The Current and Target Operating Model in Business Strategy

What is an Operating Model?

An operating model is a high-level blueprint that describes how an organisation delivers value—to its customers, stakeholders, or users—on a day-to-day basis. It connects strategy to execution by specifying the people, processes, technologies, governance, and structures needed to run the business effectively.

Core Components of an Operating Model

The core components of an operating model typically include:

1. People: Roles, skills, responsibilities, and organisational structure.

2. Processes: Core business activities and workflows.

3. Technology: Tools, platforms, and infrastructure used to enable processes.

4. Governance: Decision-making authority, rules, and accountability mechanisms.

5. Culture & Values: Norms and behaviours that shape how work is done.

6. Data & Information Flows: How information moves through the organisation.

7. Location & Infrastructure: Physical or virtual distribution of capabilities.

Why Operating Models Matter

An operating model:

• Ensures your strategy is actionable and scalable.

• Exposes gaps and misalignments before they become roadblocks.

• Provides a framework for transformation, mergers & acquisitions, or expansion.

• Facilitates clear communication across leadership and functional teams.

What is a Current Operating Model (COM)

A Current Operating Model or COM is simply a description of the operating model as it is now.

Documenting your COM is an often-overlooked step. After all, we all already know how the business ads value, don't we?

Sadly, this is often not the case:

• Senior executives are often unaware of what actually happens in the business. Tucked away in boardrooms, they can easily lose touch with what really happens.
• Staff doing the actual work may know exactly what they do. But they're often locked in silos with little understanding of what happens in other parts of the organisation.

A well-defined COM provides a solid basis for developing a shared understanding of an organisation's true strengths and weaknesses and the opportunities and threats it faces.

Consultants are often accused of charging large sums of money for telling organisations how they operate - something they ostensibly already know - but this can be a vital step in strategy work.

What is a Target Operating Model (TOM)

A TOM describes the operating model of the business you would like to create in response to the analysis of the COM and of the external threats and opportunities the organisation faces.

Using a TOM makes it easier to consider the changes you want to make in a more holistic manner. For example, there is little point in changing the way the business creates value in one area without making the necessary changes in the other areas which might be needed to support it.

That would be like sticking a blade on the front of a Mini Cooper and hoping it now functions as a grader. Whilst the blade might be fit for purpose, the engine wouldn't generate enough torque, and the tires wouldn't provide enough grip to move much earth.

Note: although the words Target Operating Model and TOM are widely used in the UK, they're much less prevalent in the US. In the US, strategists are more likely to talk about to-be or new operating model, or to talk about pivoting the business model. We believe these mean fundamentally the same thing, though.

How they relate to business strategy

One simple definition of strategy is that it is simply the best way to get from where we are now to where we want to be - or, from the COM to the TOM.

Oftentimes, practitioners will do a "gap analysis" to highlight the differences between the COM and the TOM, and then develop a plan to close those gaps.

That can be a useful framework. However, it overlooks one important factor:

How do you determine what the TOM should be and why that is the best way to achieve your strategic outcomes in the first place?

So, strategy always needs to operate one level removed from the operating model (COM and TOM). However, the operating model serves as a useful reference point when developing and executing strategy.

Operating Models in StratNavApp.com

Operating Model concepts are built into StratNavApp.com in four integrated ways:

1. The Business Model Canvas is a very popular way of expressing a business model, which includes the operating model.
2. The enhanced Business Model Canvas is a less well-known variation which emphasises the operating model elements more clearly.
3. The Value Chain is a tried and tested representation, which some now consider a little old-fashioned compared to the above, but which still adds value.
4. StratNavApp.com also allows you to define and describe the People, Process and Technology which underpins each of the high-level processes in an organisation.

In addition, because of its integrated nature, StratNavApp.com allows you to link strategic insights, goals and initiatives, etc. to elements of your business model, ensuring your strategy remains grounded in the reality of your current situation and the model to which you aspire.

You can sign up to StratNavApp.com for free right away, or, request a demo of how StratNavApp.com can help you to develop and execute better business strategies.

See also:

• Sixsess Consulting's Target Operating Model Course