Transitioning to the next-generation operating business model

People and the Business Model: The Quest for Operational Excellence
March 27, 2017
The Connections and Interdependencies of Value Creation and Business Success
March 27, 2017

 

Companies are finding new ways to unlock value through next-generation operating business models.

The ability to take advantage of new opportunities is being accelerated by technology. The emergence of sharing platforms, the changing nature of work, the means by which services are provided, are just some of the shifts that technology is making possible.

But new business models are not just about technology.

The shared purpose vision of business leaders of  how a new business model can create value for a company, coupled with their responsibilities to provide strategic forward thinking, are more important than ever, as economies and societies put new demands on the table.

Business leaders are forced to imagine ways of doing things that solve problems for their customers better and in this way they uncover new ways of creating value, and a meaningful impact on the way people live and work.

 

The future is agile.

The rapid pace of technological transformation, the accelerating speed of change, the quest for flexibility, call for agility and eadiness for transformation of the working environment. This demands of expansive mindset encompassing differing viewpoints, opportunities, and contexts. The prerequisite for this way of thinking, is a corporate culture which is marked by iself-empowerement, creativity, and innovation drive.

This entails the ability to perceive continuously new interrelationships, to integrate differing viewpoints, accepting dynamics and uncertainty, and to question the legacies from the past over and over.

As tasks become more complex, automated, enhanced by cognitive-intelligence capabilities, whether it’s responding to changing market dynamics, or accessing information from multiple sources, the business operating model of the future combines digital technologies and process-improvement capabilities in an integrated way to improve customer journeys and internal processes.

High performing companies rethink how to bring together the right combination of skills to build products and serve customers. That means resetting organisational boundaries and revisiting the team dynamics, creating more fluid structures and new ways in which day-to-day work is done.

 

This in turn calls for a shift from running uncoordinated efforts within siloes to launching an integrated operational-improvement program organised around customer journeys and the consolidation of processes, especially transactional payroll and accounting related, such as Process, Comply & Pay, Order-to-Cash or Record-to-Report.

Instead of working on separate initiatives inside organisational units, companies have to think holistically about how their operations can contribute to delivering a better customer experience.

Maximum focus on customers

This is especially the case when the matter at stake is the company’s survival capability in the future. Its innovations.

Innovations are born in people’s heads, not generated by managed processes.
The focus here is on the customer’s problem rather than on engineering technology.

Management guru Clay Christensen has convincingly demonstrated how disruptive innovations in various industries have dismantled the prevailing business model, by enabling new players to target the least profitable customer segments and gradually move upstream until they can satisfy the demands of every customer – at which point the old business model collapses.

Reinventing the Business Operating Model

There is no one way to develop a next-generation operating model. It depends on a company’s existing capabilities, desired speed of transformation, level of leadership capabilities and commitment.

Each company’s path to a next-generation operating model is unique. But successful transformations share the same set of building blocks that provide the speed and flexibility to quickly unlock new sources of value and reduce costs.

According to Digital McKinsey Practice, companies need to increase revenues, lower costs, and delight customers. Doing that entails reinventing the business operating model.

Companies know where they want to go. They want to be more agile, quicker to react, deliver great customer experiences, and take advantage of new technologies to cut costs, improve quality and transparency, and build business value.

McKinsey research shows that companies have lofty ambitions: they expect digital initiatives to deliver annual growth and cost efficiencies of 5 to 10 percent or more in the next three to five years. Yet few will realise that kind of growth.

The problem is that while most companies are trying to get better, the results tend to provide temporary gains but aren’t sustainable.

The root cause relates to the coordination of people, processes, and technologies, and a plan for how to capture that value, and technologies and tools to digitise interactions with customers.

The best management systems for next-generation operating business models are based on strategies, principles, tools, and shared purpose behaviors that drive a collaborative culture of continuous improvement focused on customer needs.

 

 

Transitioning to the next-generation model starts with classifying and mapping key journeys.

Organisations typically use 4 key levers to improve operations:

  • Digital tools and technology to improve journeys.
  • Business intelligence to improve decision making and make recommendations in accelerating processes.
  • People-Machines Interaction: Intelligent process automation (IPA) as a set of new technologies that combines process redesign with robotic process automation and machine learning. IPA can replace human effort in processes that involve aggregating data from multiple systems, enable smart workflows (to track the status of the end-to-end process in real time, manage handoffs between different groups), cognitive technologies and machine learning (to make predictions on their own based on inputs and provide insights on recognised patterns), and cognitive agents that combine machine learning and natural-language generation to build a virtual workforce
  • Shared Services Business Process Outsourcing uses third party assets and shared services resources outside of the main business to complete specific tasks or functions, such as back-office processing, that helps companies streamline processes and costs, enhance core focus, and foster a culture of continuous improvement.

 

Critical to success is sharing a broad-based belief in and commitment to transformation. 

Leading the change from the top and building new ways of working across organisational boundaries, while exploring design thinking in delivering products to customers and quickly learning from them, as well as willingness to take appropriate risks.