Chances are that your organisation’s operations are under constant pressure to stay competitive. At the heart of the transformation required to align your business operations and your business strategy successfully is the Target Operating Model (known as a TOM to its friends) – which is used as a strategic framework to describe your business capabilities and their organisation, providing a blueprint to align your operations with leadership vision.
But what does a TOM entail? How can it help complex, enterprise-level organisations achieve their goals? And, if your specific focus is an organisational subset, like Data & Analytics, how can a specific functional strategy, like data strategy, help define the roadmap to provide localised impactful results whilst also aligning with the wider Operational Model of the wider business?
Understanding how to implement a TOM is essential if you want to drive meaningful organisational change and ensure different functional areas, like Data, share capabilities and consistently set and align to common principles. This guide explores the fundamentals, their importance, applications, and examples. We will also delve into specialised frameworks like the Data Target Operating Model and the role of capabilities, like Data Governance, in shaping a model.
Our data strategy experts can help you understand your current operating model, pains and problems within it, and help you generate the vision and strategy that will inform the design of your Target Operating Model and make it a success. Get in touch and see how we can help.
A target operating model is a blueprint that defines the desired future or target state of your organisation’s operations. It serves as a guide for how your business will work to achieve its strategic objectives. By detailing the interplay of strategy, people, processes, technology, and data, a target operating model provides clarity on what needs to change to align day-to-day activities with long-term goals. It should be an essential tool in engaging with leaders within the business to get buy-in for business transformation initiatives. Your target operating model supports the development of roadmaps that help create a culture of continuous improvement delivering your corporate strategy more efficiently.
You’ll often hear Architects talk at length about People, Process, Technology, and Data as key components or domains; but at Oakland, we feel that talking about them in such a siloed way can somewhat miss the point in terms of unlocking true business value. You can very rarely solve real problems by focusing on them independently and the reality of modern business is that technology over-indexes as the focus of investment and delivery.
Our point of view is that for TOM, the value is not in the domains themselves, but where they overlap. You can unlock competitive advantage from Enterprise Architecture to:
- ENGAGE customer and colleagues with better process experiences.
- EMPOWER your people to deliver through better tools and systems.
- SCALE your business through data-driven processes, underpinned by carefully chosen technologies
- AUTOMATE key processes, enabled by process controls and data insights.
So, what should your target operating model focus on?
Well, it should outline how your organisation’s structure and the interplay between people, process, technology, and data can support its strategy; how processes can be streamlined for efficiency; and how technology will enable those processes. It also addresses how your team is organised and empowered to work more effectively. With a well-defined model, you can ensure your operations are aligned with your objectives and optimised for scalability and resilience.
If you think about your critical business processes, they revolve around creating and managing data around objects and entities, like Assets, Products, Employees, and Customers. These physical, and sometimes abstract, entities exist as logical activities linked together to generate organisational value – we call these connected up activities “Value Chains” and they deliver the purpose of your business. A Target Operating Model seeks to understand the composition and organisation of people, processes, technology and data to maximise efficiency and reduce disconnects within a function and between your business functions.
A robust strategy that delivers your organisational vision is essential in creating and implementing a Target Operating Model, particularly if it is intended to inform a wider digital transformation of your business. Learn more about our data strategy consulting below.
What Is a Data Target Operating Model?
It’s exactly what it sounds like – a TOM, but specifically targeted at a more ring-fenced and focused understanding of delivering your Data Strategy. Therefore, as a subset, a Data TOM is a vital component of and must be aligned with your broader organisational TOM, even if it is designed in isolation from it.
Data is perhaps your business’s most valuable asset. If you think about your critical business processes, they revolve around creating and managing critical data about objects and entities, like Assets, Products, Employees, and Customers.
These physical, and sometimes abstract, entities exist as logical relationships linked together through process to generate organisational value – we call these connected up activities “Value Chains”. Value chains, and the groups of co-ordinated processes generating value are, in turn, supported by capabilities that consider a range of components, including people skills and training, culture, roles and relationship definitions in addition to the more standard process, technology and data considerations.
A Data TOM specifically focuses on how data is managed, governed, and leveraged to support the achievement of wider business goals. For example, there is little benefit in generating a whole suite of sales insight data unless that insight is provided in a way that can be used by the Sales function. Unlike traditional operating models that concentrate on your organisation’s overall functions, a Data TOM concerns the frameworks and systems that support data-driven decision-making. Data & Analytics is a core value-chain enabling activity that supports successful decision-making in other parts of the business.
Importantly, activities within these value chains may fall within the accountability sphere of people in other business functions – all of whom likely have their own “operating models” – think of operational platforms that are often the primary source of data your Data Organisation operates on. This is why a Data TOM is a vital component of your broader target operating model and why conscious effort must be put in to align with the “bigger picture”. It’s difficult to achieve operational excellence when everyone is doing their own thing in an uncoordinated way.
A well-designed Data TOM aligns data initiatives with your organisation’s strategic objectives, ensuring that data is both effectively collected, stored, and utilised. It includes robust governance frameworks that establish policies, roles, and responsibilities for managing data securely. Moreover, it incorporates the right technologies and tools to enable seamless data integration, storage, and analysis. It also acts as a feedback loop, providing insight to the business about issues in the way that data is defined, collected and managed in source platforms, which creates all sorts of issues well before the Data function touches it.
Lastly, a Data TOM also considers the cultural aspects of a data-driven organisation, identifying the skills and mindsets required to embed data as a core asset and supporting better ownership and management of data as a holistic strategic imperative.
For further insight into crafting a data strategy that integrates seamlessly with your operating model, read our guides below.
What Are Data Governance Target Operating Models?
Like most things, Operating Models can be layered and complicated and it really depends on the language your business wants to align to. Some may call it a Data Governance Operating Model, which underpins your organisation’s ability to manage data effectively. Others may call it a Data Governance Data Capability definition – as a component of the Data Target Operating Model. Po-ta-to, Po-ta-to.
Either way, this a prescriptive (for your organisation) model that establishes the policies, processes, and technologies necessary to ensure that data is accurate, secure, and accessible, and well managed consistently in all areas of your business. Again, Data reaches beyond the boundaries other functions may recognise to ensure everyone manages the life-blood of the business (data) in a consistent way, and largely to reduce the effort of wrestling the data into a valuable resource for data-driven decision making.
Governance frameworks define who is owns and responsible for what types and categories of data, ensuring clear accountability and established methods of raising quality issues and ensuring ongoing improvement of data over time. They also set out policies for data business and technical, definition, usage, privacy, and compliance: critical if you operate in a regulated industry.
In addition to governance frameworks, A Data Governance Operating Model considers which are the right technologies to enable effective monitoring and control. Tools for data cataloguing, lineage tracking, and compliance reporting play a vital role in maintaining data quality.
However, technology alone is not enough – your organisation must also foster a culture where data is seen as an essential-for-life asset. This cultural shift and shared accountability is often the most politically challenging aspect of implementing Data Governance but is crucial for long-term success.
For actionable insights into developing governance frameworks, explore our data governance services below.
What Does a Target Operating Model Comprise of?
A Target Operating Model should benefit operations across your entire organisation. Typically, it should describe each capability in terms of a consistent set of components and co-ordinate with each other to generate collective value outcomes:
- Strategy & Purpose: what is the vision and mission and what’s the driving force and intended outcomes and how it will evolve positively over time
- People: Humans and hierarchies are complex, so it should come as no surprise that there are many aspects to consider including:
- Roles & Responsibilities – who is responsible for doing what and when, and how events and issues are escalated and resolved.
- Leadership & Talent – how is control exerted across the organisation and ensuring succession is actively considered and planned for in colleague development.
- Structures – how capabilities are brought together to produce effective functions, completing specific activity.
- Culture & Ways of Working – the creation of a methodologies for co-ordinating activity within teams, and to ensure teams can interact with each other collaboratively. Governance is central in providing standardised “rules of engagement”.
- Processes: The workflows upon which your organisation operates.
- Technology: The technological infrastructure that augments with the workforce, provides efficiency through automation, and can easily be scaled as the business grows. Consistent principles help to provide better alignment between tools.
- Data: Data and its management is central to understanding of all other components, considering this is the key resource generated and managed in workflows, supports customer outcomes and the business’s understanding of how well all the components are operating with each other.
- Customer experience: How the above impacts the customer experience.
Why Are Target Operating Models Important?
The importance of a target operating model lies in its ability to translate your vision for your organisation into a successful plan of action. It creates alignment between your strategic goals and operational execution, ensuring that every function and process contributes to and drives forward success.
By providing clarity, TOM lets you identify inefficiencies, eliminate redundancies, and optimise workflows. And if you’re preparing for growth or transformation, a target operating model acts as a target state that can be compared against the current state to identify capability development areas that can be prioritised into a roadmap of continuous change initiatives outlining how to scale your operations effectively and safely.
Going further, Target Operating Models also help mitigate risks by establishing clear roles and responsibilities, ownership of processes and data, governance structures – essential in today’s complex regulatory environment. They also help your company become more data-driven, integrating data and performance metrics into daily business discussions, facilitating better decision-making by integrating analytics into everyday operations.
For business leaders, a TOM is not merely a tool for operational efficiency – it is a foundation for sustainable growth, innovation and continuous improvement.
“Target operating models are important because they provide a tangible description of your future organisation that can help underpin stakeholder discussions and navigate organisational politics, supports identification of key next steps and their priority, and provide a high-level technical blueprint enabling design and delivery functions.”
Alex Guy – Group Enterprise Architect
What Are Some Examples of Target Operating Models?
To understand how a target operating model works in practice, consider the example of a large public sector organisation undergoing transformation.
The organisation, reliant on legacy systems and suffering from poor knowledge management, wants to implement new systems and behaviours to use this data. The aim is to improve its service levels for the public, become more efficient, and use its data for continual improvement, providing lasting improvements.
In developing its target operating model, the organisation identifies its strategic objectives, such as reducing operational costs by 20%, while improving customer satisfaction scores by 30%. It analyses its current operations to work out what is a barrier to these improvements – legacy systems, siloed data, gaps in knowledge management, or staff unfamiliarity with modern systems.
A plan is then created to address each of these challenges, including:
The organisation creates a roadmap to make the changes and sets about implementing them. It charts progress, holds itself accountable, and iterates upon the target operating model once it is live, focusing on new challenges.
How to Build a Target Operating Model
Developing a target operating model is a structured process.
- Strategy: It begins with defining your strategic intent. By clearly articulating the business mission and vision, the outcomes that need to be true, you provide a baseline of what the target operating model will ultimately need to achieve. Strategy sets the foundation for aligning operational action with overarching business goals.
- Analysis: The next step involves assessing the business’s current state operating model to identify pain points, gaps, and inefficiencies. This diagnostic phase provides a baseline for designing the organisation’s future state. It’s not all bad, you should also identify what is good and needs to be retained as you enter business transformation mode.
- Recommendations: Once the desired current and future states are defined, you can begin to map out gaps between the two states and understand better the scale of change required across the business or its functions. Options can be developed to inform critical decisions, and prioritisation can be driven by insight rather than best-guessing or gut feel.
- Roadmap: Creating a detailed roadmap is essential once gaps, dependencies, and priorities are understood. Roadmaps help with broader engagement across the business, can help sign-post change to areas of the business change will be co-ordinated with, and helps prioritise initiatives and set realistic timelines.
- Implementation: This involves executing planned changes while monitoring progress to ensure the target operating model delivers its intended outcomes. The process doesn’t end with implementation; you need to continuously evaluate and refine your model to adapt to evolving market conditions.
Explore our case studies, such as Yorkshire Water’s transformation journey, to see how this process has worked for leading organisations.
Common Challenges in Target Operating Modelling
Despite its benefits, developing and implementing a Target Operating Model is not without challenges.
One common obstacle we often come across is resistance to change, as your employees and stakeholders may be hesitant to adopt new ways of working. Cultural inertia can be a significant barrier, particularly in organisations with deeply entrenched processes.
Organisational politics, prioritisation of funding, and the individual plans of the stakeholders you need support from can be extremely difficult to navigate, especially if it involves gaining financial support and borrowing resource, making delivery of their agenda more challenging. The worst case is obviously where your agenda is moving in a completely different direction – which is why co-ordinating and dovetailing functional operating models into the Master Organisational TOM is important.
Another challenge is aligning multiple business units and functions, which can be complex. Coordinating efforts across departments requires strong leadership, clear communication, and the ability to spot the right compromises at the right time. It’s important to ensure that there is an identified “ultimate arbiter” that can fairly engage with and help resolve disputes and blockages quickly. Resource constraints, such as budget, time, or expertise, can also impede progress, as can “progress” that results in constraints for other stakeholders or functions who are actually responsible for impacted processes, platforms, people and data.
Finally, fragmented data systems can create silos, making it difficult to achieve the level of integration required for a successful target operating model. Data held by functional areas is not inherently bad – it’s the idea behind concepts like Mesh and Fabric. However, things can start to fall apart quite rapidly without consistent standards, policies and principles.
How Can Data Strategy Consulting Improve Target Operating Models for Large Enterprise Organisations?
Implementing target operating models can be troublesome for large organisations. Thankfully, data strategy consulting can significantly enhance the process by providing the necessary inputs about organisational issues and, key objectives, gaps in ability, future focus and an understanding of valuable capabilities that can be leveraged. Data Strategy consulting provides expertise in methodology, frameworks, and tools to effectively integrate data-driven decision-making to clearly articulate vision, mission, and objectives, that ultimately inform the operating model. Here’s how you can improve TOM development and execution with data strategy.
Aligning Data Strategy with Business Objectives
Data strategy consulting ensures that data initiatives are closely aligned with the organisation’s strategic goals. This is where data consultancies like Oakland come in. We can help identify how data can enable your target operating model by supporting key priorities like customer insights, operational efficiencies, and new sources of revenue, and dovetailing capability developments into your business without upsetting the wider organisational operating model. This alignment ensures the model is not just operationally sound and practical to implement, but also designed to leverage data as a strategic asset.
For example, our work with RAW Charging helped them chart a vision, strategy and roadmap for data to transform their business.
Optimising Data Management
Effective data management is foundational for a successful target operating model. A data consultancy can bring best practices for data collection, storage, integration, and analysis, ensuring data is accessible, secure, and reliable. This helps eliminate silos, reduce inefficiencies, and simplify operations across your business, or better support more complex and fragmented organisations where consistent standards and principles are needed for more federated, independent functions. Learn how we helped UK Power Networks gain all these benefits and more.
Enhancing Data Governance
Data governance is critical to ensuring that the data used in the model is accurate, compliant, and trustworthy – particularly in heavily regulated industries like finance or healthcare.
Our experts can be invaluable here, designing and implementing governance frameworks that define clear roles, responsibilities, and policies for data ownership and management. This includes establishing processes for data quality monitoring, security protocols, and regulatory compliance, all of which are essential.
Learn how we set data use standards for the Information Commissioner’s Office.
Choosing the Right Technology
Choosing the right tools and technologies to support the model is a complex task, especially if you work in a large organisation with diverse needs.
Consultants evaluate and recommend the right technologies for your business, such as cloud platforms, analytics tools, and machine learning solutions, making sure they align with your goals.
Enabling Data-Driven Decision-Making
Data strategy experts ensure that data is positioned to enable better decision-making within the target operating model. By developing analytics capabilities, data consultants can help you derive useful insights from your data to optimise operations, forecast trends, and identify opportunities.
In a manufacturing enterprise, for example, predictive analytics powered by a well-designed data strategy can optimise supply chain processes, reducing costs and improving efficiency as part of the model.
Creating a Data Culture
Data experts can be invaluable in upskilling your teams and fostering a data-driven culture within the wider organisation. This ensures that employees at all levels understand how to use data to achieve their target operating model objectives.
Training programs, workshops, and change management initiatives can all also be tailored to embed data literacy and drive the adoption of data-focused practices.
Supporting Scalability and Future Growth
A data strategy designed with scalability in mind ensures that the target operating model can evolve alongside the organisation. Our team can help you assess future requirements, such as handling larger datasets, integrating advanced technologies, or expanding into new markets, and build these considerations into the model’s framework.
Measuring and Optimising Performance
Finally, data strategy consulting integrates performance measurement into the target operating model, using key performance indicators (KPIs) and metrics to track progress and identify areas for improvement. Our experts provide ongoing support to refine data strategies and operational practices, ensuring the model continues to deliver value over time.
We Can Help Your Target Operating Model Become Reality
A Target Operating Model is a powerful tool if your organisation wants to align its operations with strategic objectives. Whether it’s a comprehensive model or a specialised one that targets just your data and technology, these frameworks let you optimise performance, enhance scalability, and drive innovation. For leaders and decision-makers, investing in a well-designed model is not just an operational necessity – it’s a strategic imperative to optimise the value delivery from business investment.
Our expertise in data strategy and data governance can help your organisation craft and implement an effective target operating model tailored to its unique needs. Visit our case studies to learn how we’ve helped leading enterprises achieve transformational success.
Ready to take the next step? Contact our team today to start building your Target Operating Model.
