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July 31, 2020

Digital Operating Model - Introducing the Next-Generation

5
Minute Read

In a rapidly shifting landscape, how can companies achieve successful digital transformation? Don’t focus solely on technology, commit to a future-focused operating model, or a digital operating model.

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We talk a lot about agility in regards to the rapidly-shifting digital landscape that is eCommerce. Below we go into detail on what a digital operating model is and how to develop a successful one.

Perhaps more than anything in recent memory, the COVID-19 pandemic has demonstrated just how quickly companies need to be able to adjust their customer experiences and even business models. These past few months have seen numerous organizations pivot their services to include contactless, curbside, and other low-touch strategies.

Yet even prior to these recent health concerns, businesses recognized that they need to be able to react more quickly to market shifts, trends, and customer demands. As the eCommerce space becomes increasingly crowded, the ability to be adaptive and responsive is a distinct competitive advantage. 

Unfortunately, while many companies understand this dilemma and even take it seriously, few have a strategy to address it.

infographic: The Cost of Failed Digital Transformations


Most companies at least try to improve, and perhaps even see limited success: temporary improvements that aren’t sustainable, and siloed initiatives that don’t impact the entire enterprise. But ultimately, these efforts result in a lack of meaningful, transformative, organization-wide change. In fact, according to Forbes, 70% of digital transformations do not achieve their goals. In financial terms, this breaks down to $900 billion worth of 2019 spend that missed the mark.

So how can companies achieve successful digital transformation? Don’t focus solely on technology, commit to a future-focused operating model, or a digital operating model.

This is generally a two-pronged approach. First, you must shift your focus so that your entire organization is customer-centric, and focused the customer journey, as well as the internal journey of processes within the company. Secondly, you’ll need to adjust your digital technologies and operational capabilities to apply to both of these journeys.

What is a Digital Operating Model?

Let’s dive into the concept of a digital operating model a bit more thoroughly. 

An operating model is a concept with which you’re likely familiar. Good operating models break down how people, processes, and technologies work together to achieve corporate strategic goals. 

A digital operating model takes it one step further by shifting to a customer-centric focus, eliminating gaps between leadership teams, IT, and Operations. 

This is critical, as the average organization is often siloed and running simultaneous but unconnected efforts to improve performance. For example, front and back offices may not be connected; handoffs between teams are often fumbled; and what matters to customers, like speed and service, gets lost in between. So while certain business units may be able to report operational improvements, customer satisfaction can decrease all while costs increase. 

The beauty of digital operating model transformations are that they force companies to think holistically about how their operations drive customer experience. This is most easily done by identifying the customer journey, determining how to enhance it, and then aligning internal processes to support it. 

This strategy has to work cross-functionally, as it takes numerous departments (marketing, IT, supply chain management, etc.) to support the customer journey. 

Consequently, digital operating models meet customer needs and expectations without racking up back-end costs, because everything that’s internal has been realigned to enhance the customer journey. 

They’re also far more efficient at making improvements as needed because IT and sales or business teams are closely linked from initial development all the way through to implementation. 

How to Develop a Digital Operating Model

graphic:Developing a Digital Operating Model

While digital operating models may seem relatively straightforward, companies frequently (and unfortunately) make a fatal mistake - they try to improve existing processes, instead of completely reimagining the customer experience. 

This underscores that while the concept of a digital operating model may be easily grasped, it’s far harder to execute. 

To merely focus on the customer experience without considering organizational capabilities will destroy the initiative before it’s even launched. And to reorganize internally without considering what customer want (and what they may not even know they want) won’t lead to transformation either. 

To avoid these pitfalls, companies need to do a few key things.

Center the Customer Experience

When you revamp your operating model, refocus it so that the customer journey is right at its core. 

Go back to those people, processes, and technologies, and consider how they all contribute to what matters to end-users.

For some businesses, this may mean dramatic measures like rethinking your entire product strategy, or phasing out traditional lines of business (ex. brick-and-mortar stores) to create better overall customer experiences. 

Think Digital First

By emphasizing digital from the start, you’re far more likely to gain a holistic view of your business, its capabilities, and its needs.

This takes you beyond people, processes, and technologies and allows you to consider how culture, analytics, and other key elements impact your corporate strategy. 

Furthermore, when you bridge gaps between IT and Operations right from the start, you’ll be better equipped to rapidly innovate in the future as new technologies emerge. It’s far easier to be agile when your teams are already used to working collaboratively.

Iterate Often 

A lot of agility comes down to iteration. Design, refine, and implement your initiatives repeatedly, allowing for evolution as you discover new issues and address them. When you can quickly identify and correct problems within each release, your technology and operating practices can grow together. 

This means that when something unexpected happens (like a global pandemic) your teams are able to quickly pivot, and design, test, and launch solutions. 

In Conclusion

Digital operating models are the way of the future. 

To succeed, you’ll need to center the customer, embrace digital upfront, have iterative designs and implementations, and unify your teams. 

True transformation doesn’t happen in siloes. The impact of digital operating models comes down to organizational improvement happening in tandem with customer journey and internal journey alignment.

To learn more about digital operating models and how they can set your business up for ongoing success, connect with the team at Object Edge.

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