Challenges and Perks of Target Operating Model Redesign in Larger PSOs

By Mark E. Engelberg, TimeLinx Software –

Many business model weaknesses and operational failures can be—but rarely are—attributed to a poorly designed or non-existent target operating model (TOM).

Professional Service Organizations (PSOs) that consciously plan and design a target operating model can slip up by not taking the model far enough in designing crucial components.

In the worst examples, the business strategy that is supposed to underpin the incoming TOM design is drawn up as an arbitrary list of goals.

What Is a Target Operating Model? (TOM)

To understand your ‘Target Operating Model’ and what perks it can bring to larger PSOs, it’s essential to understand the relationship of an existing operating model to the business model.

Operating Model vs. Business Model

Compared with your business model’s ‘what,’ an operating model is a less charismatic prototype of the ‘how,’ ‘where,’ and ‘when.’

In other words, the operating model is the physical implementation of the business model.

So what is a Target Operating Model, and why should you have one?

A TOM is, in effect, your operating model imagined and designed in its future state at a future point in time. Think of TOMs as the output sum of a subset of other critical models.

Essentially, your TOM gives a theoretical framework of your vision that lines up with the reality of your operating capacity and strategic objectives.

Mission + Business Model + Value Model + Operating Model + Transformation Model = Target Operating Model

Professional services organizations (PSOs) that consciously create and amalgamate that subset of critical strategic models into a single, cohesive TOM gain the advantages of:

  • Being able to show potential new clients how they deliver service-project value and what drives that value.

  • Identifying weak points in the end-to-end project lifecycle value chain, such as low utilization tracking, inefficient data-sharing between departments, and erratic timekeeping.

Though it requires far-reaching business transformation, implementing TOMs in professional services organizations serves to future proof growth from the profit and relationship risk caused by siloed data, departments, and strategic direction.

What Challenges Do Larger PSOs Face When Implementing TOM?

Larger, creakier PSOs can inadvertently mis-implement TOM due to short-term time pressures.

For example,  when the incentive to design a new target operating model is driven by the urgent need to overhaul operations to accommodate lucrative, upcoming projects, the short-term tactical urgency often results in short-term tactical changes that don’t amount to a new, fully-fledged TOM.

The result can be a halfway house where certain operational elements are frozen mid-transformation with expensive, half-built initiatives that may become redundant post-project and difficult to roll back.

How larger PSOs should approach designing effective TOMs

To avoid the above dilemma, larger PSOs with bulkier operational structures to rearrange and transform must ensure enough leeway to lay a firm foundation.

This should include a correct reorientation of the following models in preparation for the new TOM:

1. the business model

  1. the value model
  2. the operating model
  3. the transformation model

Typically, it’s the transformation model that large PSOs struggle with owing to corporate dysfunction, fear of change, poor change advocacy, and differences in perspective between key stakeholders.

Also, a key factor is the lack of visibility of the issues at hand that is stimulating the need for the TOM to change in the first place.

Creating a TOM that Truly Sets PSOs Apart and Delivers for Clients

PSOs that have outgrown previous operating models have two choices:

1. Design a new operating model and face the challenges of transformation

  1. Continue with an outdated operating model that limits service-delivery value for themselves and clients

    PSOs with the confidence and bravery to choose the TOM transformation path toward superior growth must design their TOM oriented toward the right outcomes.

    Identifying root causes of ineffective and redundant operating models

    That means learning the proper context and the problems currently limiting service-value delivery for the best possible services.

    For example:

    Are your CRM, ERP, and accounting systems in-synch, capturing critical profit and loss information? Or are they siloed,  creating an unnecessary risk to profits?

    Are your teams and departments pulling together behind the same mission and vision, or serving local departmental priorities?

    These are the kinds of problems that must be clearly identified at the beginning in large PSOs seeking to design and implement game-changing Target Operating Models.

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About TimeLinx
TimeLinx delivers innovative project & service management software as a complete solution that perfects the sell-track-manage-support-bill cycle that services organizations must have to delight their customers; TimeLinx brings the cycle together in a single application that offers less frustration, better project management, complete reporting, and improved profitability – all specially designed for Infor and Sage.