The Operating Model (OM) of a company encapsulates its core processes, organization structure, people, skills, technologies, partners, and governance principles.
It’s the operational heartbeat of an organization.
This is how your internal teams operate on a daily basis to execute their mission and achieve the goals they’ve been assigned.
As a leader, you may spend or have spent quite a lot of time defining your Target Operating Model (TOM), seeking time and cost optimization as well as higher performances.
Target Operating Models are not a new concept. It has always been an essential component to execute a company’s vision and mission. And it’s even a competitive advantage for a company who has the ability to execute faster and better than its competitors.
But in today’s world, how can you ensure the operating model you have adopted is well suited for digital and omnichannel challenges? Are you agile enough compared to the competition? Do you have the ability to test and learn and go to market quickly? Does your team unleash creativity or are they stuck into rigid process without any added value?
Companies all size face challenges when it comes to their digital ways of working.
Over the course of my career, I’ve experienced many challenges related the operating model in place:
- Inability to test and learn quickly: V-model development process and project adherence with legacy systems slow down teams’ ability to launch functionalities and services in an agile manner.
- Difficulty to accelerate digital adoption: while the digital team was obviously digital-savvy, other departments often lag, creating inertia in transformation and change management.
- Top-Down vs. Bottom-Up Digital Transformation: digital initiatives often emerge from operational teams with digital know-how. This bottom-up approach, while innovative at a team level, may not align with the overall company strategy, leading to resistance and inefficiency.
- Budget and resources allocation: piling up projects and priorities because of revenue pressure often push the management team to under allocate the right resources to the right projects, driving employee overload and churn rate.
A structured approach to audit your current operating model.
To accelerate your digital transformation and adopt a digital-friendly operating model, I’d suggest you audit your current OM based on the following framework, so you can identify gaps and improvement opportunities.
To understand where your operating model stands, conduct an Operating Model audit focusing on the following six key components:
- People and organization: Assess the digital literacy, skills, and capabilities of your workforce. Which organizational model have you adopted? How employees learn, innovate, and collaborate. How good are you at attracting and retaining talents…
- Processes: Examine the agility and flexibility of your processes, how automated they are, especially for cross functional ones.
- Governance: Evaluate how decision-making processes support or hinder digital initiatives, top management digital savviness, and how accountability comes to life at every level of the organization.
- Partners and ecosystem: Beyond costs, consider the role of external partners in your digital ecosystem, how do they align with current and long-term vision, as well as their integration level within your organization.
- Measure: How relevant are your digital KPIs, do they support decision making and are they shared in real time across the organization?
- Tools and Tech: Beyond the tech stack that you’ve implemented for customers, how efficient are your internal tools? Do they facilitate operations’ agility or are they slowing you down?
Some actionable advice while defining your Target Digital-Friendly Operating Model
As you design your target operating model, I suggest you keep the following principles in mind:
- Agility and Customer-Centricity: Ensure your operating model is flexible and focused on customer needs and experiences.
- Cross-Functional Collaboration: Promote an end-to-end approach within the organization.
- Digital Savviness Across the Board: Encourage digital literacy and skills development beyond the digital team, up to the management team.
- Leverage No-Code and Automation capabilities: While no-code and automation technologies are still not that common in medium and large companies, it can definitely help streamline processes and foster innovation.
- Embrace remote, asynchronous communication and digital collaboration capabilities: Not only you’ll be able to attract and retain digital talents, but they’ll be much more productive!
Additional TOM-related resources
- Introducing the next-generation operating model, McKinsey Digital, https://www.mckinsey.com/~/media/mckinsey/business%20functions/mckinsey%20digital/our%20insights/introducing%20the%20next-generation%20operating%20model/introducing-the-next-gen-operating-model.ashx
- Target Operating Model, IBM : https://www.ibm.com/garage/method/practices/culture/target-operating-model/
- TOM at a glance, Deloitte: https://www2.deloitte.com/content/dam/Deloitte/lu/Documents/strategy/lu-target-operating-model-glance-122014.pdf
- Deloitte Digital : https://www2.deloitte.com/us/en/insights/focus/industry-4-0/product-innovation-and-governance.html
- Digital Target Operating Model: How Good Design Enables Good Business : https://www.linkedin.com/pulse/digital-target-operating-model-how-good-design-enables-david-kwon/
- Digital product management, A structured approach to product innovation and governance, Deloitte, https://www2.deloitte.com/us/en/insights/focus/industry-4-0/product-innovation-and-governance.html
- How to Level-Up Your Product Team: The Three ‘Ps’, MonstarLab, https://monstar-lab.com/ae/blog/how-to-level-up-your-product-team-the-three-ps/
- Products and platforms: Is your technology operating model ready?, McKinsey Digital, https://www.mckinsey.com/capabilities/mckinsey-digital/our-insights/products-and-platforms-is-your-technology-operating-model-ready