Target Operating Model

Horizon Bank has embarked on an ambitious transformation programme to 'future-proof' themselves against the rapid changes taking place in the retail banking industry that we've discussed elsewhere in the Associate International Retail Banker programme.

This section assumes the bank has embarked on a strategy to become a customer-centric digital-first retail bank, redefined its business model and has undertaken a deep analysis of its operating model to define the 'As is' state and to define the 'To be' target operating model.

A Target Operating Model (TOM) describes how the bank operates as two states, an 'As is' and a 'To be', which serves as the blueprint for it to move from a product-centric to customer-centric digital-first operating model.

It can include measures of processing or productivity for the 'As is' process, and the improvements from the 'To be' process, and uses Lean and Six Sigma business performance improvement techniques that we discussed in the 'Operations and IT level I' module and also summarise in this module.

The TOM documents the 'As is' state from any existing business model and operating model documents, combined with observations by the team that will define the changes. This is crucial in defining the 'As is' state, as what the documents say and what people actually do in practice can be two very different things!

This is an example, from the Horizon Connect programme, of how the 'As is' and 'To be' processes will be documented in the TOM with supporting documents will provide further detail:

While the 'To be' operating model is designed from the bank's strategy and its business model, it must be capable of being implemented by the bank and its employees. It is no good having a brilliant TOM that far exceeds the capabilities that the bank can reasonably stretch to.

Before it is approved, the Target Operating model should be tested to determine whether the new capabilities can be achieved, and what is required to ensure that they are achieved.

The bank's Chief Operating Officer (COO) will normally be responsible for the preparation, testing and approval of the TOM. The COO will set up a team experienced in business transformation to undertake the programme and projects, working with all the retail bank's departments.