What Digital Operating Model Should We Adopt?

Editor's Note: Take a look at our featured best practice, Digital Transformation Strategy (145-slide PowerPoint presentation). Digital Transformation is being embraced by organizations across most industries, as the role of technology shifts from being a business enabler to a business driver. This has only been accelerated by the COVID-19 global pandemic. Thus, to remain competitive and outcompete in today's fast paced, [read more]

Also, if you are interested in becoming an expert on Digital Transformation, take a look at Flevy's Digital Transformation Frameworks offering here. This is a curated collection of best practice frameworks based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. By learning and applying these concepts, you can you stay ahead of the curve. Full details here.

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Organizations, small and large, are undergoing Digital Transformation to evolve to “Digital Organizations.” Beyond just adopting emerging technologies into their front-end business models and back-end infrastructure, to become a true “Digital Organization,” they must also adopt “digital” Operating Models.

While leadership may be eager to adopt these Digital Operating Models, it would be a mistake to be too hasty, as such novel structures could result in an immense cultural shock for many in the organization. Instead, we should only adopt the model the best fits with the Digital Maturity of our organization.

There are 4 primary Operating Models for Digital Organizations.

Not all organizations can benefit from realizing all 4 Digital Operating Models. Each should be pragmatically studied and emulated, bearing our organization’s unique situation in mind.

Now, let’s take a deeper look at each Digital Model.

1. The Tactical Model

The Tactical Model encompasses digital technology and innovative ways of working within various business units of the organization to achieve existing targets. However, these outlays are often in silos.

Digital marketing, online sales channels, and other technologies that enhance field force mobility are invested in and utilized to create value for the business. These investments are usually sizable, but not strategic. Digital is not considered the core of the business, with only a few people fully aware of the challenges and opportunities it presents

The Tactical Model is common in organizations aspiring to create a digital market presence, but do not invest in devising a comprehensive Digital Transformation Strategy. However, changing times will necessitate these organizations to embrace a more strategic use of digital.

2. The Centralization Model

Organizations employing a Centralization Model consolidate digital initiatives and capabilities into a central unit that leverages proper governance over digital expenditure. It helps in directing Corporate Strategy into prioritized digital initiatives, which are implemented by a central unit in collaboration with business units.

The centralization benefits organizations that are doing far too much in digital. Well-intentioned projects meant to establish innovative technologies and products are executed, but they achieve little at a strategic level.

3. The Champion Model

The Champion Model is characterized by a Digital Transformation Strategy that is well communicated across the business. A central Digital Team is not solely responsible for digital, and focus remains on sharing knowledge, educating and enabling others in the business.

Companies that adopt this structure have a culture of openness and trust to the level that they can focus on doing things rather than having meetings to plan execution. Leadership supports the employees at all levels and everybody is clear of the strategic direction and objectives.

4. The Business as Usual (BAU) Model

In the BAU Model, digital culture, processes, business models and technology are fully embedded in daily working life. The organization is adaptable and responsive to change at all levels. There is no longer a need for a centralized function and those working on initiatives and with specific digital skills re-join business units.

So, how ready is our organization? We can leverage another framework, a simple diagnostic tool, to assess our “Digital Readiness” and determine which Digital Operating Model is best for us at this stage of our Digital Transformation.

This diagnostic framework evaluates 5 key areas:

1.  Strategy and Leadership
2. Customer Engagement
3. Products and Services
4. Organization and Talent
5. Digital Operations

Interested in learning more about Digital Readiness, Digital Operating Models, and overall Digital Organizations? Our framework called Digital Organization Design discusses these areas in further depth.

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Digital Transformation is being embraced by organizations of all sizes across most industries. In the Digital Age today, technology creates new opportunities and fundamentally transforms businesses in all aspects—operations, business models, strategies. It not only enables the business, but also drives its growth and can be a source of Competitive Advantage.

For many industries, COVID-19 has accelerated the timeline for Digital Transformation Programs by multiple years. Digital Transformation has become a necessity. Now, to survive in the Low Touch Economy—characterized by social distancing and a minimization of in-person activities—organizations must go digital. This includes offering digital solutions for both employees (e.g. Remote Work, Virtual Teams, Enterprise Cloud, etc.) and customers (e.g. E-commerce, Social Media, Mobile Apps, etc.).

Learn about our Digital Transformation Best Practice Frameworks here.