriad: digitalisation of processes leads to more automation, less repetition, better data management and a customer experience tailored to the individual – namely, meeting the client’s every need through the intelligent use of data analytics, personalisation and other techniques.

The IBM iX Target Operating Model: A key pillar of business success

Simple to describe, effective in approach: IBM iX’s Target Operating Model (IBM iX TOM) outlines the desired future state of an organisation in terms of its systems, structures, and culture. In essence, it helps an organisation to focus its efforts on achieving its long-term goals by aligning processes, people and technologies with its strategic objectives. After all, if an organisation has no clear or no well-structured operating model, it may find its goals remain out of reach despite its best intentions.

As a holistic, well-defined system, the IBM iX TOM provides a crystal-clear understanding of how an organisation can operate, generate revenue, serve its customers, and manage its resources going forward. This is the first substantial step in the organisation’s evolution into a competitive, smoothly functioning enterprise that is ready for the future – and always heading in the right direction.

An overview of the IBM iX standard target operating model structure is provided below:

It is important to note that although the benefits can be significant in terms of increased competitiveness and improved performance, a TOM does require careful planning and execution. For best results, it should be considered a living document that is reviewed and updated regularly to ensure it remains relevant to the organisation’s always-evolving needs. It can then be customised according to key business requirements, strategies, and technologies.

Integrating a TOM: Our approach

At IBM iX, we collaborate with our clients to develop an operating model that satisfies all systematic and strategic needs. Our aim is to help organisations harness their existing resources and unlock the full potential of their digital technologies and processes, all in pursuit of realising ambitious goals.

Understanding the company’s goals and involving stakeholders at every stage of the transformation process is critical, which is why this serves as the cornerstone of our three-phase methodology. We then tailor each stage to meet the unique needs of the organisation, resulting in the creation of a roadmap for sustained success.

The phases are as follows:

In Phase 1, we evaluate where changes need to be made, setting the stage for transformation.
In Phase 2, we conduct a comprehensive analysis of the organisation’s current state and envision its desired future state, ensuring every step aligns with its overarching objectives.
Finally, in Phase 3, we bridge the gap between vision and reality, crafting a detailed roadmap and implementation strategy to navigate a secure route through the business landscape.

A robust TOM plays a pivotal role in guiding the organisation towards its objectives – digital transformation, operational enhancement, growth initiatives and more. With years of expertise and a track record of empowering businesses across industries, we at IBM iX are proud to offer our comprehensive solution for excellence in target operating model implementation.

As part of our TOM service portfolio, we have developed a comprehensive “TOM toolkit” to offer organisations specific resources and guidance on how to create, implement and optimise their own TOM.

This includes the following elements:

Client reference

Our clients’ success stories – both individually and collectively – stand as a strong testament to our methods. Reliability, innovation, and unwavering support: these are the pillars on which our collaboration with our clients is built. We’ve selected one such story to give you an idea of our capabilities in practice – and what you can expect in terms of product.

Here is a success story of one our clients in Consumer Products Industry.

Goal:

Deliver a Target Operating Model for Grohe’s Content Management team to enhance process efficiency and effectiveness (Process).
Provide clarity and alignment to all stakeholders (People), address technical challenges with the current CMS (Technology), and establish robust governance policies, structures, and processes for decision-making, risk management, and responsibility assignment within the organization (Governance).

Challenge:

The entrenched legacy systems and processes have become such a fundamental part of their operations that any attempts to modify them would require significant and disruptive changes.

Our Role:

Evaluated the current process for capturing and assessing use cases, identify any existing gaps, and define the desired future state to improve the process.
Developed future operating model addressing the key pillars of business operations People, Process, Technology, Governance
Delivered a tool kit containing improvised process flow, RACI, Standard Operating Procedures, recommendations on technical challenges etc.

What we have done so far:

Delivered future operating model with recommendations on each of the pillars supported by an approach, quick wins, and documentation.
Provided tool kit with Standard Operating Procedures, Process flows, RACI, CMS quality checklist, etc.
Delivered a continuous improvement plan, to plan next steps and measure the KPIs.