Why Your Target Operating Model is Failing (And How to Fix It)

You've invested months, maybe years, developing your Target Operating Model (TOM). Time was invested, workshops were conducted, and PowerPoint presentations were polished to perfection. Yet here you are, watching your transformation initiative struggle to gain traction whilst your organisation continues operating the same way it always has.

Sound familiar? You're not alone.

What Exactly is a Target Operating Model?

Before we dive into why TOMs fail, let's establish what we're talking about. If you're new to the concept or need a refresher, here's the essential definition:

A Target Operating Model (TOM) is a comprehensive blueprint that defines how your organisation should operate in the future to achieve its strategic objectives.  Think of it as the architectural plans for your business—it shows how all the pieces should fit together once construction is complete.

A well-designed TOM typically includes eight core components:

Organisational Structure: How teams are organised, who reports to whom, and how decision-making authority flows through the company.

Business Processes: The step-by-step workflows that create value for customers, from order processing to product delivery to customer service.

Technology & Systems: The digital infrastructure, software applications, and data systems that enable your operations.

People & Capabilities: The skills, competencies, and cultural attributes your workforce needs to succeed in the future state.

Governance Framework: The rules, policies, and oversight mechanisms that ensure consistent decision-making and accountability.

Performance Management: The metrics, dashboards, and feedback systems that track progress and drive continuous improvement.

Operating Locations: Where work gets done—whether in headquarters, regional offices, remote locations, or hybrid arrangements.

Financial Model: How money flows through the organisation, the financial operating model, including cost structures, revenue models, and resource allocation.

Why Organisations Create TOMs

Companies typically develop Target Operating Models during major transitions:

• Digital transformations that require new ways of working

• Mergers and acquisitions that need integrated operating approaches

• Market disruptions that demand rapid adaptation

• Growth initiatives that outgrow current organisational structures

• Cost optimisation efforts that require operational redesign
  

The goal is always the same: create a clear vision of how the organisation should work to be more effective, efficient, and competitive.

The TOM Promise vs. Reality

In theory, a Target Operating Model should serve as your North Star, guiding every transformation decision and ensuring all changes align with your strategic vision. It should eliminate confusion, accelerate decision-making, and create a shared understanding of where you're headed.

In practice? Well, that's where things often go sideways.

The Uncomfortable Truth About Most TOMs

Despite being a cornerstone of business transformation, 78% of Target Operating Model initiatives fail to deliver their intended outcomes. Organisations spend millions designing beautiful future states that never materialise, leaving leaders frustrated and employees cynical about change.

But here's the thing: it's not the concept that's broken—it's how we execute it.

The 5 Fatal Flaws Killing Your TOM

1. You Built a Monument, Not a Map

The Problem: Your TOM looks more like a museum exhibit than a practical guide. It's a static document filled with theoretical frameworks that nobody knows how to implement.

The Reality Check: If your team can't explain how to get from today's reality to tomorrow's vision in concrete steps, you don't have an operating model—you have expensive artwork.

The Fix: Transform your TOM from a "what" document to a "how" roadmap. Include specific transition plans, interim states, and measurable milestones that bridge the gap between current and future state.

2. You Ignored the Human Element

The Problem: Your TOM perfectly maps processes and technology but treats people as interchangeable resources who will magically adapt to new ways of working.

The Reality Check: Culture eats strategy for breakfast, and it will devour your TOM for lunch if you don't address the human side of transformation.

The Fix: Build change management and capability development directly into your TOM design. Map required mindset shifts alongside process changes. Identify change champions and resistance points before you launch.

3. You Made It Too Complex

The Problem: Your TOM requires a PhD to understand. It's a masterpiece of complexity that covers every possible scenario but paralyses decision-making with its intricacy.

The Reality Check: If your employees need a manual to understand how the organisation should work, they'll default to the old ways every time.

The Fix: Apply the "lift test"—can you explain your TOM in a two-minute lift ride? Simplify ruthlessly. Focus on the critical few changes that will drive the most impact.

4. You Designed in Isolation

The Problem: A small team of senior leaders or external consultants designed your TOM behind closed doors, then presented it as a fait accompli to the rest of the organisation.

The Reality Check: People support what they help create. If your team wasn't involved in designing the future state, they won't be invested in making it reality.

The Fix: Make TOM development a collaborative process. Engage frontline employees, middle management, and key stakeholders in co-creation sessions. Their insights will make your model more practical and their buy-in will make it more successful.

5. You Treated It as a One-Time Project

The Problem: You launched your TOM with great fanfare, then moved on to the next initiative, expecting the new operating model to sustain itself.

The Reality Check: Operating models require ongoing cultivation, adjustment, and reinforcement. Without continuous attention, organisations naturally drift back to familiar patterns.

The Fix: Establish governance structures and feedback loops that keep your TOM alive and evolving. Schedule regular reviews, measure progress against TOM metrics, and be prepared to adapt as conditions change.

Real-World Example: How Netflix's TOM Evolution Paid Off

To understand what a successful TOM transformation looks like, consider Netflix's evolution from DVD-by-mail to streaming giant. Their Target Operating Model shifted from:

Old TOM (DVD Era):

• Physical distribution centres and logistics

• Linear content acquisition and licensing

• Traditional media industry partnerships

• Batch-processing customer preferences
  

New TOM (Streaming Era):

• Cloud-based technology infrastructure

• Data-driven content creation and recommendation algorithms

• Direct relationships with content creators and viewers

• Real-time personalisation and user experience optimisation
  

This wasn't just a technology change—it required completely reimagining how the company operated across every dimension of their business. The result? Netflix went from a $3 billion company to over $240 billion in market value.

The Anatomy of a TOM That Actually Works

Successful Target Operating Models share several key characteristics that distinguish them from the failures:

They're Outcome-Focused Instead of describing activities, they define clear outcomes and work backward to identify the capabilities needed to achieve them. For example, rather than saying "improve customer service," they specify "resolve 90% of customer issues on first contact within 2 minutes."

They're Modular and Phased Rather than requiring massive simultaneous changes, they break transformation into digestible phases that build momentum over time. Each phase delivers tangible value whilst setting the foundation for the next.

They're Specific and Actionable They provide clear decision-making criteria, role definitions, and success metrics that eliminate ambiguity about what needs to happen. Team members can look at the TOM and understand exactly what they need to do differently.

They're Customer-Centric They start with customer needs and work backward through the organisation, ensuring every element of the operating model ultimately serves customer value creation.

They're Adaptive and Learning-Oriented They include mechanisms for continuous improvement and adjustment based on real-world feedback and changing conditions. They're built to evolve, not to be perfect from day one.

They Address the Full System They recognise that changing one element (like technology) without addressing others (like skills and culture) leads to suboptimal results or outright failure.

Getting Started: TOM Design Fundamentals for Beginners

If you're new to Target Operating Model development, here's a practical starting framework:

Step 1: Define Your Strategic Intent Before designing how you'll operate, be crystal clear on what you're trying to achieve. What specific business outcomes must your new operating model deliver? Revenue growth? Cost reduction? Customer satisfaction? Market expansion? Be specific and measurable.

Step 2: Understand Your Current State Map how you actually operate today (not how you think you operate or how you wish you operated). This includes documenting current processes, organisational structures, technology systems, and cultural norms. You can't design a better future without understanding your starting point.

Step 3: Identify Your Capability Gaps Compare your current capabilities to what you need to achieve your strategic intent. Where are the biggest gaps? These gaps become the focus areas for your TOM design.

Step 4: Design Your Future State Create a detailed vision of how your organisation should operate to close those capability gaps and achieve your objectives. This is where the eight core TOM components come into play.

Step 5: Plan Your Transition The space between current and future state is where most TOMs die. Create a detailed roadmap that shows how you'll move from where you are to where you want to be, with specific milestones, timelines, and success metrics.

Common TOM Pitfalls for First-Time Developers

Perfectionism Paralysis: Trying to design the perfect operating model before taking any action. Remember: done is better than perfect, and you'll learn more from implementing an 80% solution than from endlessly refining a theoretical model.

Technology-First Thinking: Assuming that new technology will automatically solve operational challenges. Technology is an enabler, not a solution. Fix your processes and organisational issues first.

Copying and Pasting: Taking another company's operating model and trying to transplant it into your organisation. What works for Amazon or Google may not work for you—every TOM must be tailored to your specific context.

Underestimating Change Management: Focusing on designing the future state whilst ignoring how you'll help people transition from the current state. The human side of transformation is usually the hardest part.

The ROI of Getting Your TOM Right

Organisations with well-executed Target Operating Models see measurable benefits:

Operational Efficiency: Companies typically achieve 15-25% cost reductions through process optimisation and organisational redesign.

Speed to Market: Streamlined decision-making and clearer accountabilities can reduce product development cycles by 20-40%.

Employee Engagement: Clear roles, responsibilities, and career paths improve employee satisfaction scores by an average of 30%.

Customer Satisfaction: Better-aligned operations usually translate to improved customer experience metrics and higher retention rates.

Financial Performance: Organisations with mature operating models show 2-3x higher revenue growth rates compared to those with ad hoc operational approaches.

The question isn't whether you can afford to invest in getting your TOM right—it's whether you can afford not to.

Warning Signs Your TOM Needs Immediate Attention

Watch for these red flags that indicate your Target Operating Model is off track:

Decision Paralysis: Important decisions are consistently delayed because it's unclear who has authority or what criteria should be used.

Duplication of Effort: Multiple teams are working on similar activities without coordination, leading to wasted resources and conflicting outcomes.

Talent Exodus: High-performing employees are leaving because they're frustrated with unclear roles, bureaucratic processes, or lack of career development opportunities.

Customer Complaints: Customer satisfaction scores are declining due to inconsistent service delivery or long resolution times.

Initiative Overload: The organisation is pursuing too many transformation projects simultaneously, creating confusion and resource conflicts.

Cultural Resistance: Employees actively resist change initiatives, preferring to stick with "the way we've always done things."

If you're seeing multiple warning signs, it's time for immediate TOM intervention.

Your 90-Day TOM Recovery Plan

If you recognise your organisation in the failure patterns above, don't panic. Here's how to get your TOM back on track:

Days 1-30: Diagnose and Simplify

• Conduct honest assessments with key stakeholders about what's not working

• Identify the 3-5 most critical changes needed for success

• Create a simplified, visual representation of your TOM that anyone can understand
  

Days 31-60: Engage and Co-create

• Run collaborative workshops with employees at all levels

• Incorporate their feedback into a revised TOM design

• Develop specific transition plans with clear milestones
  

Days 61-90: Launch and Learn

• Pilot your refined TOM with a small, committed team

• Gather feedback and iterate quickly

• Scale successful elements whilst continuing to refine others
  

The Bottom Line: From Failure to Success

Your Target Operating Model doesn't have to join the graveyard of failed transformation initiatives. The difference between success and failure isn't about having the perfect design—it's about creating something practical, inclusive, and adaptable that your organisation can actually implement.

Remember: the best operating model is the one that gets implemented, not the one that wins design awards.

Ready to fix your TOM? Start with an honest assessment of where you are today, engage your people in redesigning tomorrow, and commit to the ongoing work of making change stick. Your organisation's future depends on getting this right.

What challenges are you facing with your Target Operating Model? The path to transformation is rarely smooth, but it's always worth the journey when done right.