{"id":9644,"date":"2026-05-27T15:09:55","date_gmt":"2026-05-27T14:09:55","guid":{"rendered":"https:\/\/www.humatica.com\/?p=9644"},"modified":"2026-05-27T15:18:08","modified_gmt":"2026-05-27T14:18:08","slug":"part-ii-designing-a-target-operating-model-that-truly-enables-strategy","status":"publish","type":"post","link":"https:\/\/www.humatica.com\/de\/insights\/part-ii-designing-a-target-operating-model-that-truly-enables-strategy\/","title":{"rendered":"Part II \u2014 Designing a Target Operating Model That Truly Enables Strategy"},"content":{"rendered":"

This is the second article in a three-part series on designing and implementing a fit-for-purpose Target Operating Model. In Part I, we explored how to recognise when an operating model is no longer aligned with business needs, from the subtle early signs of misalignment to the structural triggers that make redesign inevitable. In this article, we turn from diagnosis to design: how to build a TOM that genuinely translates strategy into day-to-day execution. Part III will cover how to implement the new model and turn design into lasting results.<\/em><\/p>\n

\n

Most organizations underestimate how much the effectiveness of their strategy depends on the strength of their operating model. A brilliant strategy or vision can easily be derailed by slow decision-making, unclear responsibilities, siloed execution, or outdated processes. As we explored in Part I, many leaders initially misread these symptoms as people problems or short-term operational issues, when in fact they point to systemic misalignment between strategy and the way the organization works.<\/p>\n

Designing a Target Operating Model is therefore neither an aesthetic exercise nor just drawing an org-chart- it is about reshaping how the organization creates value. A TOM succeeds when it becomes the invisible infrastructure that enables speed, clarity, and consistent performance. While org-charts describe who<\/em> reports to whom, the operating model describes how<\/em> work actually happens day to day. [1][2][3]<\/small><\/p>\n

In essence, TOM design is the translation layer between ambition and execution. Executives typically have a clear view of where the organization needs to go, but less clarity about what must change operationally to get there. This is where a well-structured TOM design process becomes indispensable.<\/p>\n

1. Start with the Value Logic: What Must the Organization Excel At?<\/strong><\/h2>\n

Every TOM begins with a simple question: What must we be exceptionally good at to win in this market?<\/em><\/p>\n

The answer defines the “value logic” of the business. For some companies, it might be speed of innovation; for others, customer intimacy, operational reliability, commercial excellence, or integrating acquisitions efficiently. The TOM must intentionally reinforce these strategic strengths. [5]<\/small><\/p>\n

Without anchoring design decisions in value logic, organizations risk defaulting to familiar structures or political compromises rather than what the strategy truly requires. This is a critical distinction: a TOM should be shaped by where the business is going, not by where it has been. When the operating model is tightly linked to the company’s value creation plan and strategic priorities, it becomes a genuine enabler rather than an inherited constraint. [1]<\/small><\/p>\n

Too often, TOM projects begin with boxes and lines: restructuring teams, moving reporting lines, renaming functions. But research consistently shows that structure alone does not drive operating model effectiveness; high-performing organizations can be found using a variety of structural configurations. [12]<\/small> What matters is whether the design choices across all dimensions of the model are coherent with the strategy.<\/p>\n

2. Use Design Principles as Guardrails<\/strong><\/h2>\n

Once the value logic is defined, leaders must articulate a set of design principles that guide decisions consistently. These principles create alignment and prevent endless debates about structure or reporting lines. They ensure the TOM does not simply reflect personalities or past structures but genuinely supports the future direction of the company.<\/p>\n

Effective design principles might include statements such as: decisions should be made at the lowest accountable level; cross-functional collaboration should be embedded in core workflows; governance should be lightweight and focused on business outcomes; roles should be designed to reduce dependencies and handoffs; and technology and data should enable transparency and speed.<\/p>\n

Design principles help leaders make disciplined trade-offs. In any TOM design, there are inherent tensions, between synergies scale effects, learning curve effects and interface costs. Without principles, these tensions are resolved through hierarchy or politics. With principles, they are resolved through strategy. [4][7]<\/small><\/p>\n

The best principles are specific enough to guide real decisions and general enough to apply across the organization. They should be co-created with the leadership team, not handed down from a project office, because the act of defining them forces alignment on what matters most.<\/p>\n

3. Testing the TOM with Scenarios<\/strong><\/h2>\n

Before moving into detailed design, it is valuable to test emerging design options against extreme scenarios. How would the TOM be designed for maximum cost efficiency? How would the design look like optimized for customer centricity? How would the TOM under ideal AI \/ technology look like? Working through these scenarios forces leaders to confront trade-offs and stress-test assumptions early, when changes are still easy to make. Equally important, scenario testing makes explicit which design alternatives were considered and why they were not chosen. Documenting these “roads not taken” builds confidence in the final design and provides a clear rationale if questions arise during implementation.<\/p>\n

4. Building the TOM: A Multi-Dimensional Blueprint<\/strong><\/h2>\n

A TOM is not a new org chart. It is a comprehensive blueprint of how the organization works. The design process should consider several interdependent elements, each of which must be aligned with the others and with the overall strategy. [1][3]<\/small><\/p>\n

Structure.<\/strong> This includes reporting lines, spans of control, organisational layers, and the grouping of teams. Structure should reduce complexity, unlock collaboration, and clarify accountability. Small structural changes, such as reducing layers, combining fragmented teams, or creating cross-functional units, can dramatically shift speed and effectiveness. But structure must follow strategy, not the other way around. Research shows that 89 percent of organizations still primarily use traditional hierarchical structures, yet no single structural model consistently outperforms others. The key is fit with strategy and context. [12]<\/small><\/p>\n

Governance.<\/strong> Governance defines how decisions are made. A good TOM identifies which decisions happen where, who owns them, how escalation works, and the cadence of planning and performance management. Clear governance eliminates duplication, delays, and political ambiguity. When decisions require multiple approvals and lengthy meetings, agility is impaired and the gap between strategy and execution widens. [7]<\/small><\/p>\n

Processes and Workflows.<\/strong> These define how work flows from one function or team to another. Strong TOMs redesign workflows end-to-end for speed and clarity, rather than adapting new structures onto old processes. When departments optimise their own workflows without considering the broader value chain, fragmentation grows and customer experience suffers. [5]<\/small><\/p>\n

Capabilities.<\/strong> Every TOM implies new requirements: data literacy, leadership behaviours, commercial skills, or digital capabilities. Designing a TOM without addressing capabilities is like designing a sports car with the wrong engine. The question is not only what roles exist, but what skills and behaviours are required to make those roles effective. As AI automates routine tasks and reshapes workflows, capability requirements are shifting faster than ever, requiring organizations to build learning and adaptability into the model itself. [10][11]<\/small><\/p>\n

Technology, Data and Systems.<\/strong> Technology is no longer an add-on; it is a core part of the operating model. Systems must support decision-making, automate low-value tasks, and provide accessible, high-quality data. AI is increasingly central to this dimension, reshaping not just individual processes but entire operating model architectures. Future operating models will feature leaner expert teams working alongside AI, supported by a management mechanisms for effective AI use. [10][11]<\/small><\/p>\n

KPIs and Incentives.<\/strong> Metrics should reinforce the operating model, not contradict it. Misaligned KPIs are one of the fastest ways to undermine an otherwise well-designed TOM. If the model emphasises cross-unit collaboration but performance reviews only reward individual or departmental results, the old behaviours will persist. [1]<\/small><\/p>\n

5. Co-Creation: The Key to Ownership<\/strong><\/h2>\n

The best TOMs are not designed in isolation by external consultants or a small project team. Senior leaders must co-create the model, test assumptions, challenge each other, and align on trade-offs. This collaboration builds ownership and reduces resistance during implementation. [9]<\/small><\/p>\n

Co-creation also uncovers practical realities that top-down designers may miss, such as hidden dependencies, unspoken tensions, or real-world constraints that shape how work gets done. When managers are involved in design workshops, assessing trade-offs and designing specific processes, early involvement has been shown to overcome resistance and build genuine buy-in. [9]<\/small><\/p>\n

There is a strategic reason for co-creation beyond buy-in: the people closest to the work often understand the real bottlenecks, workarounds, and interdependencies better than anyone. Incorporating their perspective produces a more realistic and robust model. It also sends a powerful signal that the TOM is not being imposed, but built together.<\/p>\n

Stress-Testing the Model<\/strong>
\nBefore finalising the TOM, leaders should simulate real-life scenarios to pressure-test the design. How would a customer escalation flow? How would we integrate an acquisition? How quickly can we make a pricing decision? Who owns cross-functional initiatives?<\/p>\n

These tests reveal bottlenecks and clarify whether the model truly supports the strategy. They also surface edge cases where the design may look clean on paper but would create confusion in practice. Running scenarios with the leadership team deepens their understanding of the model and strengthens alignment before implementation begins.<\/p>\n

A practical approach is to take three or four critical business processes, such as new product launch, annual planning, and incident resolution, and walk them through the proposed model step by step. Where do handoffs occur? Where are decision rights clear? Where might delays build up? The answers often lead to targeted refinements that significantly improve the model’s real-world performance.<\/p>\n

Producing a Clear, Actionable Blueprint<\/strong>
\nA strong TOM ends with tangible outputs that can guide implementation. These typically include: role descriptions that define accountability and decision rights; a governance model that establishes the rhythm of planning and review; RACI matrices for critical decisions and processes; a capability roadmap identifying skill gaps and development priorities; workflow diagrams showing end-to-end value delivery; technology and data requirements to enable the model; and a transformation roadmap that sequences implementation steps.<\/p>\n

When done well, a TOM becomes a practical, actionable guide for how the organization should operate, not a theoretical document that gathers dust after a strategy offsite. The blueprint must be detailed enough to drive real change, yet clear enough that every leader in the organization can understand and communicate it. [4][7]<\/p>\n

The Role of AI in Modern TOM Design<\/strong>
\nAI is no longer a peripheral consideration in operating model design; it is reshaping the very foundations of how organizations structure work, make decisions, and create value. As AI automates routine tasks and augments human decision-making, layers of management may shrink, entire functions could be reorganised, and new roles will emerge. [10][11]<\/small><\/p>\n

Companies that integrate AI considerations into their TOM design from the outset, rather than treating AI as a bolt-on after the model is finalised, will be better positioned to capture efficiency gains while maintaining governance and accountability. This means designing roles that account for human-AI collaboration, building governance mechanisms for AI-driven decisions, and ensuring that technology architecture is a core pillar of the operating model rather than a downstream implementation detail.<\/p>\n

The pace of AI advancement also means that operating models must be designed with adaptability in mind. A rigid model that perfectly fits today’s technology landscape may be obsolete within two years. The best TOMs build in mechanisms for continuous review and iterative improvement.<\/p>\n

Conclusion<\/strong>
\nDesigning a TOM requires discipline, clarity, and cross-functional collaboration. But when executed well, it becomes one of the most powerful levers for accelerating performance and enabling strategy at scale. The right operating model turns ambition into capability; it ensures that the organization is not just pointing in the right direction, but is actually built to get there.<\/p>\n

Critically, design is only half the journey. A TOM on paper is a hypothesis; a TOM in practice is a transformation. In Part III<\/strong>, we will address the hardest part of the process: Implementing the TOM: Turning Design into Lasting Results<\/strong>. We will cover how to build a compelling case for change, achieve deep leadership alignment, manage the human side of transformation, and anchor the new model through governance, KPIs, and systems that reinforce the desired ways of working.<\/p>\n

[1] Brooke Weddle & Deepak Mahadevan, McKinsey & Company (2023), What is an operating model and why does it matter? https:\/\/www.mckinsey.com\/featured-insights\/mckinsey-explainers\/what-is-an-operating-model
\n[2] Accelare (n.d.), Org Chart vs. Operating Model: Which Method is Best for Your Business? https:\/\/www.accelare.com\/blog\/org-chart-vs-operating-model-which-method-is-best-for-your-business
\n[3] Capstera (n.d.), Target Operating Model https:\/\/www.capstera.com\/target-operating-model\/
\n[4] OC&C Strategy Consultants (2023), Fundamentals of the Target Operating Model https:\/\/www.occstrategy.com\/en\/article\/fundamentals-of-the-target-operating-model\/
\n[5] Strategy& (PwC) (n.d.), Capabilities-Driven Strategy + Growth https:\/\/www.strategyand.pwc.com\/gx\/en\/unique-solutions\/capabilities-driven-strategy\/operating.html
\n[6] Shilu Acharya, Ritec Group (2023), 5 Signs Your Operating Model Isn’t Serving You https:\/\/www.ritecgroup.com\/post\/5-signs-your-operating-model-isn-t-serving-you
\n[7] Julie Choo (2017, updated 2023), How To Design A Target Operating Model (TOM) That Delivers https:\/\/strategyjourney.com\/target-operating-model-that-delivers\/
\n[8] Julie Choo (2023), How To Setup A Resilient Agile Target Operating Model For Transformation Success https:\/\/strategyjourney.com\/how-to-setup-a-resilient-agile-target-operating-model-for-transformation-success-5-actionable-tips\/
\n[9] Hunter Kafcsak & Alexis Pugh, Propeller (2023), Common Operating Model Pitfalls & How to Avoid Them https:\/\/propeller.com\/blog\/why-operating-models-fail-and-how-to-get-yours-back-on-track
\n[10] Vibranium Bridge Strategy Consulting (2023), Reimagining Operating Models for an AI-Powered Economy https:\/\/www.vibraniumbridge.com\/post\/reimagining-operating-models-for-an-ai-powered-economy
\n[11] Don Purdon (2023), The Impact of AI on Your Organisational Operating Model https:\/\/www.linkedin.com\/pulse\/impact-ai-your-organisational-operating-model-don-purdon-e7v8c
\n[12] McKinsey & Company (2025), A new operating model for a new world https:\/\/www.mckinsey.com\/capabilities\/people-and-organizational-performance\/our-insights\/a-new-operating-model-for-a-new-world
\n[13] McKinsey & Company (2025), The new rules for getting your operating model redesign right https:\/\/www.mckinsey.com\/capabilities\/people-and-organizational-performance\/our-insights\/the-new-rules-for-getting-your-operating-model-redesign-right
\n[14] Mural (2025), Unpacking Organizational Misalignment: Where Leaders & Operators Disagree https:\/\/www.mural.co\/blog\/unpacking-organizational-misalignment
\n[15] Happily.ai (2026), The Hidden Cost of Misalignment: How Growing Companies Lose 20% of Payroll to Wasted Effort https:\/\/happily.ai\/blog\/hidden-cost-of-misalignment-2026\/
\n<\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

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