Twelve months after approving a new operating model, the board of a regional bank asks for one thing. It wants to know whether it worked. The transformation team presents a schedule that was met, documented processes and a new platform in production, but nobody can say precisely whether revenue grew because of the operating model, whether margin improved or whether customers notice any difference. The project is finished, but the value has not been proven.
That gap is more common than it seems. Many organizations design their Target Operating Model rigorously and implement it with discipline, but they define the indicators at the end, when it is too late to set a baseline. Measuring the success of a TOM requires deciding from the start what will be measured, with which formula, how often and who is accountable for each result.
In a previous article we explained what a TOM is and when it needs to be implemented, together with the first phases of the implementation methodology. This piece focuses on measurement. It shows how monitoring is adapted by industry, department or strategic objective, the KPIs for the four Balanced Scorecard perspectives with their formulas, examples of OKRs and the tools that keep the operating model optimized over time.
In the ICX Consulting methodology, the final phases of implementation are dedicated to measuring, monitoring and adjusting the operating model.
At ICX Consulting, the performance measurement and monitoring phase is flexible and adapts to the specific needs of each client's industry, department or strategic objective. This customization ensures that the metrics are relevant and aligned with each organization's priorities, which allows an accurate assessment of the impact of the Target Operating Model (TOM).
Measurement by industry. In highly regulated sectors such as banking, where regulatory compliance is critical, key indicators can be applied such as those derived from the Basel regulations (Basel III), which ensure financial stability and risk mitigation. These indicators make it possible to monitor aspects such as the regulatory capital ratio or liquidity levels, which are vital to the financial health of a banking institution. In telecommunications, the eTOM framework is used, providing a standardized structure to measure operational efficiency, service management and customer satisfaction.
Measurement by department. Monitoring can also be adapted to the needs of each department, such as finance, marketing and sales, among others. In the finance department, KPIs such as ROI (return on investment) or capital efficiency can be used. In marketing, key metrics may include customer acquisition cost (CAC), customer lifetime value (LTV) or the conversion rate. These metrics provide a specific view of performance within each area, enabling data-driven optimization aligned with the operational and tactical priorities of each department.
Measurement by strategic objective. If the focus is on reaching a defined strategic objective, ICX Consulting applies a portfolio of customized metrics to monitor progress in key areas such as attraction, conversion, retention, loyalty or process optimization. If the goal is to attract new customers, KPIs such as the acquisition rate or cost per lead could be measured. To convert, the conversion rate and average revenue per customer are monitored. If the priority is to retain and build loyalty, metrics such as the Net Promoter Score (NPS) or the churn rate are critical. As for optimization, operational efficiency can be assessed, such as the reduction of cycle times or improvements in production costs.
Real-time monitoring and adjustment. After the TOM is implemented, continuous monitoring is essential to ensure that the improvements are aligned with the expected results. ICX Consulting uses an inventory of OKRs and KPIs, adapted to the client's industry and areas of work, to monitor process performance in real time. This phase makes it possible to adjust the operating model to improve effectiveness and ensure that strategic objectives are met.
Example. In a bank, compliance with the Basel regulations is fundamental, so liquidity and capital ratios are monitored to ensure financial sustainability. In a telecommunications company, the eTOM framework makes it possible to measure the efficiency of network services and customer satisfaction. By department, a key metric for marketing could be customer acquisition cost, while in finance capital efficiency would be a central focus. In terms of strategic objectives, if the goal is loyalty, NPS and the customer retention rate would be critical indicators of success.
After implementation, results must be monitored to assess the performance of the TOM. Specific KPIs defined during the planning phase are used to measure success and alignment with strategic objectives. This phase makes it possible to adjust in real time and ensure that the changes implemented are producing the desired impact.
Example. If one of the objectives of the TOM is to improve operational efficiency, the reduction in production cycle time and its impact on costs can be measured.
Implementing a TOM is not a static process. It requires continuous monitoring and regular adjustments based on the data obtained. This optimization cycle allows the TOM to evolve with the organization and allows processes and resources to adapt to the changing needs of the market and of strategic objectives.
Example. If, after a technology platform is implemented, the results do not meet expectations, adjustments can be made to optimize its use or to reassess the associated processes.
In a dynamic business environment, the ability to adapt is a critical success factor. One of the most relevant elements for ensuring efficient operations aligned with strategic objectives is the operating model. This model defines the structure, processes and capabilities that an organization needs to fulfill its mission and achieve its vision. However, as the market and technology evolve, there comes a time when the existing TOM may become obsolete or ineffective.
Recognizing when a new TOM is needed is a challenge for many organizations, because it is not always obvious. Nevertheless, there are key indicators that can serve as warning signs. These indicators allow leaders to identify the areas that require operational transformation to remain competitive and efficient. From changes in customer demand to technological innovation, companies must watch for the signals that suggest their operating model needs to be rethought.
>> Read also about aligning the business model and the operating model <<
The key indicators that suggest the need to implement a new TOM can vary by industry and business context. However, some common signals include the following.
Variables to measure. Current and previous revenue (quarterly or annual).
Variables to measure. Operating income (net revenue minus operating costs) and net revenue.
Variables to measure. Net benefits obtained and investment costs.
Variables to measure. Net operating profit, invested capital and cost of capital (%).
Variables to measure. Percentage of promoters (scores of 9 to 10) and detractors (scores of 0 to 6) in customer surveys.
Variables to measure. Customers at the start and end of the period and new customers acquired during the period.
Variables to measure. Total time to resolve all cases and number of cases resolved.
Variables to measure. Number of satisfied customers and total customers surveyed.
Variables to measure. Start and delivery dates of products or services.
Variables to measure. Total revenue generated by the company and total number of employees.
Variables to measure. Number of defective products and total products delivered.
Variables to measure. Number of automated processes and total key processes.
Variables to measure. Number of satisfied employees and total employees surveyed.
Variables to measure. Total training investment and number of employees.
Variables to measure. Dates on which the new initiative was identified and implemented.
Variables to measure. Number of employees who left the company and total employees.
KR1. Reduce the cycle times of key processes by 20% in 6 months.
Formula. Cycle time reduction (%) = (Previous cycle time − Current cycle time) ÷ Previous cycle time × 100
KR2. Automate 80% of operational processes within one year.
Formula. Automation rate (%) = Automated processes ÷ Total processes × 100
KR3. Improve customer satisfaction by 15% as a result of faster and more effective processes.
Formula. Satisfaction improvement (%) = (Current NPS − Previous NPS) ÷ Previous NPS × 100
KR1. Reduce the delivery error rate by 25% in 6 months.
Formula. Error reduction (%) = (Previous errors − Current errors) ÷ Previous errors × 100
KR2. Increase NPS by 10 points over the next year.
Formula. NPS increase = Current NPS − Previous NPS
KR3. Increase the customer retention rate by 10% in 12 months.
Formula. Retention increase (%) = (Current retention − Previous retention) ÷ Previous retention × 100
Implementing a new TOM requires a data-driven approach. Process mining tools are essential for analyzing how processes are executed in practice and for detecting inefficiencies or bottlenecks. By analyzing event logs from systems such as ERP or CRM, companies can gain a clear view of deviations from ideal processes.
The TOM acts as the master blueprint that guides how a company structures its operations, manages its resources and aligns its processes to meet its strategic objectives. However, creating and optimizing an effective TOM requires a methodical approach and specialized tools that ensure all key aspects of the business are properly integrated and aligned.
Defining a TOM begins with an in-depth analysis of the company's current state and of the environment in which it operates. This includes assessing the organizational structure, the available technology, the existing processes and the team's competencies. From there, it is possible to determine the ideal operating model that will allow the company to meet its long-term goals. To achieve this, a range of tools and methodologies are used, such as process mapping, gap analysis and technology assessments, among others, which provide a comprehensive understanding of the business and its areas for improvement.
Once the TOM has been defined, the focus shifts to continuous optimization. At this stage, companies must be flexible and adapt to changes in the market, in technology and in customer expectations. Methods such as continuous improvement, process automation and data analytics become crucial for adjusting the TOM and keeping it relevant over time.
The use of predictive analytics and machine learning also allows organizations not only to correct current problems but to anticipate future challenges. For example, financial organizations can apply these analyses to speed up credit application approvals or to identify trends in customer behavior, enabling a more agile response to market demands.
Process automation through RPA (Robotic Process Automation) is another critical tool that allows companies to improve efficiency by reducing human intervention in repetitive tasks. This frees resources to focus on more strategic, customer-oriented activities, which in turn improves the customer experience and optimizes operational performance.
>> Read also about the importance of the TOM for CRM implementation <<
The impact of an effective TOM can be seen in several key areas of the business, such as productivity, service quality and innovation, which ultimately improves the overall performance of the organization. When the TOM is implemented correctly, internal processes flow more efficiently, eliminating redundancies and minimizing bottlenecks. This allows companies to respond more quickly to market demands and to optimize the use of their resources, which translates into greater competitiveness. In addition, a well-structured operating model aligns every department and team around the same strategic objectives, enabling more effective collaboration and more consistent decision making. This not only improves operational execution but also increases organizational agility in adapting to external or internal change.
On the other hand, a poorly designed TOM, or one that does not keep up with the changing needs of the company, can have the opposite effect, generating inefficiencies, additional costs and a loss of competitiveness. For this reason, companies must regularly assess and adjust their TOM to make sure it remains aligned with their strategic goals and with market conditions. A well-implemented TOM can transform business performance, with concrete effects on areas such as productivity, innovation and customer satisfaction.
In addition, a TOM that incorporates advanced technology, such as artificial intelligence and automation, allows companies to improve their decision making and to run more efficient and profitable processes. Organizations that do not embrace this transformation risk falling behind more agile competitors that do.
An operating model is not justified by having been implemented, but by the results it produces. For the executive committee, that means three decisions. The first is to set the baseline for each indicator before the change, because without it no improvement can be proven. The second is to choose a few indicators per perspective and assign each one an owner with the authority to act. The third is to review the dashboard often enough to correct course in time, not just to report what has already happened.
At ICX Consulting we design and implement the target operating model together with its measurement system. We define processes, business rules, control points, KPIs and OKRs before automating, and we adapt the indicator inventory to each client's industry and areas. That way the board can answer with data whether the new operating model is delivering what it promised.
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