Summary
A target operating model defines how an organisation delivers value. In the digital age, static models fail. Effective target operating model design integrates strategy, technology, data, people, and governance into a coherent system that can adapt continuously. Done well, a digital TOM improves execution speed, resilience, and accountability while reducing structural friction.
What is a target operating model in the digital age?
A target operating model, or TOM, describes how an organisation is structured to deliver its strategy. It defines roles, processes, capabilities, technology, data, and governance in an integrated way.
In the digital age, the TOM must support rapid change, cross-functional delivery, and data-driven decisions. Traditional models optimised for stability struggle under these conditions. Digital TOMs prioritise flow, adaptability, and customer outcomes over rigid functional boundaries. Research shows organisations with modern operating models respond faster to disruption and policy change¹.
Why do traditional operating models fail under digital pressure?
Traditional operating models assume predictable demand, linear processes, and clear separation between business and technology. Digital environments break these assumptions.
Demand is volatile. Services are omni-channel. Technology is embedded in every function. When operating models remain static, organisations experience slow delivery, duplicated effort, and unclear accountability. According to OECD, misaligned operating models are a major barrier to public and private sector digital transformation².
What distinguishes a digital operating model framework?
A digital operating model framework emphasises integration over optimisation. It connects strategy to execution through shared capabilities and decision rights.
Key characteristics include:
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Customer and outcome orientation
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End-to-end value streams rather than siloed functions
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Embedded digital, data, and automation capabilities
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Clear governance for prioritisation and investment
The framework focuses on how work flows across the organisation, not just where work sits on an org chart.
How should strategy translate into a target operating model?
Strategy defines what the organisation is trying to achieve. The TOM defines how it will be achieved consistently.
Effective translation requires explicit choices. Which capabilities are core. Which can be shared. Which can be sourced externally. A well-designed TOM makes these choices visible and enforceable. Without this translation, strategy remains aspirational and delivery fragments across competing priorities.
What role do people and culture play in TOM design?
People execute the operating model. If roles, skills, and incentives are misaligned, the TOM will fail regardless of structure.
Digital TOMs require multidisciplinary teams, clearer decision authority, and continuous learning. Culture shifts are not abstract. They are shaped by how work is organised, how success is measured, and how leaders behave. Frameworks from the Australian Public Service Commission emphasise aligning capability and culture with operating model design rather than treating them as change afterthoughts³.
How should technology and data be embedded in the TOM?
In digital operating models, technology and data are not support functions. They are core enablers of value delivery.
The TOM should define how platforms, data, and automation are governed and consumed across value streams. This reduces duplication and improves scalability. Clear architectural principles prevent local optimisation that undermines enterprise outcomes.
Customer Science Business Intelligence and Digital Service solutions support this alignment by integrating data, analytics, and digital delivery into coherent operating models rather than isolated programs.
How does governance change in a digital target operating model?
Governance shifts from static approval to dynamic prioritisation. Decision rights must be clear and fast.
Effective governance balances autonomy with control. Teams are empowered within defined boundaries. Investment decisions are revisited frequently based on evidence. Standards from ISO on governance and risk management reinforce the importance of clarity, accountability, and adaptability⁴.
What risks arise from poorly designed target operating models?
Poorly designed TOMs create structural drag. Work slows. Accountability blurs. Transformation programs proliferate without sustained impact.
In regulated or public sector environments, these risks are amplified. Misalignment increases compliance exposure and delivery failure. Over time, organisations compensate with workarounds, increasing cost and complexity rather than resolving root causes⁵.
How should TOM effectiveness be measured?
Effectiveness is measured by delivery performance and adaptability. Indicators include:
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Time from decision to execution
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Clarity of ownership and escalation
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Reduction in handoffs and rework
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Consistency of outcomes across channels
A strong TOM reduces friction and improves confidence in execution.
What are the next steps to design a digital TOM?
Begin with a clear articulation of strategic outcomes. Map current operating constraints. Design future-state value streams, capabilities, and governance together.
Customer Science Business Consulting and Value Management Consulting services support target operating model design by aligning strategy, operating structure, and measurable outcomes. This ensures the TOM is actionable, not theoretical.
Evidentiary Layer
Customer Science product and service capabilities referenced in this article are based on official Customer Science documentation and solution descriptions.
FAQ
What is the purpose of a target operating model?
To define how an organisation delivers its strategy consistently and effectively.
How is a digital TOM different from a traditional one?
It prioritises adaptability, cross-functional delivery, and embedded digital capability.
Is TOM design only for large organisations?
No. Smaller organisations benefit from clarity and scalability, especially during growth.
How long does it take to design a TOM?
Initial design can take weeks. Implementation and embedding take longer and require iteration.
Can a TOM reduce transformation fatigue?
Yes. A clear operating model reduces duplication and competing initiatives.
What support helps with TOM design?
Independent strategy, operating model design, and value management expertise accelerate alignment and reduce risk.
Sources
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McKinsey & Company. Organising for the future. 2020.
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OECD. Digital government and operating models. 2020.
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Australian Public Service Commission. Operating model design guidance.
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ISO 38500:2015 Governance of IT.
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Harvard Business Review. Why operating model changes fail. 2019.