BUILDING THE RIGHT TARGET OPERATING MODEL: A STRATEGIC BLUEPRINT

This is where a Target Operating Model (TOM) becomes crucial. But designing the right TOM is no simple task—it requires a thorough understanding of your organisation’s strategy, an assessment of your current operations, and a vision of the future state. In this article, we’ll guide you through how to approach TOM design, the key triggers that prompt re-evaluation, and why getting it right is so vital for long-term success.

WHAT IS A TARGET OPERATING MODEL (TOM)?

A Target Operating Model defines the way an organisation works to achieve its goals. It’s not just about organisational structure or roles; it’s an end to end framework that considers people, processes, systems, and data. Think of it as the architecture that underpins your organisation’s strategy, helping align every component to deliver maximum value.

For example, while organisational design focuses primarily on roles and responsibilities, a TOM encompasses much more. It considers how all the critical elements — like customer interactions, technology infrastructure, and data governance —work together to drive the business forward. Your TOM should be the foundation that helps you achieve agility, efficiency, and competitive advantage.

WHY REEVALUATE YOUR TOM?

COMMON TRIGGERS

Most organisations don’t approach TOM re-evaluation in a straight line. It’s often triggered by key developments such as:

• Innovation and New Technologies: Disruptive technologies can shift an organisation’s value proposition. For instance, Anglian Water’s adoption of AI technology to enhance operational efficiency is a prime example of how innovation drives the need to align the TOM with new capabilities.
• Business Growth: As businesses scale, the TOM needs to evolve. What worked for a small start-up may not be viable for a company that’s grown into a national or global player. Growth demands rethinking processes, structures, and systems to handle increased complexity.
• External Changes and Disruption: From global pandemics to new regulations, external changes can necessitate a complete overhaul of your operating model. The Smart Metering Implementation Programme in the UK is a perfect example of how a new regulatory environment led utility companies to rethink their entire TOM.

ASSESSING YOUR CURRENT STATE AND SETTING THE STRATEGIC DIRECTION

Before you can design a future TOM, you must assess your current state.
Mapping out the strengths, weaknesses, opportunities, and threats of your existing operating model is crucial.

Although you might be tempted to start with a clean slate, it’s often more effective to build on what’s already working. And in any case, you must understand the current state if you are going to make the transition from the as-is to the new model as smooth as possible.

Once you understand your current state, the next step is to set your strategic direction. This involves identifying the unique elements of your business, determining your value proposition, and aligning the TOM with your long-term goals.

DESIGNING YOUR FUTURE TOM: A HOLISTIC APPROACH

With your strategy in place, the focus shifts to designing the TOM that will enable you to achieve those strategic goals. To create a successful TOM, you must consider each of the elements:

• Organisational Governance: Establish an organisational structure and governance framework that aligns with regulatory requirements and industry standards, ensuring accountability and resilience in an evolving energy landscape.
• Products & Services: Innovate and tailor offerings to support energy transition goals, addressing customer demands for sustainable and reliable solutions while maintaining competitiveness.
• Processes & Activities: Redesign workflows to align with the strategy and eliminate inefficiencies.
• Technology: Invest in technology that supports your long-term objectives and can scale with the business.
• People: Ensure that your people have the necessary capacity and capabilities to deliver the business goals.
• Customers: Develop customer engagement strategies that build trust and transparency, focusing on sustainability and affordability to meet the evolving needs of both residential and commercial customers.
• Data: Implement data governance policies that ensure accuracy, security, and accessibility, enabling data-driven decision-making across all levels of the organisation.
• Partners & Suppliers: Build strong relationships with partners and suppliers, ensuring they align with your quality standards, values, and business objectives.
• Location: Optimise the geographic distribution of facilities and resources to enhance efficiency, accessibility, and responsiveness to market demands.
• Cost To’s: Understand the cost levers in the business and establish cost management practices that enable financial efficiency, transparency, and accountability, supporting sustainable growth and profitability.

A TOM is not a one-size-fits-all solution. It must be tailored to your specific business context, industry, and strategic goals. Cross 8’s Operating Model Transformation Framework, for instance, helps businesses redesign their TOM while ensuring rapid transformation and alignment with key drivers of change. 

THE IMPORTANCE OF COMMUNICATION AND ENGAGEMENT

One of the biggest hurdles in implementing a new TOM is ensuring that your people are on board. It’s not enough to present a completed TOM and expect immediate buy in. Instead, you need to take your team on the journey. Share the process openly, explain the reasons for change, and show them the path from where you are now to where you want to be. This engagement fosters ownership and helps ensure the success of the transformation.

Clear, structured communication is vital, especially when dealing with confidential projects or large-scale changes. While maintaining confidentiality, you should still provide relevant information so that employees understand the reasons behind the change and feel supported.

PHASED IMPLEMENTATION FOR SUCCESS

Implementing a TOM is not an overnight process. Instead, a phased approach works best. Start with a few key areas—whether that’s technology, processes, or specific teams—and gradually roll out changes across the organisation. This method minimises disruption and allows for adjustments along the way.

THE BENEFITS OF GETTING YOUR TOM RIGHT

When designed effectively, a TOM can transform your operational capabilities, enabling ongoing scalability and sharpening your competitive edge. It allows you to leverage advancements in technology for better service delivery and ensures every part of your operation is aligned with your strategic objectives.

For example, businesses that take the time to design an effective TOM are more agile in the face of disruption, better equipped to handle growth, and more efficient in their day-to-day operations. It’s not just about maintaining the status quo; it’s about creating a framework that drives future success. 

Final Thoughts: A TOM as a Foundation for Long Term Utilities Success

Designing the right TOM is a critical step for UK energy companies striving to adapt to an industry in flux. A carefully constructed TOM enables resilience and future readiness for ongoing regulatory shifts, the rapid adoption of renewable energy, and advancements in grid technology.

But this is more than a one-time effort; it’s a strategic initiative that can set your organisation up for long term success.

By grounding your TOM in a well defined strategy, taking a phased implementation approach, and actively engaging employees in the process, you set up your organisation to maximise operational efficiency and drive innovation, both of which are only going to increase in importance for the foreseeable future in the UK energy market.