Business leaders are always looking for ways to improve and reinvent their companies to stay ahead of the pack; whether it’s in response to competitors building capabilities, or customers who expect more for less. For many companies, the answer is full scale digital transformation.
Across almost all sectors of business, data analytics, artificial intelligence (AI), digital, the Internet of Things (IoT), process automation, and other technologies have moved the business operating model from one that focuses on specific processes and functions to one that operates end-to-end platforms and provide outcomes as-a-service.
About the author
Adrian Spink heads Telstra Purple across EMEA.
Many heads of business, however, see the establishment of these operating models as their top challenge in achieving digital transformation. Successful transformations realign the organisation to a singular vision; companies have a far better chance at succeeding when an operating model is aligned to the strategy. This means that for transformations to succeed, leadership teams should examine, and possibly revise, their organisations’ operating models.
At its core, an operating model serves as the first layer in the foundation for actioning enterprise architecture. It is created from the business process standardization and integration companies necessary to deliver value to a company’s different customer segments. Deciding on your operating model has a major impact on how you implement your business processes and IT infrastructure.
Without an overarching operating model, each new initiative and action you take as a business can be like starting from scratch, with no benefit from any of pre-existing, automated low-cost capabilities your organisation already has. Ultimately, selecting an operating model signifies your company’s commitment and direction to how it wants to conduct business.
The upside is that if you make deliberate choices around the integration of shared data, systems, and infrastructure, you can gain increased efficiencies, coordination, transparency, and agility. And, through deliberate choices around standardization of business processes, you can drive operational improvements and predictability across the company, which can lead to dramatic increases in throughput and efficiency.
The different types of operating models
Understanding what kind of operating model your company is aligned to is key to an effective digital transformation. Traditionally, there are four recognized types of operating models that cover most organisations - coordination, unification, diversification and replication.
The coordination model is characterized by shared customer, product or supplier data by operationally unique business units that can impact each other’s transactions, while the unification model is based on a globally integrated set of business processes where customers and suppliers are distributed geographically.
Separately, the diversification method is based on business units having few, if any, shared customers or suppliers, meaning there is minimal business process standardization and integration. Finally, the replication model is built on granting autonomy to individual business units but running operations in a highly standardized fashion, with success based on efficient, repeatable business processes rather than shared customer relationships.
Putting the customer first
All the above models have their own individual strengths and weaknesses. However, in the current climate of digital first, what many organisations require is, perhaps unsurprisingly, a digital operating model – one that places the customer at its core and joins up the traditional gaps between the C-Suite, IT and Operations to embed digital thinking up-front. Digital operating models meet the needs and expectations of today’s customers without incurring additional back office costs because their key processes, organisational structures and technical infrastructure (including data models) have been fundamentally realigned to support customer journeys.
They are more efficient and effective in delivering improvements because IT and the business work closely together throughout development from inception through implementation, ensuring that expectations and delivery plans are fully aligned. Whoever owns the customer owns the product, but in a digital organisation the business understands emergent technology and its (realistic) practical application, while the technologists have an improved understanding of the products and customers, enabling better design suited to the underlying platform and standards.
Furthermore, digital operating models are nimble and innovative because cross-functional teams focus on quick, iterative delivery and the use of continuous release management to get products to the market both quickly and safely. Data driven decision-making and short lead times enable rapid response and reprioritizsation based on feedback direct from the customer through business intelligence.
The importance of a holistic approach
Digital transformation, however, presents many challenges. One of the key tasks is to not focus on technology for technology’s sake, but instead focus on every detail of the process, making sure to purge bad habits that are uncovered and ensure consensus about the vision; that everyone within the organization is in alignment with the process and in support of transformation. And it should have the support of an organizational change management program. If these guidelines are followed, you will find that you have a much higher likelihood of a successful transformation.
By doing the above, understanding the role of digital in their organisation and moving to the right model, companies can transform operations and ensure digital and cloud services are at the heart of their business. Doing so can help them make the most of new enabling technologies to better engage with customers and successfully create a culture of digital innovation and experimentation that is better prepared to respond more flexibly to the changing business market.
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