The critical role of identifying the correct Target Operating Model (TOM) in implementing ERP/CRM solutions for organizations

In today's dynamic business landscape, organizations increasingly turn to Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) solutions to streamline operations, enhance customer experiences, and drive growth. However, one essential step is often overlooked, outlines Indika Mananwatte , Head of ERP & CRM Practice at Intellias , before embarking on the journey to implement such transformative solutions: defining the most appropriate Target Operating Model (TOM).

Identifying the right TOM is not only a good thing but also a crucial prerequisite for designing and implementing ERP and CRM systems that genuinely align with an organization’s strategic goals. Let's explore why understanding your TOM is foundational and how it is a guiding framework for your technology investment.

What is a Target Operating Model?

A Target Operating Model (TOM) outlines how an organization will operate in the future to deliver its strategy and goals. It defines the business processes, roles, organizational structure, governance, technology, and performance metrics to enable the company to achieve its objectives. Essentially, a TOM provides a holistic blueprint for how the business will function, mainly how people, processes, and technology interact.

Why is TOM a Prerequisite to ERP/CRM Solution Design?

1. Aligns technology with Business Strategy

A well-designed TOM helps businesses clearly outline their strategic priorities and operational structure. By identifying critical processes, capabilities, and performance metrics, companies ensure that any technology implementation—ERP or CRM—aligns with their future direction and long-term vision. Without a clearly defined TOM, there’s a risk that the ERP/CRM solution will be built around outdated or misaligned processes, leading to inefficiencies and missteps. Further, technology investments can be misaligned with the actual needs of the business, resulting in poor user adoption, inefficiencies, or costly rework.

Example: A company focusing on customer-centric growth may prioritize CRM modules that support enhanced customer service and engagement, while a business focused on optimizing supply chain efficiency might focus on ERP functionalities for better procurement and inventory management. Both need different TOMs to guide their technology choices.

2. Defines Core Processes and Functional Requirements

An ERP or CRM solution must be designed to support a business's core processes. A clearly defined TOM provides insights into how the organization operates, the processes that need support, and where efficiencies or changes are required. This ensures that the technology solution addresses the business's specific needs, whether that's automating key processes, enhancing customer interactions, or providing real-time data visibility.

For example, an organization focused on customer-centricity might prioritize a CRM with solid customer service and marketing automation capabilities. Meanwhile, a manufacturing-driven company may need an ERP emphasizing supply chain management. Without understanding the operating model, it is impossible to make these decisions effectively.

3. Ensures Optimal Organizational Structure and Roles

One key outcome of defining a TOM is clarity on organizational structure and roles. ERP and CRM systems heavily depend on how an organization's responsibilities and workflows are structured. The TOM dictates which functions are centralized, decentralized, or automated and how different business units will interact with each other and the system.

For instance, if a company operates in a decentralized model, where business units operate autonomously, the ERP/CRM solution must accommodate multiple configurations and reporting structures. On the other hand, a more centralized operating model would require standardized processes and workflows across the organization.

Example: A retailer implementing an ERP solution may realize through their TOM assessment that their inventory management processes are inefficient. Fixing these workflows before integrating them into the ERP system ensures that the technology maximizes productivity.

4. Facilitates Change Management and User Adoption

Implementing an ERP or CRM system is not just about technology; it’s about people. A TOM enables the organization to communicate future workflow changes, job roles, and responsibilities. This clarity is crucial for successful change management and user adoption, as it helps to prepare the workforce for how they will work differently post-implementation.

A poorly defined operating model can lead to resistance from employees who are unsure how the new system will impact their roles, leading to delays and suboptimal use of the latest technology.

5. Supports Scalability and Flexibility

Businesses are not static—they evolve. A well-thought-out TOM considers not only the current needs of the business but also how the organization plans to grow and adapt to market changes. When designed with scalability in mind, the ERP or CRM solution can evolve with the organization, reducing the need for expensive system overhauls in the future.

Practical Steps for Defining the Right TOM

So, how can organizations ensure they have the right TOM before embarking on an ERP/CRM project? Here are some key steps:

1. Engage Stakeholders Early: Collaboration between business leaders, IT, finance, operations, and front-line employees is crucial to capture a holistic view of the organization’s future state.
2. Analyze Current State vs. Future State: Assess the organization's current and future goals. This will highlight gaps and areas where processes, systems, or structures must evolve.
3. Prioritize Key Processes and Objectives: Focus on the most critical processes to achieving strategic goals and ensure these are central to the TOM and solution design.
4. Consider Organizational Change: Build flexibility into the TOM to accommodate future growth, changes in market conditions, or strategic focus shifts.
5. Align with Technology Providers: Once the TOM is defined, work closely with ERP and CRM vendors to ensure their solutions align with the organization's vision and operating model.

Conclusion

In the rush to implement new technology solutions, it’s easy to overlook the foundational importance of a well-defined Target Operating Model. However, taking the time to identify and define the TOM is critical to ensuring that ERP and CRM systems deliver value by aligning technology with business strategy, supporting core processes, and enabling scalable growth.

By treating the TOM as a prerequisite, organizations can make informed decisions, reduce implementation risks, and set the stage for successful technology adoption that drives long-term business success.

Ultimately, the real value of ERP and CRM solutions lies not in their features but in how well they support the operating model that drives your business forward.

Authors Note

As a professional with experience in helping organizations optimize their operational models and technology ecosystems, I have witnessed first-hand the transformative impact of aligning technology with a well-defined operating model. I would be happy to discuss further how your organization can take the following steps in this crucial process.

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