Crafting a Target Operating Model: Guiding Your Organization to Success
I want to dive into the world of Target Operating Models (TOMs). In my previous post about top-notch tech teams, I emphasized the importance of systems thinking, the first system to focus on being a Target Operating Model. I’m here to share some practical insights on ‘how’. Let’s get into it!
First off, what exactly is a Target Operating Model?
Think of it as your organizational map, your guiding light. It defines the structure, processes, capabilities, technology, and culture needed to achieve your strategic objectives. It represents the optimal state you aspire to, aligning with your vision and strategy. It’s your framework for improvement and decision-making; let me tell you, it’s a game-changer.
A TOM consists of several vital components, and let me break them down for you:
Organizational Structure
It’s like the blueprint of your organization, defining how everything fits together, from reporting lines to departments and decision-making processes. Trust me, getting this right is crucial for seamless operations. You’ve got to understand your organization, both the big picture and the tiny details. Get to know the key players in your organization. I have a post about structure and culture specifically for product ops folks coming soon (give me a shout if this interests you).
2. Processes (*Efficiency Experiments)
These are the gears that keep your organization running smoothly. Think of them as the end-to-end workflows, roles, responsibilities, and performance metrics that ensure your products or services are delivered excellently. I cannot over-emphasize this enough: minimum viable process, minimum viable process, minimum viable process. For whatever reason, folks want a process to set and forget — this is death; processes should evolve constantly. Process is a bad word in some places, so I lean toward ‘efficiency experimentation’ — process just enough to keep the speed but learn bottlenecks for future iteration. Just like we treat customer experiences, folks!
3. Capabilities
Your organization’s success relies on your team members’ skills, knowledge, and competencies. This includes individual and collective capabilities, such as leadership, talent management, training, and development. Investing in building strong capabilities will pay off in the long run. Just like technical capabilities, people skills, knowledge, and competencies are what you ship to customers (Conway’s law). Build and develop your team like the Swiss Amry knife you need, given where you are AND where you want to be in a year (or more). This is yet another example of where investment in people is a clear business investment — learning and development for retention? Or attrite and recruit? Both have their place but watch for your biases.
4. Technology
In today’s digital age, technology plays a crucial role in shaping your operations. It’s all about the systems, tools, and infrastructure that support your organization’s activities. Getting your tech game on point is essential for staying ahead of the curve. This is where Architects support scale. The infrastructure of the past may not support us tomorrow. The same applies to operations tooling. For example, the most a team grows, the less visibility leadership has. In some ways this is a blessing of a forcing function toward autonomous teams, but you can’t forget the importance of trust. In math class, you show your work. It’s one thing to have the right answer, it is another to show it was done sustainably for predictability, building trust. If you believe in autonomous teams, you must prioritize visibility on whatever level it builds trust. In this way, you can sustain team autonomy. The alternative is anarchy resulting in a command and control response. I have seen this too many times not to be passionate about this.
5. Governance
Ah, governance, the backbone of your organization, a fire on a cold day, stable hiking boots in rocky terrain. It’s all about setting the rules, defining policies, and managing risks. A solid governance framework will keep your operations in check and pave the way for smooth sailing. Again, prioritizing this allows small teams to work cohesively and keep the control monsters at bay. All areas of a TOM evolve, but this is constant in the product world given the time frames and the iterative nature within these time frames teams work — sprints to months, months to quarters, quarters to years, years to multi-years. Pivoting takes visibility, visibility requires context, humans share context, and context changes daily — build the cadence deliberately.
6. Culture and Behavior
Last but definitely not least, culture and behavior. It’s all about the values, behaviors, and mindset that permeate your organization. The right culture is the secret sauce for success, from leadership styles to collaboration, innovation, diversity, and employee engagement. A culture can be created, but really, it’s the combination of all things said and unsaid, done and not done.
Culture is what you do, not what you say. When developing a TOM, write down what you say and what you will do. And then do it. Observe what’s actually happening, and then adjust. This is another area where trust can falter — we know the phrase “Do as I say, not as I do.” If this is your reality, it will leak into every layer of the organization, and then you don’t have the culture you desire (and customers will feel it).
Be the invasive anthropologist — ethnographically observe but then get involved to influence behavior (a huge no-no in Cultural Anthropology).
Developing a Target Operating Model
Now, let’s talk about developing a TOM because it’s no walk in the park. When scaling your organization, you must adjust your TOM to accommodate growth, ensure efficiency, and align with the changing business landscape. Here’s a step-by-step guide, straight from the trenches of real-life experiences, to help you along the way:
Assess the current state
Take a good, hard look at your existing Operating Model (whether it was built or is naturally occurring). Identify its strengths, weaknesses, and areas that need improvement. This is your starting point for a successful TOM journey as you can identify areas for improvement and, even more importantly, what should remain untouched.
2. Define scalability requirements
As you scale, you’ll face unique challenges and requirements. It’s crucial to consider factors like increased demand, expanded markets, and resource allocation. As a leader, understanding this trajectory is one element, the next is sharing this trajectory and its adjustments, those new insights consistently with your team. They should use this information to pivot how they workin the Operating Model. This can take the form of developing and reviewing strategic objectives. Take a deep dive into your organization’s vision, goals, and competitive landscape.
3. Engage stakeholders
Here’s a pro tip from the trenches: involve key stakeholders, including executives, department heads, employees, and even external partners. Trust me, collaboration is the key to a comprehensive and inclusive TOM. This is where learning from the past or considerations of the broader organizational culture come into play. A TOM is not just a department thing, so go beyond your department just like goals; their insights and perspectives are pure gold.
4. Design the future-state TOM
Armed with the insights gathered, it’s time to design your future-state TOM. This is where you reimagine your organizational structure, optimize processes, identify required capabilities, upgrade technology infrastructure, and define the culture and behavior that will drive success.
Leaders own this, but if you want to be a key player based on your insights from steps 1–3, influence the change and identify where you or your team can play a role. The argument that springs to the top of my head is consistency. There is always dysfunction in a complex system; with a TOM aligned across the business, the system can look like ocean currents — moving and flowing but flexible where intersection points build strength, not weakness.
5. Prioritize adjustments
Let’s face it, you can’t tackle everything at once. Prioritize the critical adjustments needed in your TOM. Trust me, a phased and manageable transition is the way to go. Don’t create the whole plan at once, either. As I have said before, plan for plans to change — start small, implement, and learn.
6. Execute adjustments
Get down to the nitty-gritty, implement adjustments, and establish metrics to track progress (essential!!). Tracking progress can be done in many ways, but I would prioritize a survey first to baseline and compare within a quarter. Communicate the changes (and their value), provide training and support, and monitor the implementation process closely. Regular assessment and adjustments will keep you on the right track.
7. Monitor and optimize
It’s worth repeating: Your TOM is not set in stone. Monitor its effectiveness, collect data on performance, customer feedback, and market trends. Let these insights guide your ongoing optimization efforts. Believe me; continuous refinement is the secret to staying ahead of the curve.
Crafting a Target Operating Model is no easy feat, and governing it is more challenging.
Governing the Target Operating Model: Leading the Way to Success — the Operations plug :)
A Product or Engineering Leader takes on the responsibility of owning the decisions and overseeing the implementation and execution of the defined operating model within their teams or departments. They are the ones who ensure that the TOM aligns with the overall business strategy and objectives. They provide guidance, direction, and support to their teams, monitoring performance and progress along the way.
Operations plays a pivotal role in optimizing efficiency, productivity, and quality within their respective domains. They keep a close eye on how work is organized, processes are structured, and resources are allocated to achieve the desired outcomes. Through continuous monitoring and assessment, they make necessary adjustments to ensure that the TOM remains effective and aligned with the evolving needs of the organization.
R&D Operations teams are experts in optimizing and streamlining the operational aspects of product, engineering, and design functions. They work hand in hand with Product and Engineering Leaders to develop, implement and improve processes, tools, and methodologies that align with the operating model.
R&D Operations is a bridge, fostering communication and collaboration across different teams. They identify areas for improvement, address bottlenecks, and drive operational excellence. By providing valuable insights and metrics, they enable Product and Engineering Leaders to make data-driven decisions and continuously enhance the operating model.
In essence, Product and Engineering Leaders take on the ownership role, providing strategic guidance and oversight, while Operations provide the governing support to ensure smooth execution. It’s a collaborative effort that drives the organization towards achieving the desired outcomes and attaining success.
Final Reality check
A Target Operating Model cannot be just written down, to be forgotten. It’s not a static document sitting on a digital shelf. It requires active governance, coaching, and iteration. Targets move, and so do organizations. If we want our TOM to come to fruition, we must adapt and refine it as our teams, company culture, and industry landscape evolve.
Remember, a TOM is a target — a vision of how things should ideally operate. But in practice, adjustments and refinements are essential for the TOM to remain relevant and effective. Embrace the iterative nature of adjusting a TOM, and don’t shy away from regularly revisiting and refining it. Together, as leaders, we navigate this ever-evolving journey and steer our organizations toward continued growth and success.
Need Help? Every organization is unique, and I understand that needs vary. Schedule a call to receive personalized guidance and recommendations tailored to your specific needs.