The digital core at the heart of organizational design
September 21, 2023
At a recent social gathering, two people I know, both working in logistics, found themselves in an intriguing conversation. Both had the same job title, "Head of Logistics." One described their job as “ensuring that things get to the right place at the right time.” The other? “Designing algorithms to digitize and optimize logistics processes.” This stark contrast beautifully encapsulates the transformation underway at so many of our clients as they seek to grow and better serve their customers more efficiently every day. We’re witnessing a very real revolution in what organizations can accomplish with data and technology at the core.
Every day, new technologies are taking on increasingly complex tasks and processes at ever faster speeds. The leaps being made by generative AI only prove the point. What we once believed to only be the purview of people – the act of creation or “generation” – is now possible in seconds drawing on vast data sets that few, if any, human beings could achieve. So what? Technology is becoming the primary way to get work done. In this new world, organizations increasingly rely on algorithms to create and deliver value to their customers.
A key consequence is that previously unwieldy and unrewarding complexities now present opportunities. While conventional businesses find initial growth and scale bring efficiencies, they also see diminishing returns as their operating model buckles under the weight of the added complexity of new products, markets, and customers. However, operating models powered by data and technology can manage this heightened complexity at a significantly lower marginal cost compared to traditional organizations. At the same time disrupting the long-standing correlation between linear headcount growth and business outcomes, allowing businesses to scale without proportional increases in staffing.
Many organizations have invested heavily in managerial processes and enterprise resource planning systems such as SAP, Oracle and Workday to achieve just this. While these investments are crucial, the key to transformation lies in core business technology. Using data and technology to tailor offers and execute the core value chain is where the most significant impact and potential for future growth is to be had.
A tech-powered operating model, one that is designed with data and technology at its core, empowers organizations to discover untapped sources of value, enhance their offerings, radically reduce costs and seamlessly connect capabilities with others. In fact, our recent research shows that companies embracing tech-powered operating models are 1.6 times more likely to achieve profitable growth.
Companies with tech-powered operating models are 1.6x more likely to achieve profitable growth compared to companies without.
But just how does it do that? Unlocking technology's full potential goes beyond cost-cutting and efficiency. It means leveraging data and technology for speed, agility, and resilience, empowering organizations to meet customer demands, outpace rivals, and fuel growth. These models support transformations that are broader and faster than ever before and enable continuous, dynamic reinvention. They help organizations overcome complexity and explore new avenues for value creation.
Wealth management is a great example of an industry where we’ve seen a lot of rapid reinvention. Digitized value chains are enabling digital wealth management specialists and robo investors to develop more personalized services and offerings, and to deliver these new offerings more quickly and efficiently than ever before. One significant result is greater democratization of wealth management, making it more accessible to a wider customer base. This creates new revenue streams for wealth management providers – while also bringing customers greater flexibility and choice.
Based on your company’s strategy, identify the enterprise level capabilities that will be required to win in your market and deliver on the promise of data and technology. Reimagine how each of your businesses would create and deliver value for your customers if it fully embraced the latest technologies. Consider how these new capabilities will meet new customer needs, enhance customer experiences, and reduce process pain points. Creating operating models that challenge traditional trade-offs of scale and agility.
Building these new capabilities requires leadership focus and recognition that it will take structural, process, metrics, and talent changes to achieve alongside a modern modular data and technology architecture. It will take focusing on outcomes, organizing customer facing product teams around growth and shared service and platform teams for efficiency and scale. It will mean breaking down siloes and thinking across the enterprise. It will require new policies and decision rights to empower teams to make decisions closer to the customer. It will need the ability to engage partners at a new level, seeking ways to share in risks and rewards.
Consider the example of an online grocery retailer in the UK. To deliver on time, reliably and efficiently it leverages data, AI, robotics and new agile ways of working. At the heart of the business is a centralized data platform that contains data on every product, customer, partner and supply chain step and environment. This is used by agile teams to continuously develop and improve everything from delivery routing, robotic picking, spoilage management, to customer offers.
Digitizing the core value chain doesn’t only benefit customers. It also benefits employees. Introducing a tech-powered operating model enables a true transformation of the workplace. It supports decentralized decision-making, informed strategic decisions, and remote collaboration through advanced technologies.
The tech revolution is transformational and the relationship between technology and people is multifaceted. Once we recognize that AI and data-driven technologies can outperform humans in certain tasks, we can also better appreciate the roles where human ingenuity can boost innovation, therefore maximizing the human + machine workforce relationship.
All of this can have a profound and liberating effect on individual employees while also increasing productivity, a major benefit for the organization. Employee roles are evolving fast. To benefit from investment in technology, we also need to invest in developing talent – building the capability to design, steer and interrogate the data and technology in ways that benefit customers most.
The tech revolution is transformational and the relationship between technology and people is multifaceted.
In today's fast-paced business landscape, the digitization of the value chain has become a catalyst for transformative growth. By designing around data and technology, businesses can achieve scalability, agility, and profitability, while providing enhanced value to their customers.
Industries as diverse as wealth management, consumer goods, industrial and retailing can all benefit from embracing the digitization of their value chains.
By embracing this model, businesses can unlock next-level growth, enhance productivity, and stay ahead of the curve. The tech-powered revolution presents an opportunity to thrive and power both customers and employees alike.
Back to that social gathering I mentioned. How did that conversation between two heads of logistics pan out? Is logistics all about ensuring that things get to the right place at the right time, or is it all about designing algorithms to digitize and optimize this process? The answer, of course, is both. The reason more organizations are digitizing the value chain is precisely because it ensures we get things to the right place at the right time – faster, smarter, and more efficiently than ever before.