In the increasingly complex and demanding world of investment management, a well-defined and strategic Target Operating Model (TOM) is essential for firms to maintain a competitive edge. A strong TOM is built of different components, covering different aspects within the organisation, such as processes, technology, governance, and human capital.
This blogpost outlines the key components in the transformation of their TOM by investment management firms. By following a structured framework, firms can better navigate industry challenges, close capability gaps, and position themselves for sustained success.
Target Operating Model: Strategic overview
For investment managers today, a TOM must be an essential artefact to define the strategic direction of the organisation, with a focus on:
In a strong TOM, these elements must be closely interconnected and configured in an optimal way. A robust (interconnected and optimised) TOM is crucial for allocating the firm’s resources to those key areas that will drive the firm’s growth and underpin its stability. By defining a firm's future operating vision, the TOM identifies performance gaps and areas for improvement. Importantly, TOMs are not “one size fits all”: boutique firms may focus on talent and niche client relationships, while large global managers might prioritise scalability and cost efficiency. Regardless of scale, the TOM ensures coherence, fostering competitiveness and adaptability.
TOM core components
To remain effective, the TOM must be reviewed regularly to maintain alignment with the firm’s strategic goals. Components contributing to operational excellence include:
Each TOM component contributes to structured and resilient investment management. While aspects like processes or client engagement can often yield quick results when optimised, broader transformations—especially in technology and product offerings—demand extensive planning and investment, reinforcing long-term competitiveness.
Transformation stages: Building a future-proof TOM
Transforming a firm’s TOM can be simplified through five manageable stages, each building on the last to align with strategic goals. Not all stages require completion every time; firms can assess their TOM periodically to identify any need for adjustments, enabling a flexible path to sustained competitiveness:
By implementing this framework, investment firms can systematically achieve operational goals and build a foundation for long-term success. A well-designed TOM supports not just immediate targets but fosters an agile, client-centric organisation able to adapt to market and competitive changes.
Conclusion: The strategic value of a robust TOM
In an industry grappling with unprecedented market volatility and regulatory scrutiny, a robust and adaptable TOM is of vital importance for investment management firms. Regularly refining and aligning the TOM with strategic goals is not a one-time exercise but an ongoing process that keeps firms responsive to industry shifts. Firms that proactively engage in this continuous TOM assessment will be better positioned to lead in client service, operational efficiency, and innovation.
Bringing in external expertise for TOM transformation adds significant value by providing an outside-in perspective, identifying best practices, and drawing on industry benchmarks. By making TOM transformation a central aspect of strategic planning, firms not only enhance their operational capabilities but also future-proof their business, creating lasting value for clients, shareholders, and other stakeholders alike.
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