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What is a Digital Operating Model?

image of Mark Walters Mark Walters
Mark Walters 30 May 2022 Time to read: 

Digital Transformation has led many organisations to review their business strategy and technology operating model, to drive enhanced customer experience, foster innovation and create new opportunities for monetisation, all whilst improving efficiency and driving down costs through the adoption of new technologies and ways of working.

More than 55% of CIOs identified Digital as their top business priority for 2022, building on the growing trend on investment in project- to- product ways of operating.

Major transformation and change programmes have seen more focus on better data & analytic outcomes, enabled by advanced technologies and delivered by adopting collaborative styles and agile ways of working in which cross functional business and technology working groups are established, and organisations integrate more closely with partners. The need to evolve – if not revolutionise – is required, but how is this achieved?

Digital transformation is not just a technology challenge; it is a business-wide cultural one.

Mark Walters, Operating Model Practice Lead

The Digital Operating Model

An operating model describes how people, process and technology are organised to achieve strategic objectives. A digital operating model places the customer at its core and drives cohesion across the C-Suite, IT and Operations to embed digital thinking up-front.

Digital operating models meet the needs and expectations of today’s customers  by progressing an enterprise wide approach that sees key processes, organisational structures, data models and technical infrastructure fundamentally realigned to support customer journeys.

This is the opposite to the approach we find within many organisations, where digital transformation is based on a doomed assumption that smooth co-operation can be achieved using traditional improvement methods that fail to systematically address complex functional and geographical siloes with fragmented accountabilities and inconsistent incentives.

Digital transformation is not just a technology challenge; it is a business-wide cultural one.

The challenges of implementing a new digital operating model

Instead of working on separate initiatives inside organisational units, companies must think holistically about how their operations can contribute to delivering a distinctive customer experience. The best way to do this is to focus on customer journeys and the activities that support them.  This typically presents a paradigm shift for most organisations, challenging existing norms and cultural values.

Supporting individuals throughout the digital transformation demands proactive approaches to communications and engagement so they can feel included, and able to contribute to the change.  Transparency and openness on key aspects of business strategy, in language understood by everyone, allows individuals to recognise their contribution to success.

Where to start

We often find that companies fall into the trap of simply trying to improve existing processes and reorganising pockets of the business. Instead, they should focus on entirely reimagining the customer experience and identify opportunities to unlock value.

Operating models are multi-faceted arrangements and need to be viewed from a number of angles that incorporate a series of inter-related attributes; processes, clearly essential, have a proportionately small contribution to the successful sum of the parts.

Engaging early across all key stakeholders to understand current operating practices and mapping to future aspirations clarifies critical concerns within the operating environment, potentially highlighting:

  • Financial management and risk that facilitate necessary motivation and empowerment
  • Commercial partnerships that allow focus on core business values
  • Skills and capabilities that support the new digital environments
  • Collaboration and ways of work that improve effectiveness and reduce waste

Building an integrated operating model is a complex and typically lengthy undertaking requiring committed investment of time and money in order to sustain a change journey that delivers in accordance with business strategy.

In the next article we will focus on suppliers, looking at when it’s appropriate to outsource and when it could be detrimental to your digital transformation.

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