As I was grooming my business architecture skills several years ago, I realized the importance of the “Target Operating Model” (TOM) when defining the Future Business Blueprint. Occasionally, I come across architects who fail to recognize TOM as the bridge between Business Strategy and Future Business Blueprint. Most of them consider TOM and Future Business Blueprint to be the same thing; they are similar but different. Although Business Strategy communicates “what” the future vision is, it stops short of articulating “how” the future of the organization would look like. To some extent, organizations “translate” Business Strategy into Operational Plan which details the annual activities and initiatives to be executed. But how do organizations “illustrate” the future vision without diving into details? Well, this is where the “Target Operating Model” (TOM) comes in.
A Target Operating Model (TOM) is a conceptual representation of an organization’s desired end state that describes the “functional structure” and “working style” required to fulfill the future vision. It illustrates the organization’s vision using a simple model that describes how it plans to deliver services to stakeholders i.e. it shows how an organization creates, markets and delivers value to customers, employees, shareholders and partners. In essence, a simple or basic TOM would consist of vital business functions, key business stakeholders, core business offerings, primary business locations, and key business interactions. Okay, we know what TOM is, but how does it benefit us? Well, TOM finds application is several areas but organizations mainly use it to achieve the following outcomes:
- Communicate future vision
- Inform future business blueprints
- Identify operational gaps
- Assess impact of changes
- Determine future capabilities
- Establish business priorities
- Market business transformation
- Inform organization structure design
- Inform annual operational plans
- Justify proposed investments
Since TOM is shaped by an organization’s vision and mission, it is usually developed during the last phase of the strategic planning process. The responsibility for developing the TOM is usually with the leadership team which depending on circumstance may opt to hire external consultants or engage an in-house team comprising strategists and architects to deliver it. Apparently, the challenge is not in defining the TOM but its actual realization which obviously requires time and patience as it is often constrained by an organization’s capacity, capability and appetite for transitional changes. To support this lengthy process and govern the smooth transformation towards the TOM, guiding principles (strategic and design) should be defined; these principles inform the decision-making process when prioritizing, selecting, funding, aligning, and optimizing transitional changes. Perhaps this is the point where architects lock in and start leveraging TOM to define the future business blueprint (capabilities, processes, functions, services, etc.). So how could architects leverage TOM? Well, I see the TOM to be a key ingredient for most architecture work.
As it were, architects spend a lot of effort and time understanding current state and articulating the future state – they are expected to comprehend, conceptualize and communicate the future state in a succinct manner. Having been one of those architects, I can attest this is not a simple puzzle to solve especially in the absence of future vision. You will most certainly encounter many obstacles which you’ll have to endure and overcome before producing meaningful results. Chances are you will get to deal with vague strategy, elusive future vision, obstinate stakeholders, conflicting interests, resistance to change, and competing priorities. Imagine the situation when these obstacles are eliminated; isn’t it going to be great? Well, that is exactly what the TOM has in stock for architects; by the time it is delivered, a lot of plumbing has already been done for you:
- Future vision is clearly defined
- Leadership team is engaged
- Guiding principles are articulated
- Transformation scope is determined
- Best practices are considered
- Future model is demystified
- Future capabilities are identified
- Target operating model is tested
- Target operating model is communicated
As a result, architects could easily leverage the TOM to quickly produce relevant architecture blueprints. Though high-level, the TOM clearly informs the underlying architecture effort by ensuring consistency, traceability and alignment to the future vision. In summary, below are some of the Future Business Blueprints that could be produced easily using the TOM:
- Value Chain Model – a visualization of the end-to-end business processes that contribute towards generating stakeholder value.
- Capability Model – a visualization of the core and support business and technology capabilities required to support the business strategy.
- Service Model – a visualization of key business services and their relationship to underlying processes.
- Maturity Model – a visualization of capability maturity and gaps to be closed prior to realizing future vision.
- Collaboration Model – a visualization of key interactions between the organization and its stakeholders like customers, partners, shareholders and employees.
- Location Model – a visual representation of business location model clearly articulating the product and service offerings
- Transitional Roadmap – a visualization of the organization transition from current to future state clearly depicting the incremental realization of the future vision.
So what opinion do you have regarding leveraging the TOM? Who is entrusted with developing it in your organization? Do you feel it is an important input to architecture effort? Please feel free to share your experiences with us. Until next time, I will pen off here.