Is a Target Operating Model still a valid approach for design?

Bruce Russell, Jaibeer Singh

As an investment industry management consultancy, we have been fortunate to advise many of the leading global investment organisations on uplifting their operating model to enable their investment, client or corporate strategies. This has been a proven way of aligning the organization behind an operational strategy and providing the much-needed long-term vision for achieving a common goal.


With an increasing need for flexibility and agility, and the shortening cycle of tech led innovation, is the concept of a Target Operating Model (TOM) still the way to plan and execute operational change?

The Case against a TOM:

1. Potential for Obsolescence – The broad approach for a TOM is to set a ‘vision’ for the operating model that describes the ideal state from a people, process, technology, and data perspective. Typically, this then requires a multi-year program of work to achieve the necessary changes to realise this vision. In this intervening period, changes can occur that either make the vision redundant or alter the way it should be executed. This pace of change is increasing, led in part by rapid technology innovation, so the obsolescence risk of a TOM is very real.

2. Stifles Innovation – The irony of a TOM that is attempting to foster and promote innovation is that it may achieve the opposite effect. By segregating the business into ‘run the business’ and ‘change the business’ capabilities, business teams may not feel accountable or even empowered to deliver ongoing innovation. The phrase that all technology, process, or people uplift will be ‘delivered by the TOM’ is an all too familiar phrase we hear. The result being that the organization is stuck in an ‘innovation paralysis’ whilst the multi-year TOM is delivered. For an investment organisation to remain competitive, innovation needs to be embedded within each business functions’ DNA and so any initiative that stifles this may actually end up doing more damage than good.

3. Isn’t Executable – ‘If only we could run our business on PowerPoint!’ is a familiar inside joke amongst the TOM literate community. As with all inside jokes there is an element of truth here. Whilst TOMs may promise a grand vision that will truly revolutionize the way an investment organization operates, the end delivered result often falls well short of this promise. The causes are many, but it often comes down to the vision not being executable due to real world constraints such as availability of technology or service providers, budget constraints and (most importantly) the ability of the investment organization to deliver large transformational change. What started as an all-encompassing change to people, process and technology often ends up being a technology lead system replacement/upgrade with the business operating fundamentally the same the way they did before, albeit with shinier, but more expensive toys.

Given this, is the case for a TOM still a valid approach to define and execute your operational strategy? Yes, our view is that it is still the most effective way to deliver meaningful and sustained operational change.

If done correctly, a TOM enables:

  • A strategic way to deliver coordinated operating model change: a TOM clearly articulates the strategic vision and ensures everyone is striving towards a common goal. It avoids disjointed and often conflicted decision making and helps prioritize initiatives in a coordinated way
  • A way to consider all options: a key element in designing a TOM is to consider and compare all relevant available options, including those that may have been deemed ‘too hard’ or too transformational from the current environment. Adopting the phrase that ‘sacred cows make the best burgers’ is a useful mantra to ensure the full range of potential options are considered and to fully explore what is possible
  • An opportunity for simplification: by providing a clear vision, the organization can focus on the things that matter and it forces an assessment on why things are done the way they are done. An important deliverable of a TOM is a cross-functional view of key processes, and this can help with process efficiency and optimal assignment of roles and responsibilities across different teams. A reduction in process complexity and leverage of outsourcing arrangements for non-core activities is an additional attribute towards overall operating model simplification

An Agile Approach to TOM Design & Implementation:

So how do you ensure that a TOM delivers an effective outcome, bearing in mind the pace of change and need to foster agility and for the design to be implementable? In our view a more agile approach to the design and implementation of TOM’s is required, taking into account the following precursors of success:

In essence, while the TOM provides a structured approach, its design and execution must embrace agility. A blend of strategic vision, continuous feedback, and an iterative mindset can ensure that TOM remains an effective tool even in a dynamic environment.

How can Alpha Help?

We have extensive experience in successfully advising and implementing Target Operating Model solutions for our Asset and Wealth Management clients. We would be happy to discuss any challenges your organization may be facing and share relevant insights on how those challenges can be addressed. To get in touch, feel free to get in touch with us here.

About the Authors

Bruce Russell
Executive Director

Bruce is a Melbourne based Executive Director with Alpha FMC with 20+ years of industry and professional experience. With over 30 years industry experience, Bruce has provided strategic consulting advice to many leading investment organizations in Asia Pacific. His expertise has helped many leading investment organizations optimize their operating models to deliver the best investment outcomes to their investors and members.
Prior to commencing his consulting career, Bruce spent 8 years at HSBC Asset Management in a variety of senior roles across operations, product and business change. He was previously a company auditor and is a qualified Chartered Account with a Bachelor of Commerce from La Trobe University in Melbourne, Australia. Having spent 10 years in the industry prior to Consulting, he also knows the importance of delivering advice that is practical and implementable. Bruce has delivered consulting engagements to more than 50 organizations, from the largest Asset owners through to boutique investment managers

Jaibeer Singh

Jaibeer ‘s experience within Financial Services spans across Government Investment Corporations, Superannuation Funds, Asset Owners, Life Insurance, and Digital Banking from strategy development to operational implementation. His key projects include Benchmarking and Target Operating Model Review for a Private Markets Investment Management firm, Design of TOM for a Professional Services Firm, Project Health Check Review for a Super Fund, Technology Platform Implementation at an Australian Big 4 Bank, Corporate Strategy Development for an Insurance company, and Third-Party Vendor Management for a neo-Bank among others Jaibeer specializes in strategic implementation and operational improvement programs spanning Target Operating model design, business process mapping, key performance indicators (KPIs) design, benchmarking and optimization of process efficiency. Prior to joining Alpha, Jaibeer was a Strategy and Operations consultant with Monitor Deloitte (Strategy Consulting arm of Deloitte) in Sydney. He holds an MBA from UNSW (Sydney) and a Bachelor of Engineering from Indian Institute of Technology (IIT).