Target Operating Model

Creating Alignment Through Cocreation

Target operating models are mechanisms for creating the broad organizational alignment needed for sustainable transformation. They provide a way of thinking about the firm and how it delivers value—independent of the organizational structure.

Yes, you can use them to help you work toward the structure you need, but their primary goal is to engage and align. Indeed, most transformation programs are trying to overcome the problems associated with the silos and fiefdoms; replacing one set of silos with another is just another route to better sameness.

“The only valid purpose of a firm is to create a customer.” Peter Drucker

Building A TOM Means Teasing Apart The Purpose Of The Organization

It means focusing on the brand promise and the things you just cannot escape from. If you are in this business, these are the core elements and capabilities.

Just like a sea anchor in a storm keeps the boat oriented toward the oncoming waves, the brand promise becomes the rudder that you will use to steer the ship. But you still need a vision of what that ship is going to look like; even if you are busy changing it plank by plank while still at sea.

It’s that clarity of vision that forms the core of the target operating model. It’s not like a mission or a strategy; it’s an articulation of how the unique capabilities of your firm are translated into services and offerings that customers will want.

Service Offerings Configure Core Capabilities

Every business has a set of purposes that it exists to fulfill.

If you tease apart this purpose you should end up with a set business capabilities—or putting it another way, your capabilities are a decomposition of purpose (not organizational function). Those capabilities encapsulate the resources, processes, technologies, applications and information needed to realize that sub-element of purpose. Typically, the core capabilities of the organization are resourced in-house since they represent the differentiating and distinctive features when compared with competitors. Utility capabilities might be managed through a shared service operation or outsourced altogether, but they are design decisions.

Service offerings represent the propositions you take to market. They embody a set of configured capabilities that your customers (external stakeholders) consume. A standardized service offering may then be specialized for different markets or customer segments.

It's About How You Engage The People

As customers, our expectations are always increasing. We want “better, cheaper, faster, smaller, more convenient, and more personalized.” But getting your organization to focus on interpreting this objective implies drawing on the passion and full talents of those doing the work. They are the ones who will find new and better ways to delight customers. Moreover, engaging employees, potentially along with both partners and customers, in a value co-creation exercise is the best way of ensuring that employees own service definition and the change program.

The best way of achieving this is with a set of “big-tent” workshops; moving multiple parallel teams through a quasi-competitive exercise to design the best service proposition and customer experience. Each team starts by identifying and characterizing the personas of the service consumer and digging into the “job-to-be-done” before designing the journey the customer will go through. They can then work backwards to design the offering and how the organization will support that result.

All participants get a chance to contribute to the final results; they learn together and from each other. When they design the service vision, it becomes their service, their ideas, their new way of working. Contrast this approach with that of imposing the new way of doing things. It’s no longer a question of imposing change; the challenge becomes one of channeling their enthusiasm.

From Here To There

You can then compare that target state with your current situation and develop plans that will get you there. Inevitably, you then become involved in establishing the critical changes that will get you to your goal, influencing your organizational roadmap.

The TOM never Stays Still

“It’s not about developing the perfect set of models, it’s more important that the exec team can agree; even if their interpretation is slightly different.” Chief Architect, Global Credit Card Provider

Rather than deciding on an organizational structure up front and putting a manager in charge to figure out what resources she needs, the approach outlined here ensures your target organisation structure is derived from the service propositions. You start with purpose (the "why" and for "whom") to understand their needs (their context and journey maps). You want to understand and design the customers experience before working out the best way of delivering those services. Inevitably, those services become an orchestration of a set of reusable, configurable and scalable components that, in turn, are implemented by a robust set of processes. With that clarity in hand, it then becomes possible to articulate the organizational design to support that operating model.

Moreover, because your team designed the experience they want to deliver (the service proposition) they already "own" the outputs of their work. They want to test them, to continuously improve them. You are no longer imposing change on people, they are developing their future.

Consulting Case Studies

A Major European Bank Employs Business Architecture And CX To Overcome Silos EuroBank was embarking on a major change programme aimed at reinventing the core of the organisation over the next 5 years. …

Structure Talent will help you plan your TOM, reviewing your existing artifacts and approaches, validate the engagement approach, and help you create the alignment.