Digital Operating Model

A structured approach to choosing and

implementing new technologies
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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Strategy should drive technology decisions

to transform an operating model 04
Digital Operating Model as a response
to a changing environment 05
Better meeting customer needs with technology 06
Envision the operating model as an agile framework
centered around the customer experience 09
Map digital transformation based on
impact to avoid wasting resources 16
Break down process into three steps
to build a digital operating model 18
Plan holistically to future-proof your
business and prioritise investments 21
Contacts 22

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Strategy should drive technology
decisions to transform an
operating model
Technology keeps evolving at breakneck plan and a clear understanding of where the
speed, often with the power to disrupt need for digital innovation is greatest within
entire industries. This puts executives in a the organisation. Without a big-picture view
constant struggle to decide in which tech- and a comprehensive plan, the result is
nologies to invest to remain competitive and often a suboptimal allocation of resources,
relevant. In the media, there is no shortage driving costs with little impact. Executives
of artificial intelligence, blockchain, cognitive should instead take a structured approach
automation and other technology success to choosing and implementing new technol-
stories that compound the pressure on ogies, and set clear strategic priorities given
executives to invest, but which also often their organisation’s limited resources and
lead to a paradox of choice with too many capabilities. Monitor Deloitte’s Digital Oper-
applications and solutions to choose from. ating Model helps enterprises effectively
address these decisive choices.
The way many companies approach digitali-
sation of their operations – meaning the use
of technology to improve performance – is
through individual initiatives of functional
heads, as opposed to having a structured

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Digital Operating Model as

a response to a changing
environment
Using technology to improve operations can However, implementing new technologies
be extremely impactful. We recently worked should not be seen as a tick-box activity of
with a global consumer goods company isolated performance improvements, but
and helped cut its yearly media monitoring rather as a vital next step in the continuous
agency fees by 90 Percent thanks to the quest to better address customers’ needs
use of web scraping and image recognition to ensure one’s long-term competitiveness.
engines. Similarly, our teams helped a The key is to rethink holistically ones’
large German grocery chain to improve operating model to better address evolving
the accuracy of its weekly sales forecast customer needs and expectations.
using neuroscience, achieving 80 Percent
accuracy for its promotional leaflets. Given
the measurable and tangible success of
these technologically-driven performance
enhancements, it is no wonder that execu-
tives feel an urge to act.

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Better meeting customer
needs with technology
Customer expectations are continuously sons. As an example, the fact that Huawei Companies exist to serve customers, and
increasing. In today’s digital world, fast, may no longer be able to offer the Android those that meet their customers’ expec-
reliable, flexible and personalised offerings operating system could hinder its ability to tations most effectively ultimately win.
at competitive prices are starting to become compete meaningfully in Western markets Operating models represent the set of activ-
the default value equation across industries. despite the fact that its technology and flag- ities companies undertake to render their
How companies calibrate and execute each ship products have garnered international services. Successful companies know that
of these elements will often define the acclaim. in order to keep winning they must continu-
overall customer experience, a new proxy ously look for ways to improve their operat-
for value propositions, differentiation and According to a recent study conducted for ing models. The effective use of technology
competitiveness. another global leading consumer electronics helps companies to carve out new com-
brand in France, 57 Percent of consumers petitive advantages. The technology itself
Professor Erik Gordon from the University believe that in-store sales staff provide bet- is however not the main driver – meeting
of Michigan recently questioned whether ter recommendations when they use digital customers’ expectations is. Hence, before
brand loyalty ever existed, and if consumers tools, and 57 Percent of consumers aged adopting a new technology, companies need
stick with brands more out of laziness 18 to 34 state they would visit stores more to assess the areas where they may not be
than loyalty.1 Given the pace of change regularly if they were digitally equipped2. meeting customers’ expectations (both at
and increased ease of opting in and out of Both of these data points suggest that digi- present and in the future), and then look for
offerings, companies are finding it harder to tal operating models may have even greater the root cause by assessing their internal
sustain earned loyalty without a deep and benefits than the cost savings or throughput capabilities. Jeff Bezos, Amazon’s founder
more intimate understanding of customer improvements you would expect. and Chief Executive Officer calls this process
habits and preferences. Transparency and “working backwards”.
accountability are equally important in the That said, enterprises do not necessarily
eyes of customers, strengthening the case need to implement every available technol-
for blockchain-based customer loyalty pro- ogy to better address customer needs and
grams. We also see the network effects of expectations. Carefully selecting the right
platforms and strategic alliances becoming technological tools can give companies a
all the more important for the same rea- decisive competitive edge in the market.

1
  A mericus Reed, Erik Gordon, Marketing to Digital Natives: How Brand Loyalty Is Changing, Knowledge@Wharton, September 19, 2018.
2
  La digitalisation, vecteur de fidélisation pour les jeunes, LSA.fr, September 25, 2019.
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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Gaps in customer expectations do not exist

in silos, which is why it is so crucial to under-
stand the competition and potential for sub-
stitution. Similarly, capability gaps are not
merely an internal issue. It is as important to
assess suppliers based on the capabilities
they offer or the constraints they impose.
Companies need to better understand how
their value chain and ecosystem work and
start making an impact there before they try
to optimise their operating model.

“Leaders start with the customer

and work backwards. They
work vigorously to earn and
keep customer trust. Although
leaders pay attention to
competitors, they obsess over
customers.”
Amazon Leadership Principles – Customer Obsession3

  w ww.amazon.jobs/en/principles [Issue: 18.02.2020].

3

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Envision the operating

model as an agile framework
centered around the
customer experience

Traditional operating models have been

defined as the combination of technologies,
processes, roles and organisation. While
this definition holds true, it hardly reflects
the heightened complexity of our digital
era. Today’s companies operate under the
constant threat of disruption, bringing with
it a need for speed and hyper-customisation
without sacrificing scalability. At Monitor
Deloitte, we recommend envisioning
your Digital Operating Model as a wheel
in motion. At the center is the customer
experience or value proposition with all of
the operating model elements extending
out from there, adding the two incremental
layers of innovation and partnerships &
alliances, both critically important in a world
which is driven by constant change and
subject to limited resources.

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Fig. 1 – Digital Operating Model Principles

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Value
proposition The core ideas behind the Digital Operating
Model are, first, to be obsessively focused
Te

on the customer and, second, to structure

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To

your operations in a way that is fluid enough

n

gi
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og A
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ic a
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l ga to be adaptable, responsive and silo-free.

Or Technology in this scenario should only be
seen as an enabler.

When one of the leading global media com-

I n n o v a ti o n
panies decided to modernize its attraction
parks’ customer experience, it started by
Part s
nerships & Alliance identifying specific short comings in the
current visitor experience, pain points and
associated inefficiencies given customers’
new expectations in a digitally enabled envi-
ronment. The exercise resulted in an entirely
new digital operating model developed
along the highlighted framework, which sig-
nificantly improved the overall visitors’ satis-
faction. Figures 3 and 4 overleaf provide an
overview of how this was achieved.

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Tab. 1 – Digital Operating Model framework dimensions

Dimension Explanation

Value Proposition •• Focus on addressing customer pain points.

•• Improve performance on preferred elements of the

value proposition.

End-to-End Roles & Resp. •• Break functional silos to ensure end-to-end

ownership of outcomes.

•• Distribute local decision rights to speed up

service to the client.

Technological Tools •• Use technologies to automate repetitive, low value

adding tasks.

•• Build infrastructure and tools to drive data-driven

decisions and processes.

Agile Organisation •• Work in agile mode to foster continuous improve-

ment across functions.

Digital capabilities •• Recruit & train your organisation to be digitally

savvy.

•• Think digitally when building offerings, go-to-market

campaigns, and UI/UX.

Innovation •• Search for ways to continuously improve the cus-

tomer experience.

•• Experiment with new solutions to address identified

issues.

Partnerships & Alliances •• Choose your role and position in ecosystem.

•• Scan for competencies to access or partners with

whom to grow.

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Fig. 2 – Amusement Park illustration

Customer expectations Amusement Park Possible Root New Target

in digital era Users’ Pain Points Causes Value Proposition

Fast Queueing · Ride traffic fluidity Maximize

· Slow payments enjoyment
time
Lack of information · Information overload (Cf., ride, eating,
· Wrong canal shopping time)
Reliable
before, during
Undifferentiated · Wrong tone for audience and after your
experiences leading to · Lack of customer data visit to build
unnecessary bottle lasting memo-
Flexible necks ries

Lack of preparation · Missed information

lead to missed oppor- · Missing services
Personalized tunities & disappoint ·…
ments

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Initiatives Derived from

New Target Value Proposition

Shorten lines · Gather live data about users

· Gather live data about rides
· Run live data analytics
From pain points to initiatives

· Push notifications to direct & optimize traffic

Create end to end · Personalize pre-arrival information to ease journey & create anticipation
narrative · Notify visitors of program & up coming activities
· Share live ride wait time and distance

Use devices familiar to · Gather data through app & branded wearable
visitors · Allow payment through app & wearable

Incorporate new services · Take professional photos and distribute QR code to access them instantly
based on new consumpti- · Provide park employees with tools to access all live park information to
on habits address guests’ issues or questions

Given the numerous overlaps or codependences between individual

initiatives, it is easy to understand that Digital Operating Models cannot
be addressed by single initiatives but need to be considered as a whole

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Fig. 3 – From initiatives to Operating Model

Digital Capabilities
Before visit:
Streamlined booking process
From initiative to Operating Model

During visit:
Back-end and front-end processes
The park transformation was successful becau- digitally adjusted to an electronic
se executives started by first fully redefining wearable or the app
the desired customer experience from end to
end and only as a second steps identified and Value Proposition
structured all of the required initiatives, having · Shorten lines
them work in an integrated, cohesive manner · Deliver end to end narrative via app &
from the outset. digitally enhanced infrastructure
· Link park services to allow instant
gratifications

Technological Tools
· Supply visitor with branded digital
wearable to enable the experience
· Develop & use mobile app for persona-
lized communication
· Build digitally enhanced infrastructure
in parks (e.g., reactive screens connec-
ted to park wearable)

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Innovation
· Real-time queue management
· Customer tailored experience based
on collected guest information

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Cap gita

Agile Organization
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&

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· Streamlining of processes as well

as data-driven decisions leading to
Value efficiency improvements, particularly
proposition to fluidize traffic and reduce
queuing times
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Or

I n n o v a ti o n

Part s
nerships & Alliance

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Map digital transformation
based on impact to avoid
wasting resources
Despite adopting increasingly customer- welcome these individual initiatives as pre-
centric operations, companies still strug- liminary tests and celebrate their success
gle to identify where best to focus their stories. From our point of view, however,
improvement efforts and how best to these initiatives can also be costly to an
succeed given the ongoing digital transfor- organisation, not only because they often
mation within their sectors. Digital transfor- fail due to lack of commitment or resources,
mation often begins with a functional head but also because they may be siphoning
exploring and pursuing an individual initi- valuable resources away from functions that
ative which may help meet her or his KPIs could deliver a better return on investment
more effectively. Without a proper process for the organisation. Cost savings are not
in place to prioritise the digital tools needed only about spending less, but also about
for the overall operating model, many may spending purposefully and strategically.

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Digital Operating Model | A structured approach to choosing and implementing new technologies

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Break down process into
three steps to build a digital
operating model
To ensure your organisation doesn’t end up
with uncoordinated, discrete improvement
initiatives spread across various functions,
you need to approach the investment deci-
sion process in manageable steps. We usually
recommend a three-stage process.

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Fig. 4 – Process to design your organization’s Digital Operating Model

1 Assess present & 2 Identify & prioritize 3 Build Roadmap to

future business & technology initiatives connect all selected
capability needs based on expected initiatives, into a
overall impact & new integrated
strategic fit Digital Operating
Model

Defining Digital Operating

the Gaps Lab Model Roadmap Lab

Assess & Select Assess & Select

First, assess your business needs relative improve capabilities and/or performance in that area may prove far too competitive
to customer expectations, ecosystem using established or nascent technologies and tight for many companies to develop
constraints and technological development, and recent cross-sector success stories. successfully the competency internally.
while also identifying critical digital capability Executives should then consider each
gaps. By mapping the gaps between desired initiative and combinations thereof based on The final step is to build an in-house
offering and current capabilities, you can expected impact and feasibility in terms of action plan. Strategy, after all, is ultimately
start prioritising improvement areas. resource requirements, projected financial expressed by a company’s actions. For-
returns, technical infrastructure and other malising a plan of action is the best way to
With a clear understanding of the improve- qualitative factors. For example, it may seem galvanise energy internally and assign the
ment areas to focus on, the second step extremely strategic to develop artificial intel- roles, responsibilities and resources required
is then to identify digital initiatives that will ligence tools, but the market for key talent to kick start implementation.

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 Digital Operating Model | A structured approach to choosing and implementing new technologies

Plan holistically to future-

proof your business and
prioritise investments
Building a Digital Operating Model may not To address these challenges, Deloitte has
be easy, but it is critical at a time when so developed multiple proprietary tools to:
many industries are vulnerable to techno-
•• Sharpen industry future state analysis
logical disruption. One sure way to make
using artificial intelligence
the journey manageable is to commit to a
disciplined discovery process. •• Accelerate the assessment of existing
capabilities based on our long track record
We believe companies, which build a digital of digital transformation successes
operating model that is disciplined, holistic
•• Frame and articulate clearly the choices
and dedicated to continuously improving
executives need to make to ensure their
the customer experience are in the best
business and strategy succeed
position to compete effectively and remain
relevant. A focused approach will save exec-
utive teams wasted effort and opportunity The lasting positive impact of a digital oper-
cost by prioritising initiatives that add the ating model is real and value accretive if you
most value. In our experience, companies follow the approach presented in this Point
often struggle with their digital transforma- of View.
tion because they:

•• Feel stuck and do not know where to start

•• Operate in functional silos

•• Are unclear about what their position in

the value chain should be or are unsure
how disruptive change in their sector
might impact them

•• Struggle to assess and determine tangible

impact of digital initiatives

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Contacts

Milan Sallaba Cedric Dallemagne

Partner | Monitor Deloitte Senior Manager | Monitor Deloitte
Technology Sector Lead for Germany Technology Sector
Tel: +49 (0)40 32080 4256 Tel: +49 (0)40 32080 4752
msallaba@deloitte.de cdallemagne@deloitte.de

Contributors

Jonas Janik Sandra Posern Tobias Detzler

Manager | Monitor Deloitte Senior Consultant | Monitor Deloitte Consultant | Monitor Deloitte

Florian Kuntz Philipp Hartmann

Consultant | Monitor Deloitte Consultant | Monitor Deloitte

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Digital Operating Model | A structured approach to choosing and implementing new technologies

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Issue 02/2020