Forming A Digital Operating Model Design
At its core, a digital organisation uses modern technology (Cloud, APIs, IoT, AI, VR/AR, etc) to deliver a better customer and staff experience that also improves the bottom line through either increased revenue or reduced cost to serve. It’s hard to argue with a business strategy that aims to increase revenue, reduce costs, and make your customers happy. Even for public sector agencies and non-profits, the goal of reduced cost to serve, a better customer experience and improved public perception is hard to argue with. As a result, a business strategy that at least includes a move towards going digital is now mainstream.
The problem is no longer convincing people that a digital strategy is important. The challenge is turning a strategy of going digital into a way of working within the organisation i.e. implementing a digital operating model. I think there are two reasons why this is a challenge:
- Failing to understand that a digital strategy is a business strategy that requires implementation across the business and not just within the IT team.
- Organisations try to mimic what others have done to become digital rather than finding a digital model that works for them. This tends to result in them rolling out digital model methods and tools (e.g. a Chief Customer Officer, Product Owners, SAFe) and wondering why they aren’t suddenly digital. But, just like good Scrum teams focus on the pillars of empiricism (transparency, inspection, adaption) rather than the current methods of implementing those pillars (stand-ups, retrospectives, showcases, etc), good digital organisations focus on embedding key digital shifts within their operating models using digital concepts in ways that work for them. Tribes, guilds and squads may work for organisations like Spotify and Spark, but that doesn’t mean they’ll work for everyone or are even necessary to become a digital organisation.
To become a digital organisation, decision makers need to understand the underlying digital operating model shifts required by all organisations, then figure out how to implement these in a way that works for their specific organisation.
Digital Operating Model Shifts
Every organisation is made up of a set of building blocks – people, process, technology, data, channels, customers, services and locations. These building blocks can be designed and combined in infinite formations to create organisation-specific and unique operating models. Digital technologies have created new opportunities for how the building blocks can be combined. Who would have thought 10 years ago, that sharing a car with strangers would not only be considered a safe and convenient mode of transport, but an industry with an expected worth of $285 billion USD by 2030. This operating model was not realistically possible before smartphones, APIs and cloud services.
These new opportunities mean you have even more ways to design and combine the operating model building blocks in a way that works for you. Unfortunately, there's no avoiding the fact that you are still going to need to figure out what works for your organisation. However, if you remember that the first trick to digital operating model design is to realise there is no right or wrong answer, this can be less daunting. In fact, part of a good digital operating model is an inherent ability for the design and combination of elements to change over time to ensure it can evolve to meet the ever-changing needs of customers, staff and technological advancement.
So rather than focus on the way Spotify organises its teams; Xero does product ownership; Air New Zealand does customer experience design; Netflix uses the cloud. You are far better understanding the key digital shifts all organisations need to make and the options you have to realise those shifts within your organisation.
So what are these shifts? Unfortunately digital transformation is underway now so we don’t have the benefit of the Wikipedia page 'Proven Digital Transformation Shifts of the Early 21st Century' but we are starting to see an early first draft. The key ones I see, which I will expand on in a subsequent blog article, are:
- Make your business strategy your technology strategy and your technology strategy your business strategy.
- Shrink the gap between your customers and everyone that plays a part in delivering services to your customers.
- Be an insights-driven learning organisation that adjusts to customer feedback, lessons learned, talent levels, maturity and general environment context.
- Use your channels strategically and operationally by considering the channel mix strategy, the channel shift plan, and the channel operations approach.
- Create a digital culture by putting the customer at the center of everything you do.
What are the key shifts you see in digital organisations? How are they represented in the organisation’s operating models?
Next up, in Part 2, I look at the key steps that businesses can take to adopt a digital model in their future strategies.
Find out more about our digital capabilities at Deloitte Digital New Zealand.