Target Operating Models
What is a Target Operating Model?
The Target Operating Model (TOM) is a tool a company can use to express the vision of the future through a number of key elements of the business, which include:-
- Business Process structure.
- Business Roles performing their tasks within these processes.
- High Level descriptions of how the business processes will be enacted.
- Key Performance Indicators (KPIs) related to the processes.
The business process structure should define the company’s vision of how it will deliver its products and services to customers through end-to-end processes and back-office support functions. It is described down to level 2 and the diagram below shows a typical process model for a project manufacturing company.
Business roles are the generic titles that relate to a skill set that is recognised in all businesses and can be aligned to a set of tasks that are normally performed at a single desk. They are not HR job descriptions and nor will they be related to seniority within the business.
Supporting the process model are vision statements of how the end-to-end processes will be enacted, that is the business rules that will be used to perform them but also the expected outcomes from both the customer and the corporate point of view in the way these processes will be performed. Written in the correct way they provide the perfect back cloth to a CEO and Senior Management communication of what the business will look and feel like, in say 3-5 years’ time.
The final element is the Key Performance Indicators, these can also form part of the strategy map, having been derived from the development of the balance score card. Even without this strategic structure we would expect these key performance indicators to measure the future performance of the end-to-end processes as described within the target operating model; they would ideally have 3 sets of measures, minimum acceptable, ideal target and exceeding expectations. This is recognition that many processes cannot be made completely predictable and controllable by the company and levels of variation need to monitored and managed.
Why is the Target Operating Model (TOM) needed for successful ERP Implementations?
Most ERP implementations will be targeted at taking the business forward from its present ASIS state to some future vision TOBE. This vision cannot be driven from a technology perspective and must be both owned by the business and be related to overall business process not the ERP systems capability.
Only via a helicopter view, as provided by a TOM, can we describe this vision, begin to communicate it and test whether the ERP system can deliver the required improvements and changes.
Since the business processes and their orchestration should be how you define the delivery of your products and services; then this is the fundamental way of describing how the business will be organised in the future. To be able to define the configuration required from your ERP system you will need a fresh definition of the business process model, developed without reference to existing custom and practice probably based on best practice which will enable comparison and benchmarking.
By reverting back to simplified business roles we can remove the issues of relating work to specific individuals, thereby presenting a clear view of the changes required.
Once the TOM is defined you can use it to compare with what exists within the existing processes and therefore determine the gap and change agenda that will drive the implementation of ERP.
Therefore, in addition to describing the future vision of the business, the anticipated benefits of the TOM are that you can also describe the changes that will be undertaken right down to an individual person’s role.
By looking at processes the key performance indicators can be set and by defining these within a range as described earlier you can manage and deliver and continuously improve processes as part of business as usual.
The TOM therefore drives a forward vision which should include improvements to existing processes not just an automation of what exists now.
How do we deliver Your Target Operating Model?
Essentially we perform five elements of work to support you to develop a Target Operating Model suitable to support ERP implementations; these are:-
- Development of a backbone business process model, which utilises process models based on best practice such APQC and our own experience.
- Creation of a higher-level process model, based on the end-to-end processes, which brings in relevant elements of best practice.
- Standardisation of business roles based on best practice.
- Development of a minimum KPI set based on the end-to-end processes defined
- Development of a communication document for delivery to staff from senior management.
The way we deliver this is through workshops driven with operating process and role models that we believe would suit your businesses. We use some simple tools to enable us to extract the key information to help build on the initial model and tailor it to your unique circumstances.
By offering up potential models your role is to critique the proposal and challenge your own thinking and constructs, without having to start with a blank sheet of paper. The debate builds a picture of how the business has evolved and how it can move forward enabling us to propose process, organisation and role changes that will not only improve business performance and agility, but also define the key ERP functionality that will make this a reality.