Digital and business transformation in our industry must be continuous and while technology plays a vital role, it is only one of the pillars for renewal of in-market approaches and organisational processes. This is the crux of an article written by Kieran O’Brien, an Alta consultant with Invigors EMEA who is based in Ireland.

With a pandemic effect on global businesses, smart organizations are looking at their business structures and considering how to better position themselves for “the new world order in a post pandemic era,” says O’Brien.

The article in the June edition of Accountancy Ireland defines a target operating model (TOM) and clearly notes the common issues and essential elements of achieving such a business model. “The objective of a TOM is the development of an organisation that will support critical business strategy with clearly developed roles and responsibilities and with measurable skills and capabilities,” writes O’Brien. He notes also that a single TOM may not be applicable to some organizations and may best be structured into individual TOMs that are aligned to each business model that the organization is supporting. This will support a quick TOM adoption and maximize responsiveness.

In particular, he notes that successful business models will have a clear go-to-market strategy and they will include extensive review of all processes, the roles of personnel and how the entity is organized. Company leaders must keep reviewing and evolving their organizational and operational structures to keep their businesses relevant and responsive to changing demands of their customers and shareholders.

O’Brien reports that TOMs are often ineffective due to these common issues:

-The inflexible nature of historic business models, which fail to support a business that is evolving its operations (for example, a financing organisation that is moving from supporting large/complex transactions to a flow business operation);

-In financial services, the continuation of the historic segmentation between ‘front office’ and ‘back office’ when it is evident that both cannot continue to operate independently of each other effectively; and

-Having an operating model that is not aligned to a specific business operation, with the consequence that the organisation develops functional silos that result in process inefficiencies and poor communication.

His article is a quick read with visuals and bullets to summarize subject matter that is  expansive, covering everything from vision to technology; all are essential for continuous internal corporate-wide analysis. This will be needed to truly deliver on an organization’s strategies.

The benefits are worth the effort of developing a TOM. As this piece notes, the examination will illuminate gaps and provide more “clarity around roles and decision-making, often accelerating customer outcomes.”

The key interdependent elements examined in a TOM are:

-organization/people
-go-to-market
-process
-technology

The technology element includes examining core systems in both the front and back end, integrations, ecosystems and sources of data and connections needed to support better decisions and more flexibility for continuous renewal.

Areas for consideration include digitalization, data analytics and services automation.

However, before embarking on a TOM it is recommended that peer entities be evaluated to gain insight into your competitors’ operations and market approach. This will allow more focus on ‘best in class’ elements to consider adopting.

“Designing a new TOM provides an opportunity to optimise the size, structure and shape of your business and ultimately, deliver on your organisation’s strategies,” writes O’Brien.

If done well, O’Brien says, creating a TOM “provides an opportunity to optimise your business operations and reduce your operating cost by looking at various insourcing/outsourcing alternatives. It also provides a significant level of internal transparency to your staff, giving clarity around roles and decision-making and often accelerating customer outcomes.”

Source: Kieran O’Brien, FCA, is Executive Director of Invigors EMEA and is based in Ireland.  Invigors EMEA, part of The Alta Group, works closely with its other regional divisions to help international equipment leasing and finance companies adapt to changing conditions and enter new markets.