Fundamentals of the Target Operating Model

A Target Operating Model (TOM) is a strategic blueprint that defines how an organisation operates to deliver on its business objectives. It acts as the critical bridge between an organisation’s strategy and its operational execution, aligning processes, systems, structures, and people to achieve optimal performance.

At its core, a TOM ensures that every component of the organisation—governance, processes, technology, and talent—works harmoniously toward achieving the company’s vision.

It focuses on three foundational principles:

Customer Centricity: Ensuring the organisation delivers maximum value to its customers by aligning all functions and departments around customer needs to improve customer retention and lifetime value.

Integration: Creating streamlined, end-to-end processes that reduce inefficiencies and enhance collaboration across business units.

Simplification: Eliminating redundancies by assigning responsibilities to single entities or departments – reducing complexity, accelerating decision-making, and improving overall operational efficiency.

Without a robust TOM, organisations struggle to execute their strategy effectively, often falling short of their potential in cost efficiency, customer satisfaction, and growth.

Benefits of the Target operating model

In an increasingly competitive and unpredictable market, a well-designed TOM is critical to overcoming operational challenges and ensuring resilience. It delivers significant benefits across several dimensions:

1. Strategic Alignment

A TOM provides the structural framework to translate high-level strategic goals into actionable plans. By connecting corporate strategy to day-to-day operations, businesses can create a unified direction that drives consistent results.

2. Cost Optimisation

Inefficiencies in processes and systems can inflate operational expenses. A TOM identifies and eliminates redundancies, enabling organisations to reduce costs while maintaining or improving output quality.

3. Agility and Adaptability

Markets and industries evolve rapidly. A TOM equips businesses with the operational flexibility needed to pivot in response to changing demands, new market opportunities, or external disruptions.

4. Customer Value

A customer-centric TOM ensures that all aspects of the business focus on enhancing customer satisfaction, loyalty, and engagement. It aligns resources, processes, and technologies around the goal of delivering exceptional value.

5. Synergies Across the Organisation

By fostering integration, TOM enables seamless collaboration between departments and business units, unlocking synergies that drive productivity and innovation.

Potential Use Cases

The applications of a TOM are diverse, making it a valuable tool across industries and business scenarios. Some common use cases include:

1. Installing an international governance

Implementing a TOM is critical when establishing an international governance framework. A TOM provides the structure to clearly define roles, responsibilities, and decision-making authority across global, regional, and local levels. By aligning governance processes with strategic objectives, it ensures consistent standards while allowing for regional flexibility where necessary.

2. Mergers and Acquisitions / Integration of new business units

Post-merger integration can be challenging without a unified operational framework. A TOM aligns the operations of the merged entities, helping realize synergies and streamline processes.

3. IT and Digital Transformation

Organisations adopting new technologies or overhauling existing IT systems require a TOM that standardises and optimises processes before implementation, reducing the risk of costly delays and inefficiencies. In fact, an IT transformation without a prior definition of a TOM will most likely fail.

4. Cost Reduction Initiatives

For companies aiming to streamline operations and cut expenses, a TOM identifies areas of redundancy and inefficiency while ensuring critical functions remain intact.

5. Shifting Business Models

Businesses transitioning to new operating models—such as subscription services or e-commerce—require a TOM to restructure processes, teams, and technologies around the new strategy.

A robust TOM is more than just an operational framework; it is the cornerstone of sustainable growth and competitive advantage.

To find out more about our experience in implementing strategic and effective Target Operating Models, contact one of our experts or [email protected].