target operating model definition

Defining the business future state

Version 1.2

February 2009

Target Operating Model

2Copyright © Maddison Ward 2006

What is a target operating model

A definition of the future state of an organisation

People

Process

Technology

Customers

Markets / Geographies

Products

How do I get a target operating model

No prescriptive approach to delivering a T.O.M.

No commonly agreed principles as to what goes into a T.O.M.

Each organisation will have different needs and different focus.


What are the major components of a T.O.M?

PROCESSPEOPLE

TECHNOLOGY

ProceduresKPI’s

VolumetricsBusiness Rules

Management Information

CultureBehavioursLeadershipTrainingIncentives/RewardPeer ReviewsMonitoringEnvironment

Customer onlineCRM

Order ManagementFinancial systems

What should these look like in the future state?

Customers

Products

Markets


4

3. The Opportunity (Hypothesis)

3. The Opportunity (Hypothesis)

• What is the size of the opportunity?• What is the current baseline?• What is the performance gap?

• What is the size of the opportunity?• What is the current baseline?• What is the performance gap?

4. The Customer “Principles”

4. The Customer “Principles”

• What are the governing customer principles?

• What is the value proposition?• Who are the customers (needs based

segments)?• What is the potential in each segment?• What is the contact strategy?• What is the customer lifecycle?

• What are the governing customer principles?

• What is the value proposition?• Who are the customers (needs based

segments)?• What is the potential in each segment?• What is the contact strategy?• What is the customer lifecycle?

5. Product / Proposition

5. Product / Proposition

• What are the advice needs per segment?

• What are the product needs per segment?

• How is the product provided (platform, sourcing)?

• What are the pricing and fee assumptions?

• What are the advice needs per segment?

• What are the product needs per segment?

• How is the product provided (platform, sourcing)?

• What are the pricing and fee assumptions?

6. Process6. Process

• What are the affected processes• What are the likely interim

processes• Are there likely to be significant

business rules & triggers (eg. Complaints)

• What are the major process KPI’s

• What are the affected processes• What are the likely interim

processes• Are there likely to be significant

business rules & triggers (eg. Complaints)

• What are the major process KPI’s

7. Roles & Skills7. Roles & Skills

• What are the advisor roles, skills and numbers?

• What is the skills gap and training needs?

• What is the vehicle to achieve this (CAD)?

• How are advisors measured, incentivised and remunerated?

• What are the advisor roles, skills and numbers?

• What is the skills gap and training needs?

• What is the vehicle to achieve this (CAD)?

• How are advisors measured, incentivised and remunerated?

8. Technology Services & Infrastructure

8. Technology Services & Infrastructure

• What tools and capabilities will be required (build or buy)?

• What capabilities can the current tools provide?

• Where are the capability gaps?• Will we have to procure service /

software?• Is this new technology to the

organisation?

• What tools and capabilities will be required (build or buy)?

• What capabilities can the current tools provide?

• Where are the capability gaps?• Will we have to procure service /

software?• Is this new technology to the

organisation?

9. Implementation Roadmap

9. Implementation Roadmap

• What is the high level implementation plan?

• Will there be a pilot – what will this look like (geography, customer segment)

• What is the high level implementation plan?

• Will there be a pilot – what will this look like (geography, customer segment)

10. Benefits Realisation10. Benefits Realisation

• What is the Economic Model?• How will benefits be measured

• What is the Economic Model?• How will benefits be measured

2. The Compliance / Regulatory Framework

2. The Compliance / Regulatory Framework

• What compliance framework exists• Who are the regulators• What are the policies & rules that

have to be adhered to?

• What compliance framework exists• Who are the regulators• What are the policies & rules that

have to be adhered to?

1. The Business Strategy / Vision1. The Business Strategy / Vision

• What market does the business want to be in

• How is that market addressed currently

• What is the competitive environment

• What market does the business want to be in

• How is that market addressed currently

• What is the competitive environment

What is a target operating model

Customer Journeys “I Wants” -> Colleague Journeys “I Needs”Customer Journeys “I Wants” -> Colleague Journeys “I Needs”


The first challenge is to define the target

What kind of business do we want to be / what is our “vision”?What is our value proposition (ie, why are we here?)What products / services should we be offeringAt what pricing / marginWhat revenue and profitability targets should we have, over the next 5 yearsWhat cost base can we / should we support for the aboveWhat is our anticipated cost of saleWhat is our predicted cashflowHow do we present ourselves to our market and what do we stand for? (What is our brand strategy and value)How do we make our customers aware of what we offer (What is our marketing strategy (ALT / BTL))How do we sell to our customers (What is our sales strategy (online / direct to consumer))How do we handle partner organisations (B2B)How do we provide our customers with customer service (how do we handle their enquiries / complaints)From whom do we source our raw materials (What is our supplier strategy)How do we distribute our products to our customers (What is our logistics / supply chain strategy)How to we utilise IT to support our business (What is our IT strategy (insource / outsource))What financial / governance processes and controls do we need

In defining our target operating model, we’re trying to answer the questions:-

What business do we want to be in, and how is that changing from the business we’re in today


The first challenge is to define the “end-state”

PeopleWhat kind of people do we need?How many of them?How are they organised?Where do they sit?How do we measure them?What rewards / incentives do we have to put in place for them?What training do they need?What career / promotion prospects will we put in place for them?How do we deal with performance issues?How do we recruit them (or make them redundant from current state)

ProcessWhat are our macro business processes (level 0)How do they decompose into units of work (level 1+)How do we measure their efficiency (KPI’s)What volumetrics do we believe each process will have (how often will the process be used)How much will each process cost to runWhat are the business rules for each processWhat triggers a business process (event, time, volume etc).What are the process hand-offs, and how does the organisation map to the processWhat systematic technology do we want to put in place to support each process (and how much value or cost saving does that bring compared to the technology total-cost-of-ownership – ie, do the volumetrics stack up to the cost?)What management information do we need to measure the process

TechnologyWhat systems do our colleagues need to support the business processes we’re asking them to doHow do our customers interact with us through technologyWhat level of automation do we want through the various channels/segments/touchpoints!

We can then start to decompose these into models about how our business should look:-


Where do we begin?

Customer PrinciplesWhat products/services do we want to offer our customersHow do we want to interact with our customersHow much do we want them to do for themselvesDo we want their online and offline experiences to be similarHow do we contact our customersHow often to we proactively communicate with our customersHow much do we spend on each customer, and how much is the customer worth to usWhat do we want our overall customer satisfaction target to be, as a result?

Customer Journeys (I wants)What segmentation of customers do we haveHow do we want to treat each segmentHow much value do we get from each segmentWill the customer journey be the same for each segmentWhat are the steps through the journey, what are the inputs and what do we expect the customer to do / feel at the end of each step.Who, in our organisation is the touch-point for the customer through each of the journey steps?How do we measure customer satisfaction across each segment / journey (customer KPI’s).

StrategiesCustomer Segmentation ModelCustomer Contact StrategyCall-centre StrategyOnline / Social Media StrategyCustomer Value Proposition (s)

The commonly recognised starting point is the “customer experience”

This tries the articulate the “Customer I Wants, and the overall approach to how those I Wants might be addressed within the cost/revenue parameters of the overall business



Process Level 0, 1 & 2 Process Maps & KPIsBusiness Rules SpecificationsWorkflowArchivingPhysical SecurityInterim processes (transitional state)Manual procedures (for non-automated processes)

TechnologySystems requirements specificationUser StoriesWireframesMI RequirementsLists of Values specificationUser Roles & PermissionsData Requirements & Ownership (including retention)Help RequirementsScripting RequirementsEnvironment Requirements System Service Level Requirements

From which we can derive a set of Colleague Journeys “I needs”.This, then, can be further decomposed into:-

PeopleOrganisation DesignRemuneration / Compensation / Reward modelOrganisation VolumetricsEstates PlanSkills / Competencies AssessmentOrganisational Change Readiness AssessmentJob DescriptionsEmployee ContractsRelocation / Recruitment / Redundancy PlansTraining Plans


Business capabilities will have different focus

Call Centre channel

PROCESS

PEOPLE

TECHNOLOGY

Online channel

PROCESS

PEOPLE

TECHNOLOGY

… but the overall design needs to be holistic, or consciously not (based on the business strategy and/or customer principles

For example, different emphasis on channels – call-centre design vs online design

Knowledge

Collateral

CUSTOMERS


Summary

Business Strategy+underpinning strategies

… what do we want to be?

Customer Design

Process Design

People Design Technology Design

transition states (releases) | implementation plans | pilots | launch plans | marketing plans etc

BUSINESS PROGRAMMES

… Customer Principles

… I wants

… I needs

Compliance / Regulatory Framework

Products Design



Example checklist