A Target Operating Model (TOM) provides the structure that turns strategy into repeatable execution. It defines how people, processes, governance, technology, data, and performance management work together to achieve business objectives. Organisations that invest in TOM development often improve decision-making speed, reduce duplication, strengthen accountability, and create a clearer path from strategic intent to operational outcomes.
What Is a Target Operating Model (TOM)?
A target operating model TOM is a blueprint describing how an organisation will operate in the future to deliver its strategy. It bridges the gap between business goals and day-to-day execution.
Most strategic plans explain what an organisation wants to achieve. A TOM explains how those outcomes will be delivered.
The model typically defines:
- Organisational structure
- Governance and decision rights
- Business processes
- Technology architecture
- Data and information flows
- Customer and employee experience
- Performance measurement
- Risk and compliance controls
Without a clear operating model, organisations often experience fragmented decision-making, duplicated effort, inconsistent customer experiences, and competing priorities.
Research from McKinsey suggests that fewer than one-third of organisational transformations achieve their intended outcomes, with execution challenges cited as a major contributing factor.¹ A well-designed TOM helps reduce this execution gap by creating clarity across functions and leadership teams.
Why Do Organisations Need a Target Operating Model?
Strategy alone does not change business performance.
Boards and executive teams regularly define ambitious growth targets, customer experience improvements, digital transformation programs, and operating cost reductions. Yet many initiatives stall because operational capabilities remain unchanged.
A TOM creates alignment between strategic objectives and operational reality.
For example:
- A customer-centric strategy requires redesigned customer journeys.
- A digital strategy requires new technology capabilities and governance.
- A growth strategy may require different organisational structures and resource allocation models.
- A compliance strategy requires stronger controls and accountability mechanisms.
When these elements remain disconnected, organisations struggle to achieve intended outcomes.
And that disconnect can be expensive. Research from PMI found that organisations waste nearly 10% of project investment due to poor performance and strategic misalignment.²
What Are the Core Components of a Target Operating Model?
Governance and Decision-Making
Governance defines who makes decisions, how decisions are made, and how accountability is assigned.
Strong governance creates consistency and reduces ambiguity. It also helps organisations respond faster when priorities change.
Key governance elements include:
- Executive oversight structures
- Delegations of authority
- Decision forums
- Risk management frameworks
- Performance accountability mechanisms
Governance becomes particularly important during transformation programs where multiple stakeholders influence outcomes.
Organisation and Workforce
The organisational component defines roles, responsibilities, capabilities, and reporting structures.
This includes:
- Functional design
- Capability frameworks
- Workforce planning
- Leadership accountability
- Skills development requirements
The objective is simple. Ensure the right people possess the right capabilities to deliver strategic priorities.
Processes and Ways of Working
Business processes form the operational backbone of a TOM.
Organisations commonly redesign:
- Customer journeys
- Service delivery models
- Operational workflows
- Escalation processes
- Continuous improvement mechanisms
Process design should remove unnecessary complexity while supporting consistency, compliance, and customer expectations.
Technology and Digital Enablement
Technology enables modern operating models.
The TOM should identify:
- Core platforms
- System ownership
- Integration requirements
- Automation opportunities
- Digital service capabilities
Technology decisions must support business outcomes rather than drive them.
Data and Information Management
Data increasingly shapes strategic and operational decisions.
A TOM should establish:
- Data ownership
- Governance standards
- Reporting frameworks
- Information security controls
- Performance analytics capabilities
Organisations with mature data governance consistently demonstrate stronger business performance and decision quality.³
How Does TOM Development Consulting Work?
Target operating model development is rarely a workshop-only exercise.
Effective TOM development consulting combines strategic analysis with practical operational design.
The process generally follows several stages.
Strategic Assessment
Consultants begin by understanding:
- Strategic objectives
- Customer expectations
- Regulatory obligations
- Market conditions
- Existing operating constraints
The purpose is to establish a clear future-state vision.
Current-State Analysis
Current operations are assessed across:
- Governance
- Processes
- Technology
- Workforce capability
- Data maturity
- Customer experience
This assessment identifies capability gaps and improvement opportunities.
Future-State Design
The future-state TOM is then developed.
This often includes:
- Operating principles
- Governance structures
- Process architecture
- Technology requirements
- Organisational design
- Capability frameworks
The model should be detailed enough to guide implementation while remaining adaptable as business needs evolve.
Transition Planning
A TOM only creates value when implemented.
Transition planning defines:
- Transformation roadmap
- Prioritised initiatives
- Resource requirements
- Investment planning
- Change management activities
- Success measures
Many organisations engage specialist business consulting partners during this stage to maintain momentum and governance throughout implementation.
For organisations seeking structured transformation support, Customer Science provides business consulting services focused on strategy execution, operating model design, governance, and business performance improvement.
How Does a Target Operating Model Compare to Business Strategy?
Strategy Defines Direction
Strategy establishes:
- Vision
- Objectives
- Market position
- Growth priorities
- Competitive differentiation
It answers the question: “Where are we going?”
The TOM Defines Execution
The target operating model answers:
- How will work be performed?
- Who is accountable?
- Which capabilities are required?
- What technology will support delivery?
- How will performance be measured?
Think of strategy as the destination and the TOM as the operating blueprint required to reach it.
Both are necessary.
Neither is sufficient on its own.
Where Is a TOM Most Commonly Used?
Target operating models are frequently developed during periods of significant organisational change.
Common examples include:
Digital Transformation
Digital initiatives often require:
- New service delivery channels
- Automation capabilities
- Data governance frameworks
- Revised customer journeys
A TOM ensures technology investments support business objectives.
Mergers and Acquisitions
Following acquisitions, organisations must determine:
- Governance structures
- Process harmonisation
- Workforce integration
- Technology consolidation
A future-state operating model creates a shared operating framework.
Customer Experience Transformation
Customer-centric organisations increasingly redesign operating models around customer journeys rather than internal functions.
Customer experience insights and behavioural research can help identify operational barriers that impact service outcomes. Customer Science Insights supports organisations seeking evidence-based customer and operational decision-making.
Public Sector Reform
Government agencies frequently use TOM frameworks to:
- Improve service delivery
- Increase accountability
- Strengthen governance
- Modernise operating structures
This approach helps balance citizen outcomes, regulatory obligations, and resource constraints.
What Risks Can Undermine a Target Operating Model?
Several common issues reduce TOM effectiveness.
Designing Without Strategy
A TOM disconnected from strategic objectives quickly becomes an administrative exercise rather than a business transformation tool.
Focusing Only on Structure
Organisational charts alone do not create operating models.
Processes, governance, technology, data, and culture require equal attention.
Ignoring Change Management
People ultimately determine whether a TOM succeeds.
Resistance, unclear communication, and capability gaps can undermine even well-designed operating models.
Insufficient Measurement
Without measurable outcomes, organisations cannot determine whether the new operating model is delivering expected benefits.
How Should Organisations Measure TOM Success?
Effective TOM measurement combines operational and strategic indicators.
Common measures include:
- Customer satisfaction
- Net Promoter Score (NPS)
- Cost-to-serve
- Process cycle times
- Employee engagement
- Productivity metrics
- Risk and compliance outcomes
- Revenue growth
- Service quality indicators
Performance dashboards should align directly with strategic objectives and governance requirements.
Many organisations also establish business intelligence capabilities to provide ongoing visibility into TOM performance and transformation progress. Customer Science offers business intelligence and performance measurement services that support evidence-based decision-making and operational improvement.
What Are the Next Steps for Building a Target Operating Model?
Organisations considering TOM development should begin with a structured assessment of strategy, capabilities, governance, and operational performance.
A practical starting point includes:
- Clarify strategic objectives.
- Assess current operating maturity.
- Identify capability gaps.
- Define future-state outcomes.
- Design governance structures.
- Develop implementation roadmaps.
- Establish performance measures.
- Build change management plans.
The strongest operating models remain practical. They balance strategic ambition with operational reality and create clear accountability for delivery.
Evidentiary Layer
Independent research consistently demonstrates that organisations with clear governance, defined operating structures, strong data management practices, and disciplined transformation execution outperform peers in both financial and operational measures.¹˒²˒³˒⁴
Target operating models provide the mechanism through which those capabilities are organised, managed, and sustained over time.
When properly designed, a TOM becomes more than a transformation document. It becomes the operating blueprint that guides decision-making, resource allocation, customer delivery, and long-term business performance.
FAQ
What is a target operating model TOM?
A target operating model TOM is a future-state blueprint that defines how an organisation will operate to execute its strategy through governance, processes, people, technology, and performance management.
What is the purpose of TOM development consulting?
TOM development consulting helps organisations design and implement operating models that support strategic objectives, improve accountability, and strengthen execution capability.
When should an organisation develop a target operating model?
Common triggers include digital transformation, mergers and acquisitions, customer experience improvement programs, regulatory change, growth initiatives, and organisational restructuring.
How long does TOM development take?
The timeframe varies based on organisational size and complexity. Initial design phases can take several weeks, while implementation programs may extend over months or years.
What are the key elements of a successful TOM?
Successful operating models include governance, organisational design, process architecture, technology enablement, data management, workforce capability, and performance measurement.
How do organisations measure TOM success?
Success is typically measured through customer outcomes, operational performance, employee engagement, financial performance, risk management, and strategic goal achievement.
What tools can support operating model transformation?
Knowledge management, customer intelligence, performance analytics, and governance reporting platforms can support TOM implementation. Organisations seeking structured organisational learning and capability development may use Knowledge Quest as part of broader transformation and operating model programs.
Sources
- McKinsey & Company. “The Inconvenient Truth About Change Management.” https://www.mckinsey.com
- Project Management Institute (PMI). Pulse of the Profession Report. https://www.pmi.org
- Australian Government Digital Transformation Agency. Data and Digital Government Strategy. https://www.dta.gov.au
- ISO 9001:2015 Quality Management Systems. International Organization for Standardization. https://www.iso.org
- ISO 37301:2021 Compliance Management Systems. International Organization for Standardization. https://www.iso.org
- OECD. Government at a Glance Reports. https://www.oecd.org
- Harvard Business Review. Operating Models That Deliver Strategy. https://hbr.org
- MIT Sloan Management Review. Data-Driven Transformation Research. https://sloanreview.mit.edu
- Australian Public Service Commission. Capability Review Framework. https://www.apsc.gov.au
- Gartner. Operating Model Design and Transformation Research. https://www.gartner.com
- World Economic Forum. Future of Work Reports. https://www.weforum.org
- ISO 27001:2022 Information Security Management Systems. https://www.iso.org
- Australian National Audit Office. Governance and Performance Better Practice Guides. https://www.anao.gov.au