Advantages of using Target Operating Models to drive transformation

Using Target Operating Models to drive transformation

You’re managing a more complex business environment than ever before. In addition to remote workforces, escalating risk issues are mixed with the need to better apply automation strategies for efficiency.  From our conversations, organizations are quickly trying to understand how to create a plan for managing change.  Part of this lies in how to recognize your company’s DNA – people, process, and technology – to get the results you are working towards.

You might have core questions such as:

• What are the best points to drive automation, efficiency, and effectiveness?
• How do changes align to our operating measures and goals?
• If we invest, will it drive the outcomes the organization has outlined for the business?

Without the right operating model, you haven’t given the organization the right compass for change.

What is a Target Operating Model?

A target operating model helps drive and steer a business to a new and optimized way of working. It offers a structured approach that supports a better understanding of your organization and creates a methodology for change.

A target operating model functions as a type of bridge, or path, between the daily running of a business (i.e. its operations and existing operating model) and the company’s strategic vision for growth and transformation. Businesses can follow the structured approach provided by a target operating model to understand their business processes and better prioritize their business needs or requirements.

In this way, they can design a unique, effective, and enterprise-wide methodology for change and move away from a more piecemeal construction of business transformation.

To ensure the best outcomes for the business, Target Operating Models require effective governance by:

• The right configuration of process owners and stakeholders to monitor performance, resolve issues and maintain accountability
• The right guidance for the process and governance teams to manage accountability and execution
• The right people with the right talent requirements to ask the right questions, raise the right objections and to be involved with informed, joint decision-making processes
• The right tools to visualize and measure key performance activities

How do you upgrade your operating model?

A business first needs to begin with capturing and documenting its existing operating model to better understand its current position and the requirements for change. This is a team activity, involving as many stakeholders as is necessary.

Here the current operating model is described in layers, or through a framework diagram, using existing maps, process and materials that are centrally stored for transparency and accessibility.

The operating model’s description includes high- and low-level details about business unit and directorate functions, the activities performed by each function, business operation processes and guiding policies and procedures.

With a more structured picture of the operating model in hand, decision making around change is easier and new ways of working can be explored, automated, integrated and tracked.

What are the overall benefits of using target operating models?

The benefits of using target operating models, as listed by Gary Shub and colleagues in their article ‘Differentiation Begins with a Target Operating Model,’ include:

• Shorter time-to-market cycles due to greater agility in launching new businesses and trading new products
• Better ability to ramp up volume quickly at minimum marginal cost
• Increased client satisfaction due to a more transparent and compliant operating model
• Superior investment performance, from focusing investment management resources on priority growth areas and supporting them with tools, data, and insight
• Reduced risk from a more controlled and stable operating environment
• Greater long-term cost-effectiveness

Companies that aspire to deliver business transformation strategies would benefit from creating a basic yet strategic, target operating model to better understand the system, process, and people requirements across their key business areas.

BusinessOptix has helped hundreds of clients collaborate on and redefine their operating models.