FLOYD MAC DONALD'S BLOG
'INTEGRATED OPERATING MODEL IN THE DIGITAL AGE'
How to work toward an integrated operating model?
Customer & business expectations
The pace of technology innovation and use of digital technology and devices is moving at ‘lightning-speed’ and causes a tidal wave of changes with a profound impact. Nowadays, we all experience that digital technology has become a central part in our lives. It is now the foundation of our daily reality. Worldwide people are interconnected with a smartphone, tablet or computer and become highly demanding shoppers whom expect high-quality products on their doorstep in record time.
Digital technology has changed customer behaviours, preferences and expectations. That is why, companies are rushing to catch up to the latest developments and convert their business and operations from traditional to digital technology to meet changing customer expectations. More executives are recognizing that digital transformation is a journey that takes time in any organization. They also recognize that the use of digital capabilities, cloud software technology, artificial intelligence (AI), and Internet of Things (IoT) applications will accelerate and will have an impact on how businesses and operations will be run in the future.
Operational & digital challenges
Almost every day we see customers looking for the newest, fastest, and most cost-effective solution that meet their needs. Hence, keeping up your business operation and information system management with fast paced digital technology is a key condition for success. It is a path to success that calls for intertwining business functions, organizational architecture and system architecture into an Integrated Operating Model (IOM). The IOM must be able to sustain new levels of speed, agility, efficiency, and precision. Additionally, it has to be capable of combining digital technologies and operations capabilities so that your company can improve their product and/or service quality, build value and provide compelling customer experience at a lower cost.
If your organization can adapt and embrace digital innovation and operations improvement capabilities in an integrated way it will be more effective. As a result, it improves internal processes which can attract and retain customers. For example, Google has invested in Internet search, cloud computing and advertising technology. Furthermore, Google hosts and develops a number of Internet based services and products, and generates profit by advertising in its AdWords program. Google has grown from a web search-engine company to a global leader in areas such as android mobile phone technology, YouTube, AdSense and Google Earth mapping, while also exploring newer fields that have growth potential. At the heart of Google’s success is Google’s search technology Pigeon Rank™, a system for ranking web pages, and their unique advertisement system, AdWords.
How to work toward an Integrated Operating Model?
The most important approach for companies is to put customer experience at the heart of an Integrated Operating Model (IOM). This requires a different kind of skill set and a mind-set that can cut across organizational silos. To implement an IOM successfully, the following key foundations are needed to excel your business operations:
- Executive and leadership commitment
- Apply transformational change management practices to support a culture change and desired speed of digital transformation
- Optimize the operational architecture, system architecture and supply chain efficiency, and
- Develop employees’ dynamic capabilities, competencies and skills
Key foundation 1: Leadership
The first key foundation is deep involvement of executives and leadership to accomplish an IOM and higher levels of operational excellence. Primary change agents in the businesses, such as CEO’s, senior business executives and managers have outside influence on the success of the digital transformation in a company or organization. Therefore, it is essential to have a clear vision and digital transformation strategy that is effectively communicated across the company. Executives and leadership, in fact, underpins whether an IOM becomes a reality or remains an aspiration.
Digital technology applications are already making leadership and management aware of what is happening in their organization. For most, automated data collection and analysis frees managers up to spend more time with their teams. For example, executive quarterly balanced scorecards and monthly management dashboards provide leaders with visualized key business performance indicators (KPI’s) and the ability to adjust people’s workloads instantly.
Key foundation 2: Change management to support cultural change and digital transformation
The second key foundation is to cultivate a culture of excellence that requires leaders to “walk the walk, not just talk the talk”. If you want to achieve an organizational cultural change that promotes values such as integrity, openness, interdependency, transparency and adaptability, you need to change how the organization works. Therefore, it needs to be able to apply transformational change management practices to support the culture change and speed of the digital transformation.
For example, Apple has an organizational culture for creative innovation. Apple’s company cultural is incredibly unique. Couple of features include:
- being good or even better than many main competitors isn’t enough: instead the company culture seeks to be the best.
- Mediocrity is never acceptable
At Apple, people are not all the same and that is Apple’s greatest strength, they believe in inclusivity. It is no secret that keeping information hush-hush is highly valued at Apple. While some parts of the culture have been critiqued, Apple continues to retain innovative workers and produce high-quality products.
Key foundation 3: Optimize operational architecture, system architecture and supply chain
The third key foundation is proactively aligning the organizations’ dynamic capabilities, processes and business information in order to strengthen delivery of business products and/or services. In essence, it is about the convergence of people, process and digital technology (tools). Thereby, it is essential to identify key priorities in terms of trends, barriers and future customer requirements to which your business may have to respond.
Furthermore, it is important to have a clear definition of the key business performance indicators and ensure consistent alignment with the business strategy. It is all about building a more agile, customer focused, smart integrated operational architecture, aligned system architecture and supply chain efficiency that has capabilities to deliver ‘just- in-time’, ‘just-in-place’ or ‘just-in-sequence’.
For example, Amazon is not a “brick-and-mortar” company but is an internet retailer that utilize their website as a sales channel. It operates as an online store and a full-service e-commerce provider that leverage its technology platform. Amazon competes with traditional retailers as well as other internet retailers on the basis of selection, convenience and price advantages, and offers positive customer experience through for example, Amazon Prime and Syndicate Stores program (e.g. Waldenbooks).
Amazon has a multi-tier supply chain in place, a three-echelon inventory system where they maintain their own distribution centers using robotics, vision systems and software, and mechanical innovations. Also, Amazon ships products directly from suppliers and pull inventory from wholesalers to fill orders which they then deliver directly to the consumer. Currently, Amazon is one of the most successful internet retail companies.
Key foundation 4: Development dynamic capabilities, competencies and skills
The fourth key foundation is closely linked to the culture change of employees’ development and qualifications. The development of new competencies revolves around the capacities to be more agile, people-oriented, innovative, customer-centric, streamlined, efficient and the ability to leverage opportunities to change the status quo and tap into new data sources. Therefore, employees need to be trained to use new technologies effectively. Empowered and engaged employees will assume responsibilities they might not otherwise take on. Teamwork, empowerment and commitment contribute to creating, maintaining and sustaining integrated operations and operational excellence, which increases reliability, minimizes errors and costs in the organization.
For example, Netflix is the pioneer and global leader of streaming television and movies through Amazon Web Services (AWS) cloud network technology today. Netflix values can be summed by the phrase “people over process”. They also rely on the idea of a dream, which is when “all of your colleagues are extraordinary at what they do and are highly effective collaborators”. The result is a more flexible, fun, stimulating, creative, and successful organization.
The company offers its employees generous benefits like unlimited holidays and an expense policy that simply requires people to “act in Netflix’s best interests”. Furthermore, Netflix makes hiring and promotion decisions based on the values that are integral to the success of the company: Judgment, Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty, and Selflessness. Netflix company’s structure and culture builds the skills and capabilities of its personnel to adapt and respond to customers quickly.
The path to success and survival in today’s digital-agile marketplace is putting the four key foundations in place. In addition, product excellence and recognition of employees are the most important asset in your company. Also, having a constant stream of new, innovative, high value products and/or services that your customers want to buy is equally as essential. The best way to do this is to use an Integrated Operating Model (IOM) and utilize the internal business processes and supply chains that support them.
Floyd Mac Donald is the founder and principal at Mac Donald Consultancy. We inspire and train clients to use an integrated and multi-perspective approach. In combination with a paradox and adaptive mind-set and our integrated services to identify and solve clients challenges, and achieve business enhancement effectively.