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What is a Target Operating Model or TOM?
A model that shows how an organization should operate to achieve its aims
A favourite of management consultants, the Target Operating Model or TOM seems like an esoteric model — except that it’s not, and neither does it need to be. In this post, I attempt to explain it in simple terms.
A Target Operating Model (TOM) is typically used when an organization undergoes a change or transformation. This could be a restructure, merger, digital reinvention etc.
As stated in the name, it shows how an organization will operate going forward or in other words, how an organization will deliver its products and service in the future.
It’s a blueprint or model that outlines the key components, and how they would (need to) come together, to achieve the desired strategic outcomes.
The TOM connects strategic outcomes to operational reality.
In many cases, the target state will be synonymous with the future state. However, in more complicated changes, there may be various target states that arrive enroute to the future state. For example, if post-merger an organization undergoes various milestone-based transformations, then various target states will present themselves as part of the broader future. The TOM must make clear which target state it’s for.
The three terms: target, operating, and model, come together to define precisely what a TOM is and what it represents.
Input
The main input into the TOM is the strategy.
Strategy is often mis-understood. It’s not some nebulous aspirational statement. Instead, it’s a precise articulation of the gameplan an organization has chosen, and the rationale for it. Using Richard Rumelt’s terminology, it’s about diagnosis, guiding policy and coherent action.
Without a strategy, the TOM flounders. To make it easier to develop a TOM, the strategy should ideally be broken down into design principles. Having this intermediary step allows tight and transparent coupling between strategy and the TOM.
From this input, the TOM can be developed. While the components of the TOM can vary depending on an organization and…
