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Exploring the secrets of operating models: How to transform strategies into actual operating plans?
When modern enterprises face increasingly fierce competition and a rapidly changing market environment, a clear operating model becomes increasingly important. Every organization hopes to effectively translate its strategy into actionable plans, and this is the role of the Target Operating Model (TOM). The target operating model not only describes the state that the organization hopes to achieve, but also provides guidance for achieving this goal.
The target operating model concretely transforms the concept of strategy into daily operating plans.
When building a target operating model, it is usually necessary to first define the current "current situation" (As Is Model), and then plan the future "desired state" (To Be Model). Through this process we are able to clearly identify current shortcomings as well as future needs.
Some target operating models focus on improving the link between information technology and strategy, while others may focus on linking organizational design to strategy. Regardless, these patterns are designed to support the organization's long-term vision and current mission.
An organization's operating model should evolve with its strategy, and form must follow function.
There is a framework derived from Ashridge Higher Education called POLISM, which consists of five key components: process and capabilities (P), organization (O), place (L), information System (I), Supplier and Management Systems (S and M). These components are interrelated and support the overall operation of the operating model.
As little as a one-page document can become an operating model, and the Operating Model Canvas is a great example of this. However, if the document exceeds 100 pages, it may tend to be more of a manual than just an operating model.
A good target operating model project will typically include a sequential roadmap that specifies how the company needs to move from "as is" to "desired state."
To start working on the target operating model, it is recommended to start with a value chain map. First identify the value propositions (i.e. products and services) offered by the organization and then define for each value proposition the value chain of activities required for delivery. Such a visualization process can help identify possible optimization and standardization options that can help achieve economies of scale or consistency.
When a regional target operating model is developed, the model becomes a cross-regional change project aimed at establishing regional standards for local implementation. Such models typically capture the current state of organizational design, business capabilities, and supporting technology components and define a vision for what should be achieved in the future.
Working on the target operating model at every level of detail shows how to work from high-level strategic design principles down to job descriptions and specific performance metrics for each role held.
As organizations grow in this challenging business world, their operating models must continue to be adjusted and optimized. However, it is worth thinking about how to ensure that the evolution of the operating model is always consistent with the organization's long-term strategy in response to changes in the external environment and internal needs?
