A Fit for Future Target Operating Model for Business Success

In today’s rapidly evolving business landscape, organizations are under constant pressure to adapt to global dynamics, enhance scalability, and ensure transparency in their value chain. A modern, flexible IT framework is no longer optional—it’s a necessity. The transition to SAP S/4HANA represents a transformative opportunity for businesses to upgrade their IT systems and align them with long-term strategic goals.

However, the key to a successful transformation lies in more than just technology implementation. It requires a well-defined Target Operating Model (TOM) that acts as a strategic guide, ensuring operations are optimized to drive growth and address future challenges effectively. Without it, organizations risk delays, unforeseen costs, or even failure by carrying outdated structures into the new system. The TOM acts as a roadmap for key areas of the business. For instance, in finance, it outlines responsibilities for profit and loss management and reporting structures, creating a strong foundation for financial steering and control. In supply chain management, it aligns processes with strategic goals to ensure effective procurement, manufacturing, and distribution.

To prevent inefficiencies and costly revisions down the line, organizations must prioritize establishing a clear and future-ready Target Operating Model (TOM) at the outset of their SAP S/4HANA transformation. This model serves as a strategic foundation, encompassing key areas such as organizational structure, performance management, business processes, material flows, and enterprise architecture. By striking a balance between standardized practices and unique business requirements including legal and tax considerations the TOM ensures a well-rounded framework for a successful transition.

Building Clarity for Strategy Execution: Steering & Performance Management

Within a TOM the steering and performance management model is a vital pillar of corporate management and a fundamental enabler for driving business success. In today’s increasingly complex and fast-paced markets, traditional feedback loops between strategic goals and outcomes are insufficient. Instead, these models must empower organizations to proactively identify internal and external dynamics, assess risks and opportunities, and make informed, forward-looking decisions. This requires tools and frameworks that not only offer a broad perspective on business performance but also maintain the flexibility to adapt to shifting market demands and diverse business environments.

Designing and implementing an effective steering & performance management model presents a delicate balance between depth and breadth. It must provide a comprehensive 360-degree view of business performance while offering sufficient granularity to pinpoint areas for improvement and guide actionable strategies. However, companies risk losing focus and adaptability by overloading their models with excessive detail or by aiming to track every possible performance indicator. The key lies in crafting a tailored approach that balances complexity, relevance, and usability, ensuring transparency and fostering sustainable growth. An overly intricate system can lead to information overload and diminish the clarity and value of performance insights, making it crucial to establish clear priorities and maintain strategic focus.

To meet these demands, a performance management model must align seamlessly with a company’s broader Target Operating Model in areas such as  governance, organization structure, , value chains, and technological solutioning. Selecting meaningful performance dimensions and KPIs, defining clear responsibilities, and ensuring technical feasibility are essential steps. Tools like SAP S/4HANA play a critical role by serving as a reliable “single source of truth,” enabling flexibility and scalability. By addressing these elements cohesively, companies can enhance decision-making through their digital transformation, and secure long-term success in a competitive landscape.

cbs Corporate Business Solutions offers a Target Operating Model Framework and consulting services leveraging deep expertise across all pertinent business and technology domains to support effective transformation.

What this means for SAPinsiders 

Define a Target Operating Model (TOM) early in SAP S/4HANA transformation: Establish a comprehensive and future-ready TOM at the outset of your SAP S/4HANA implementation. This ensures a well-structured approach to aligning business processes, performance metrics, and enterprise architecture with your strategic goals, avoiding inefficiencies, delays, and costly revisions. 

Leverage SAP S/4HANA as a single source of truth: Design steering and performance management models that provide a 360-degree view of business performance, focusing on relevant KPIs. Utilize SAP S/4HANA’s scalability and data integrity to proactively adapt to market changes, assess risks, and make informed decisions. 

Tailor processes for standardization: Customize your TOM to strike a balance between standardized practices and unique business needs, including legal and tax compliance. Align this framework across key areas like finance, supply chain, and governance to drive efficiency, transparency, and scalability in your operations.