Reinventing your operating model to win in the digital world: how to capture the full value of digital transformation

24/10/2021

The changes are about how you conduct business today: you need a new operating model to support new levels of speed, agility, efficiency and accuracy that the market demands.

How to profitably deliver services to customers has become a defining challenge for businesses today.

There are a number of reasons for this. One is because customers don’t just expect more, the expectations themselves also change quickly, radically shifting profits. The other is that executives face an increasingly complex landscape of technologies, methodologies, and both regulatory and compliance pressures to ensure that new processes are standardized and traceable.

This sea change for both B2B and B2C businesses is fundamentally transforming what “services” means. One research by McKinsey suggests that as much as 45 percent of employee activities can be automated by adopting current technologies. That is calling into question how businesses work, build skills, and deliver customer experiences.

This reality is particularly important given the high-stakes nature of today’s digital environment. The same research has revealed a “power curve” where the top quintile of performers captures more than 90 percent of the economic profit. The 24 companies that make up the top 1 percent of the sample earn – astonishingly – the same as the next 87 companies combined.

Moving into the top quintile, or even improving within it, is not easy. Most companies have embarked on journeys to transform their operating models, of course, but performance has been uneven. The efficiency levels of many service industries, for example, have barely changed over the past decade. Confusion about what the primary “axis of change” is – from customer expectations to technology – as well as which combination of capabilities to build and in what sequence, has been the primary culprit.

Yet we know that companies across industries can successfully make the leap when they put in place a sound strategy and commit to making a specific set of big moves: accessing new markets or capabilities through mergers and acquisitions, investing in capabilities and value-creating activities at significant scale, aggressively allocating resources to those capabilities and activities, and radically improving productivity. There are recurring patterns of success, and a step-function improvement in productivity is one of the leading forces that allows companies to move up the power curve. To be clear, these “big moves” aren’t single bet-the-company kinds of actions. Experience has shown, rather, that a series of bold initiatives that reinforce each other and create impact cumulatively is the recipe for a successful transformation.

When it comes to digital services, these big moves are all about disrupting how your business works today and are necessary to put in place a next-generation operating model that can sustain new levels of speed, agility, efficiency, and precision.

We believe that requires a three-part program:

  1. Designing the next-generation operating model and transformation roadmap
  2. Transforming the customer journeys that matter through a combination of capabilities and approaches
  3. Building up cross-functional foundations to scale and sustain the benefits of the transformation