09/03/2023

Target Operation Model: Treat your business with an update

Author: Maximilian Anger

Eine Gruppe von Menschen sind in einem Raum - Vogelperspektive

“The idea was good, but the way it was implemented was not.” – Many of us have experienced this phenomenon at work or in our daily lives. The reason for the failure could be the misalignment of strategy and business operating system that many companies find themselves in. To help with that, IBM iX has developed its own Target Operating Model (TOM) for its clients. It is an effective tool to help companies with the definition and implementation of new strategies.

According to the McKinsey report, as many as 70 per cent of all transformations fail to make it to the execution phase or are derailed during implementation. This is because the transition from strategy to execution is never straightforward. It is a web of decisions, dependencies, and requirements. A strategy should therefore not only answer the question of where the company wants to go. It should also formulate, in small steps, how this is to be achieved.

What is a Target Operating Model?

The Target Operating Model (TOM) defines all the elements needed to translate a formulated strategy or initiative into the operational business of an organisation and to achieve the desired target state. The TOM bridges the gap between strategic vision and day-to-day operations. Just as an update brings a computer’s operating system up to date, the TOM updates a company’s operating model.

What does the IBM iX Target Operating Model include?

The IBM iX Target Operating Model is a modern framework that combines the most common elements needed to successfully implement a formulated strategy or initiative. It is designed to help organisations bring their operating model up to date.

Comparison of vaccine development methods.

“Strategy & Goals” provides the overall plan, from the business ambition to the technical platform solutions.
“Experience” details how the target groups needs are solved and what value is delivered.
“Processes” identifies the steps needed to support value delivery.
“Skills” indicates the capabilities needed from people perspective and how they translate into roles.
“Activities” describes who does what and how capabilities and roles are distributed among company, partner and 3rd party involved.
“Location” indicates where the tasks will be performed.
“Technology” specifies which technologies are needed to implement the processes and tasks.
“Governance” defines the rules and structures within the organisation by which decisions are made, problems are solved and how individual roles and partners interact.
“Management system” measures and defines the company’s performance and strategy execution.
“Culture” is an important factor in business success because it is a determinant of the adaptability of the operating model and must be considered – however, corporate culture cannot be imposed from the outside.
The “Change Roadmap” is a detailed description of the sequence of steps that are necessary to change the organisation and the benefits of these changes.

What is the benefit of a Target Operating Model?

A TOM creates a common understanding of the future state of an organisation and helps to understand that digital transformation cannot be limited to the introduction of specific technologies or the digitisation of the customer interface, but is rather about the adaptation of the individual elements of the operating system. No interface or tool can save the implementation of a strategy if an organisation’s internal processes, activities, governance, and measures are not aligned with the desired state. The TOM sets the stage for updating the operating model by creating transparency and awareness, while focusing on the value to be delivered – be it customer or employee experience. There is no universal TOM that will fit all organisations. The strategic context, the size of the company and the maturity of the individual business units will determine how a TOM is created.