Once you have a clear target operating model, the next question from any serious executive is simple:
“What is this worth, and what will it cost us to get there?”
This chapter is about answering that question with enough rigor to make real decisions, without disappearing into a modelling exercise that stalls momentum.
We will cover:
- How to identify the cost, revenue, risk, and experience levers in your TOM
- How to estimate benefits and investments with reasonable rigor
- How to phase benefits over time, distinguishing quick wins from structural changes
- How to assemble a concise business case pack that can get through a board or investment committee
13.1 Identifying Cost, Revenue, Risk, and Experience Levers
A TOM by itself is not a number. The numbers come from specific levers the TOM changes: how many people you need, how much rework you remove, how many customers you retain, how many incidents you avoid, and so on.
A practical way to structure this is by four value families:
- Cost and productivity
- Revenue and growth enablement
- Risk and capital
- Customer and experience
You do not need to monetize everything, but you do need a coherent story across all four.
Cost and productivity levers
For cost, link TOM design choices to operational drivers:
- FTE and labor: consolidation of teams, automation, shared services, spans and layers
- Non-labor operating expenses: facilities consolidation, vendor rationalization, tooling and licenses, travel and overhead
- Unit cost: cost per transaction, per order, per policy, per claim, per customer
Work through your major TOM moves and ask:
- Which processes are being simplified or automated?
- Where are we consolidating locations or vendors?
- Which roles or layers are being removed, repurposed, or added?
- How will volumes per FTE or per facility change?
Then, phrase each cost lever as a simple value statement such as:
- “Reduce manual processing effort in X journey by 30–40% through automation and standardization.”
- “Consolidate Y back-office locations into Z hubs, reducing run-rate occupancy and overhead by A–B%.”
You will quantify these later; for now, you are building the catalogue of levers.
Revenue and growth levers
TOMs often have underrated revenue upside. Look for:
- Higher conversion: simpler onboarding, faster quotes, better lead handling
- Increased retention: better service, fewer errors, proactive outreach
- More share of wallet: better cross-sell at key touchpoints
- Faster time to market: shorter product development and launch cycles, reusable platforms
- Channel shift: encouraging lower-cost, higher-conversion channels (digital, partners)
Again, phrase levers explicitly:
- “Increase conversion in SME onboarding by 5–10 percentage points via faster decisions and fewer drop-offs.”
- “Lift retention of high-value customers by 2–3 percentage points via better issue resolution and proactive outreach.”
Some of these will be “enablers” rather than stand-alone revenue guarantees—call that out explicitly rather than pretending you can forecast revenue to the decimal.
Risk and capital levers
Risk and capital benefits can be large, but are often vague. Make them concrete:
- Lower operational losses: fewer processing errors, fraud incidents, outages
- Fewer material audit findings and remediation programs
- Better capital efficiency: lower required buffers due to more reliable controls or better data
- Lower regulatory penalties and remediation costs
Translate TOM changes into levers like:
- “Reduce high-severity operational incidents in X process by 40–60% through stronger embedded controls and systemization.”
- “Reduce model/data-related regulatory findings by half through clearer ownership and data governance.”
You may or may not monetize these in the headline case, but you should at least describe and size the order of magnitude.
Customer and experience levers
Experience improvements tend to drive revenue and cost, but you can also treat them as explicit objectives:
- Shorter wait and lead times
- Higher satisfaction and NPS
- Lower complaint and rework rates
- Higher digital adoption and self-service
Where possible, link to economics (e.g., churn, referrals, reduced call volumes). Where not, still articulate clearly:
- “Reduce average onboarding time from 10 days to 2, for X segment.”
- “Move 30–40% of simple service interactions to self-service within two years.”
You now have a structured list of levers across cost, revenue, risk, and experience that the TOM should move. The rest of the chapter is about putting sensible numbers behind them.
13.2 Estimating Benefits and Investments with Reasonable Rigor
A TOM business case is not a precision forecast; it is a decision tool. You need enough rigor to be credible, but not so much complexity that no one understands the model.
A few principles:
- Work with simple, transparent formulas.
- Use ranges, not single-point estimates, where uncertainty is high.
- Make assumptions explicit and easy to challenge.
- Involve Finance early so the logic matches how the company thinks about value.
Benefit estimation: the basic formula
Most benefits can be expressed as a simple structure:
- Cost benefits:
- Benefit = Volume × (Current unit cost – Target unit cost)
- Revenue benefits:
- Benefit = Volume × Price × (Delta in conversion / retention / share)
- Risk / loss benefits:
- Benefit = Volume × (Current loss rate – Target loss rate) × Loss severity
For example:
- Manual effort reduction:
- Cases per year × Hours per case × % effort reduction × Cost per hour
- Conversion uplift:
- Leads × Current conversion × Uplift % × Average contribution margin per new customer
- Incident reduction:
- Historical incidents per year × % reduction × Average loss per incident
Use historical data and your as-is diagnostic to populate current values. Where history is noisy or incomplete, use:
- Benchmarks (internal or external)
- Pilot results from similar changes elsewhere
- Expert judgment, but with explicit ranges and rationale
Where possible, have one simple “benefit sheet” per major lever, showing:
- Inputs (volumes, rates, unit values)
- Assumptions (uplifts, reductions, adoption rates)
- Resulting annual run-rate impact once fully implemented
Investment estimation
Be equally transparent on the investment side. Typical categories:
- Technology and data:
- New platforms or modules, integration work, licenses, infrastructure changes
- People and change:
- Transformation team, backfill for subject-matter experts, training, communications, change management
- Process and operations:
- Temporary dual running, overtime to clear backlogs during cutovers, documentation and testing
- Restructuring and location changes:
- Severance, relocation, facility closures or fit-outs, contract exit costs
- Vendor and sourcing transitions:
- Transition fees, overlapping vendor periods, knowledge transfer
Separate:
- One-off (non-recurring) investments
- Run-rate cost changes (new licenses, extra risk staff, ongoing support for new platforms, etc.)
A simple approach:
- Build a top-down estimate by workstream or initiative (e.g., “CRM replacement,” “Operations hub consolidation,” “Automation program”).
- Cross-check with bottom-up estimates for the largest items (e.g., vendor quotes, internal rate cards, known severance formulas).
- Apply contingency where uncertainty is material, and show it explicitly rather than hiding it.
Reasonable rigor vs. false precision
Signs you have just enough rigor:
- A senior Finance leader can walk through the model in 30–60 minutes and understand it.
- You can trace each major number back to a small set of inputs and assumptions.
- You have at least a base, downside, and upside view for overall impact.
Signs you’ve overdone it:
- The model has dozens of tabs, but small changes in a single assumption move the total by 50%.
- Only one or two people understand the logic.
- Every challenge results in another layer of complexity rather than clarifying assumptions.
Err on the side of simplicity plus transparency. Executives will trust a well-structured, clearly explained model with moderate rigor more than an opaque “perfect” model.
13.3 Phasing Benefits: Quick Wins vs. Structural Changes
Your TOM does not switch on in one go. The business case must reflect when benefits arrive and how they build—otherwise you will disappoint stakeholders and starve later waves of funding.
Think in terms of:
- Quick wins
- Medium-term structural changes
- Long-term, platform or culture-based benefits
Quick wins
Quick wins are changes that:
- Require limited investment
- Have few dependencies
- Fit within existing systems or contracts
- Can be implemented within, say, 3–9 months
Typical examples:
- Process simplifications and waste removal
- Policy clarifications and threshold adjustments
- Manual reports retired, duplicated checks removed
- Small automations or workflow fixes on existing tools
- Obvious vendor or license rationalizations
They often deliver:
- Modest FTE savings or capacity release
- Reduced rework and error rates
- Shorter lead times in specific steps
In the business case, treat quick wins as:
- Early, visible benefits that help fund and build confidence for bigger moves
- Proof-points that your TOM logic holds in practice
Medium-term structural changes
These are changes that require:
- Some technology or location shifts
- Organizational redesign and role changes
- Rewiring of decision rights and governance
Typical examples:
- Setting up shared services or centers of excellence
- Consolidating locations or hubs
- Introducing new platforms that are smaller in scope (e.g., workflow, CRM, analytics layers)
- Embedding new management routines and KPI trees
Benefits usually start 12–24 months from kick-off, and often include:
- Larger FTE savings in selected areas
- More noticeable improvements in experience and lead times
- Clear reduction in certain incident or error types
In the business case, show:
- When each structural initiative goes live (by wave, BU, or region)
- Ramp-up of benefits over 1–3 years (e.g., 40% year 1, 80% year 2, 100% year 3)
Long-term platform and culture plays
Some TOM elements are inherently multi-year:
- Replacement or consolidation of core systems
- Large-scale data and analytics capabilities
- Deep culture changes (e.g., end-to-end ownership, continuous improvement mindsets)
They may take 3–5 years to fully mature. Benefits often show up as:
- Sustained lower cost-to-serve and easier scaling
- Greater flexibility to launch new products and enter new markets
- Improved capital efficiency and risk resilience
In your business case:
- Avoid front-loading these benefits unrealistically.
- Be explicit that some value is optionality: the ability to capture future opportunities that would otherwise be too slow or expensive.
- Consider keeping some of these as qualitative or scenario-based upside, not baked fully into the base case.
Handling double-running and J-curves
TOM transitions often cause a temporary dip:
- Dual-running systems and teams during cutover
- Learning curves and productivity drops after go-lives
- Parallel vendor costs during transitions
Your phasing must show:
- These temporary cost upticks and how long they last
- When step-downs actually occur (e.g., only after a full migration, not at the start of a project)
Executives will be far more comfortable if the J-curve is visible and explained than if it appears as “surprise overruns” later.
Bringing it together: a simple time profile
For the overall business case, present:
- Annual net impact (benefits – run-rate costs) over a 3–5 year horizon
- One-off investments by year
- Cumulative cash flow, payback year, and (optionally) NPV
Underneath, maintain a simple mapping of:
- Which initiatives drive benefits in which year
- The relative contribution of quick wins vs. structural and long-term changes
This prevents the common trap where Year 1 is heavily loaded with benefits that, in reality, cannot arrive before key platforms and org changes are in place.
13.4 Building an Executive-Ready TOM Business Case Pack
Finally, you need to tell the story in a way that a CEO, CFO, and board can grasp in one sitting. The business case pack should be tight—typically 10–20 pages, not 80.
A practical structure:
1. Executive summary (1–2 pages)
Contents:
- Clear statement of what is being decided (scope of TOM, time horizon).
- Headline value: ranges for:
- Run-rate cost impact (e.g., savings of X–Y%).
- Revenue enablement (qualitative plus any quantified upside).
- Risk and resilience improvements (narrative plus any rough sizing).
- Investment size and profile:
- One-off costs over years.
- Net annual P&L impact and payback period.
- Top 3–5 risks and mitigations.
- Ask: what approval or commitment you want (funding, organizational changes, next-phase mandate).
This is the page or two people will reread and share.
2. Link to strategy and TOM overview (2–3 pages)
- One slide on strategy and value agenda: how the TOM supports the strategic direction.
- One slide with the one-page TOM summary (from Chapter 12): value streams, macro-structure, tech, sourcing, performance, and risk anchors.
- One slide summarizing key design principles and choices (central vs local, platforms, shared services, etc.).
This anchors the numbers in a coherent design, not a random collection of initiatives.
3. Value logic and driver trees (2–3 pages)
For each major value pillar (cost, revenue, risk/experience):
- A simple driver tree:
- E.g., “Cost-to-serve → Operations FTE → Volume × Unit effort × Cost per FTE → TOM levers.”
- E.g., “Churn → Active customer base → Retention rate → TOM levers on issue resolution, service speed.”
- One slide with quantified summary:
- Contribution of top 5–10 levers (e.g., “Operations automation: X–Y per year,” “Location consolidation: A–B per year”).
You want decision-makers to see:
- Where the bulk of value comes from.
- Which assumptions matter most.
4. Investments and cost-to-achieve (1–2 pages)
- One slide showing investment breakdown:
- By category (tech, people/change, restructuring, vendors).
- By year.
- One slide on run-rate cost changes:
- New costs as part of the TOM (e.g., increased platform fees, additional control staff)
- Offsetting reductions elsewhere.
Be explicit about contingency and underlying assumptions (e.g., vendor rates, severance formulas).
5. Phasing and financial profile (2–3 pages)
- Annual view of:
- Benefits (stacked by major lever or pillar).
- Run-rate costs.
- Net impact.
- Cumulative cash flow, payback year, and (if used) NPV / IRR.
- Annotation of key milestones that unlock each benefit wave (e.g., “Shared service live in Region X,” “Platform Y deployed to BU Z”).
One clear chart of “when this pays off and why” is worth far more than multiple dense tables.
6. Risks, sensitivities, and scenarios (1–2 pages)
- Top TOM-related risks (delivery, adoption, tech, vendor, regulatory) with specific mitigations.
- Simple sensitivity table:
- What happens if key benefits are 25–50% lower than base?
- What if certain investments run 20% higher?
- Optional: scenario view:
- Downside, base, upside net outcome.
This shows that you have thought about uncertainty rather than ignoring it.
7. Implementation implications and next steps (1–2 pages)
- High-level transformation structure:
- Governance, workstreams, key roles (not full org chart).
- Critical dependencies:
- Other programs, major regulatory changes, key vendor decisions.
- Immediate next steps upon approval:
- Mobilization actions, priority hires, RFPs, pilots.
End with a crisp decision slide:
- What you are asking approval for (scope, funding, time horizon).
- What you commit to deliver by when (both design artifacts and early value).
If you treat the TOM business case as an integral part of design—not a last-minute finance task—you’ll have a credible, understandable answer when leadership asks, “Is this worth it?”
