What is a “Target Operating Model” and why Should We Care?
“An information and technology (I&T) operating model represents how an organization orchestrates its I&T capabilities to achieve its strategic objectives. An enterprise operating model describes how the enterprise configures its capabilities to execute its actions to deliver business outcomes as defined in the business model.” - Gartner
When I first started out as a developer many years ago, no one really talked (much) about about the process that was followed to build code, nor how what we did fit into the way the organization as a whole operated, however that is changing. In most modern companies software has become such an integral function that how it is built (or acquired), how it is deployed and how it is supported is now critical to almost every part of the organization. In this new world, it is important that the operating model we adopt address all facets of the software lifecycle, not just development, deployment and support.
When we think about a Target Operating Model (TOM), we need to consider that it’s not an “all or nothing” decision. We don’t have to go “all in” to agile or “all in” to waterfall - each approach has it’s place as do approaches that mix agile, waterfall or iterative. One of the reasons that I really dislike the term “transformation” is that the assumption is that we need to totally transform the entire organization - nothing could be farther from the truth. We need to understand what is working, what is not working (or could work better), prioritize the areas to improve, review the results of the improvement and iterate.
Going back to Gartner’s definition of operating model, I read it to imply that there are at least two types of operating models: IT and Business. In order to be effective, the IT operating model must be adjusted to focus on the strategic objectives whereas the business operating model must be created to focus on the desired business outcomes. This sounds simple, however I think it’s much more complicated than it first appears. Whereas defining a target operating model may be pretty straight forward (understand the strategic directives, then define a supporting operating model), I believe the real challenge is in moving from the current state to the desired state. In order to effectively make this move, I believe it’s important to first really understand the current state and this is where things are going to get difficult. Most organizations want to bypass the current state assessment as “we already know how we currently operate”, however my experience over the last twenty years has taught me that every organization has one or more operating models. What has become equally evident is that what the organization believes their model to be (which is usually illustrated by an org chart) and how it really operates is usually not the same thing. Additionally, many leaders believe that the only thing they have to do to implement a new model is to change the org chart which is an approach that not only may be doomed to failure, but may cause significant organizational damage.
In summary, a Target Operating Model (TOM) is nothing more than an organizational design approach that maps organizational capabilities, both IT and non-IT, in support of strategic goals and objectives. There are three critical parts of moving to a new TOM : 1) clearly defining organization strategic objectives; 2) clearly understanding the current operating model, and 3) clearly defining and implementing an effective (and gradual) transition plan. I equate this effort with leaving on a road trip. First we need to completely understand where we are, secondly we need to agree on our destination and thirdly we need to understand our travel capabilities and constraints. Unless we take the time to understand all three, our roadtrip will possibly end in disappointment if not total disaster….