Target operating model and digital transformation: opportunities and challenges 

In a world that is digitizing at breathtaking speed, companies are faced with the challenge of adapting their operating models accordingly. The so-called Target Operating Model (TOM) is the key to efficiency and competitiveness. But what exactly is behind this concept and how can it guide a company's digital transformation?

Digital transformation is changing the way we do business, while raising numerous questions about the security and effective management of these changes. However, it also creates countless opportunities: lean operating models, process optimization and the ability to react quickly to market changes(operations management) are just some of the benefits.

In this article, we look at the definition of a target operating model, its functions and objectives, and how digital transformation affects companies. We also shed light on the opportunities that are opening up for the target operating model in the era of digital transformation and discuss the challenges and steps required for successful implementation.

What is a Target Operating Model (TOM)?

A Target Operating Model (TOM) represents an ideal-typical framework in which a company can achieve its strategic vision and business goals efficiently and effectively. It describes how a company should be organized in order to achieve its goals and forms a bridge between strategic planning and its implementation. The TOM serves as the basis for the alignment of the corporate structure, operational processes and IT systems and thus supports the digital transformation and the achievement of abstract goals.

Definition of the target operating model

A Target Operating Model encompasses the fundamental aspects of the organization, processes and IT systems that together form the foundation of how a company operates. Within these dimensions:

• Organization: Defines the structures, hierarchies, roles and responsibilities within the company.

• Processes: Comprises all core and support processes required to achieve the strategic objectives.

• IT systems: Refers to the technological components and software solutions required to support and improve processes(Lean IT).

The collaboration of these dimensions enables a company to review and adapt its current operating models in order to remain competitive in a dynamic environment.

Functions and objectives of a target operating model

The main function of a Target Operating Model is to provide a clear and structured vision of the operational activities and their execution, which are directly linked to the company's strategic objectives. Several objectives are central here:

• Strategic alignment: Ensuring that all operational activities contribute to achieving the overarching strategic goals.

• Increased efficiency: Optimization of processes for improved productivity and cost savings.

• Transparency: Creating clarity about responsibilities and processes to facilitate decision-making.

• Adaptability: The ability of the company to adapt quickly to market or internal changes.

• Risk management: Identification and minimization of operational risks through clearly defined processes and structures.

The TOM is not a rigid concept, but rather a dynamic framework that must be regularly reviewed and adapted in order to ensure the resilience and competitiveness of an established company.

The importance of digital transformation

Digital transformation has become a key term in today's business world. It represents the comprehensive change that companies are undergoing in order to survive and grow in an increasingly digitalized and networked market environment. For companies, digital transformation is no longer just an option, but an absolute necessity in order to remain competitive in a dynamic environment and respond to rapidly changing customer needs. It involves the redesign of processes, the application of innovative technologies and the development of a digital culture that is a common goal in order to revolutionize business models and ensure strategic success.

Definition of digital transformation

Digital transformation refers to the process of integrating digital technology into all areas of a company. This process leads to fundamental changes in the way the company operates and creates value for its customers. The aim is not only to improve existing processes, but also to develop new business models and explore innovative ways to increase efficiency and achieve a sustainable competitive advantage.

Effects of the digital transformation on companies

The digital transformation has far-reaching effects on companies in all sectors. The focus is on the modification and digitalization of processes, which leads to a change in working methods and corporate culture. Here are some of the key impacts:

• Increased efficiency: Automation and optimization of workflows lead to faster processes and cost reductions.

• Improved customer interaction: Digital channels enable more direct and personalized contact with customers.

• New business models: Companies can open up new markets with digital services and products.

• Data-based decisions: By analyzing large amounts of data (big data), better and more informed decisions can be made.

• Flexibility and scalability: Cloud technologies allow companies to easily adapt to changing business requirements.

Overall, digital transformation enables companies to be more agile, customer-centric and resilient in a constantly changing market. The target operating model plays a central role here, as it combines strategic alignment with the necessary operational and technological changes.

Opportunities of the digital transformation for the target operating model

Digital transformation opens up a wide range of opportunities for the design and optimization of a company's target operating model (TOM). A forward-looking operating model embraces technology as a catalyst for growth and innovation. The integration of digital technologies makes it possible to achieve strategic goals more effectively and create a robust foundation for future growth. The effectiveness, efficiency and agility of the TOM are significantly improved through digital transformation.

Development of an effective operating model

An effective operating model is the backbone of any successful company. Digital transformation makes it possible to rethink and realign the operational structure. It involves the implementation of new, digitally driven processes and the use of data analytics to optimize decision-making. This enables companies to react more quickly to market changes and adapt their services.

Improving business processes through digital technologies

Digital technologies have the potential to fundamentally change business processes. Digitalization enables companies to standardize their processes, reduce sources of error and ensure compliance. This leads to more transparent and agile processes, which form the core of a robust target operating model.

Increasing efficiency and reducing costs

Increasing efficiency through digital transformation is a crucial point for the target operating model. Automated processes and artificial intelligence support the fast and error-free processing of routine tasks, which can ultimately lead to a significant reduction in costs. Consistent process optimization both increases efficiency and reduces costs.

Increased agility and adaptability to changes in the market

Agility is essential in a dynamic business environment. The target operating model must be flexible in order to be able to react to changes in the market in a timely manner. Digital tools such as cloud solutions enable companies to scale quickly and efficiently and adapt their operating models to new circumstances.

Change management and employee acceptance

A successful digital transformation requires the support and acceptance of employees. Change management is a critical factor based on communicating the vision, training employees and creating a culture of continuous improvement and open feedback. Employee training and development are essential for an innovative target operating model.

Complexity of the digital transformation

Digital transformation can be complex and challenging. It requires an in-depth review and realignment of operational structures and processes. It is important to ensure that the TOM takes this complexity into account and includes strategies for dealing with challenges.

Security and data protection in the digital world

In the course of digital transformation, companies must also pay particular attention to security and data protection aspects. This includes implementing advanced security systems and protocols to comply with data protection regulations and strengthen customer trust.

Dealing with new technologies and pressure to innovate

New technologies bring with them pressure to innovate. A forward-looking target operating model must provide scope for constant technology monitoring and the introduction of innovative solutions. It is important to find a balance between technological progress and practical implementation.

Analysis of existing structures and processes

The basis for the transformation to a digitalized operating model is a careful analysis of existing structures and processes. Companies need to identify which areas can benefit from digital solutions and where there is potential for optimization.

Definition of strategic goals

Strategic goals form the guideline for the design of the target operating model. These goals must be clear, measurable and achievable in order to ensure the success of the digital transformation. They serve as a point of reference for all subsequent change measures.

Development of a holistic concept and implementation

A holistic concept for the target operating model combines strategic, operational and technological perspectives. Implementation requires detailed planning, resource allocation and continuous evaluation of progress.

Creation of company-wide collaboration and communication

Communication and collaboration are key elements of any target operating model. Digital platforms can promote networking between departments and contribute to an integrative way of working, which is essential for the digital era.

Continuous monitoring and adjustment of the target operating model

To be successful in the long term, a target operating model must be regularly reviewed and adapted. This ensures that the company reacts proactively to changes in the market and continuously drives forward the digital transformation.

Outlook on the future of digital transformation in the target operating model

The digital transformation is significantly shaping the further development of target operating models (TOM). In a dynamic environment, companies must rethink their existing structures and realign themselves with their strategic goals in order to remain competitive. Key aspects of future TOMs will be resilient processes that enable a rapid response to market changes.

In the future, an all-encompassing target operating model will not only include functional transformation, but a comprehensive, company-wide renewal. A holistic approach is essential in order to realize the digital and abstract goals of a company. Companies within companies, i.e. substructures, are becoming increasingly important for specialized services and innovations. The digital transformation in the TOM therefore focuses on the extended operating model - flexible, adapted and future-oriented.

Conclusion

A Target Operating Model (TOM) is a conceptual model that maps a company's vision from its existing structures and processes to its strategic goals and desired future direction. These models are particularly important in the context of digital transformation, where they help to ensure that business activities are aligned with a common goal.

The advantages of a well thought-out TOM are obvious: it creates clarity within the company, identifies synergies between different areas of the company and provides a blueprint for resilient processes. As a result, companies are better positioned to operate in a dynamic environment and develop holistic solutions.

The development and implementation of a Target Operating Model (TOM) offers both opportunities and challenges. One clear opportunity lies in supporting the strategic goals of an organization. By realigning existing processes and structures, a TOM can drive digital transformation, which is an essential prerequisite for success in a dynamic environment. This creates resilient processes that enable the efficient and effective achievement of objectives.

However, companies also face challenges. Adapting to a TOM requires a comprehensive and functionally well-thought-out transformation that encompasses not only internal processes, but also the entire external operating model. This can be a considerable effort, especially if the company is strongly anchored in its current operating model and requires comprehensive solutions.

In summary, an effective target operating model is not just an abstract idea, but a strategic tool that guides the transformation of a company from a current to a future, optimally positioned operating model. It is therefore fundamental for any company that is geared towards a functional and complete transformation in order to remain competitive in the long term.