Is your operating model aligned with your business strategy?

As businesses ramp up investment in AI, cybersecurity, and cloud technology, many are failing to account for one critical factor: how these emerging technologies fit into their Target Operating Model (TOM).

According to ITPro’s 2025 Future Focus report, over 78% of IT leaders have placed AI among their top three priorities for the year, with 24% planning to allocate up to 31% of their IT budgets to AI alone.

Yet, despite this surge in AI investment, many organizations struggle to integrate AI into daily workflows due to a lack of in-house technical expertise and clear strategic direction.

A well-defined TOM provides the framework for how a business operates, ensuring that new technologies, processes, and workforce capabilities align with strategic goals. Without one, even the most promising AI initiatives risk falling short of their potential.

Why Businesses Resist TOM Changes—And Why That’s a Mistake

Pete Smyth, CEO of Leading Resolutions, cautions against overlooking TOM updates, noting that many business leaders hesitate to make changes for two key reasons:

1. Past failures with TOM initiatives—Often, businesses that have attempted to implement a TOM in the past may have encountered poorly designed, generic frameworks that failed to address specific organizational needs.
2. A sense of stability—If operations appear to be running smoothly, leadership may see little incentive to overhaul existing structures.

However, Smyth warns that ignoring TOM adjustments can lead to operational inefficiencies, skill gaps, and an organization ill-equipped for future challenges.

“Not addressing your TOM can leave your business bloated, slow, or with critical skill and capability shortages,” he explains.

“With AI adoption becoming a necessity rather than an option, organizations that don’t update their TOM risk being unprepared for growth, change, and the volatility of today’s business landscape.”

When Should Businesses Rethink Their TOM?

There are clear signals that indicate when a business must reassess its target operating model. According to Smyth, key moments for change include:

• Mergers, acquisitions, or divestments—Structural shifts demand a new operational strategy.
• New product launches or leadership changes—Strategic direction must align with organizational evolution.
• Market disruptions—Businesses must be agile enough to respond to emerging opportunities.
• Cost-cutting and efficiency drives—A misaligned TOM can lead to redundancies and wasted resources.
• Technology shifts—AI adoption, automation, and new digital tools require an updated framework for integration.
• Skills shortages—The right TOM ensures workforce capabilities align with future needs.

For small and medium-sized businesses (SMBs), maintaining a flexible and adaptable operating model is even more crucial.

Unlike large corporations with dedicated teams for operational strategy, SMBs often lack the internal expertise to continuously evaluate and optimize their TOM.

The Role of External Expertise in TOM Development

While some business leaders believe they can manage radical organisational change in-house, Smyth argues that internal teams often lack the objectivity and market-wide visibility needed to implement effective TOM transformations.

“Being on the inside makes it difficult to get a true enterprise view of the issues and opportunities,” he says. “At the same time, relying on a one-size-fits-all framework from a large consultancy won’t deliver the specific strategic direction businesses need.”

Instead, he advocates for a rapid assessment approach, led by experienced technology and organisational experts. This method enables businesses to:

• Gain an objective, data-driven view of where changes will create the most value.
• Align technology investments with strategic goals rather than chasing trends.
• Ensure that AI, cloud, and cybersecurity initiatives integrate effectively within the business.

Future-Proofing Business Operations

For businesses that want to stay ahead of market shifts, a target operating model isn’t a static framework—it’s a continuously evolving strategy. Smyth underscores that allocating resources, evaluating staff needs, and updating existing technology are not set-and-forget activities.

“Without a strong operating model, businesses risk losing relevance,” he warns. “A well-defined TOM ensures organisations remain agile, efficient, and resilient—no matter what challenges lie ahead.”

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