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Integrated Operating Model In The Digital Age

Updated: Jun 28, 2023

By Floyd Mac Donald


Integrated Operating Model

How can we work toward an integrated operating model?


Customer & Business Expectations

The pace of technology innovation and the use of digital technology and devices is moving at ‘lightning-speed’ and causing a tidal wave of changes with a profound impact. Nowadays, digital technology has become a central part of 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 who expect high-quality products on their doorstep in record time.

Digital technology has changed customer behaviours, preferences, and expectations. Companies rush to catch up with the latest developments and convert their business and operations from traditional to digitized technology. This is to meet the higher expectations of customers. More executives recognize that digital transformation is a journey that takes time for any organization. They also recognize that using digital capabilities, cloud software technology, artificial intelligence (AI), and Internet of Things (IoT) applications will accelerate and impact how businesses and operations will be run.


Operational & Digital Challenges

Almost every day, we see customers looking for the newest, fastest, and most cost-effective solution that meets their needs. Hence, keeping up with your business operations and information system management with fast-paced digital technology is key to success. It is a path to success that intertwines business functions, organizational architecture and system architecture into an Integrated Operating Model (IOM). The IOM must sustain high speed, agility, efficiency, and precision levels. Additionally, it must combine digital technologies and operational capabilities. This is so your company can improve product and/or service quality, build value and provide a 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 attract and retain customers. For example, Google has invested in Internet search, cloud computing and advertising technology. Furthermore, Google hosts and develops several 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 Android mobile phone technology, YouTube, AdSense and Google Earth mapping. It is also exploring new fields with growth potential. At the heart of Google’s success is Pigeon Rank™, a system for ranking web pages.


How can we work toward an Integrated Operating Model?

Companies must put customer experience at the heart of an Integrated Operating Model (IOM). This requires a different skill set and mindset that cuts across organizational silos. To implement an IOM successfully, the following key foundations are needed to excel in your business operations:

  1. Executive and leadership commitment.

  2. Apply transformational change management practices to support culture change and digital transformation speed.

  3. Optimize operational architecture, system architecture and supply chain efficiency, and

  4. Develop employees’ dynamic capabilities, competencies and skills.


Key Foundation 1: Leadership

The first key foundation is the deep involvement of executives and leadership to create an IOM and higher levels of operational excellence. An organization's president, senior business executives, and managers primarily influence digital transformation success outside the organization. Therefore, it is essential to have a clear vision and digital transformation strategy communicated across the company. Executives and leadership underpin whether an IOM becomes a reality or an aspiration.


Digital technology applications make leadership and management aware of what is happening in their organization. Automated data collection and analysis free managers to spend more time with their teams. For example, executive quarterly balanced scorecards and monthly management dashboards provide leaders with visualizing key business performance indicators (KPIs) 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 cultivating a culture of excellence that requires leaders to “walk the walk, not just talk the talk”. If you want to achieve 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 culture change and digital transformation speed.


For example, Apple has an organizational culture of creative innovation. Apple’s company culture is unique. A couple of features include:

  • Being successful or even better than many competitors isn't enough: instead of merely being successful, the company culture seeks to be the benchmark.

  • Mediocrity is unacceptable.

At Apple, people are not all the same, which is Apple’s greatest strength. They believe in inclusivity. It is no secret that Apple values confidentiality. While some parts of the culture have been critiqued, Apple retains innovative workers and produces high-quality products.


Key Foundation 3: Optimize Operational Architecture, System Architecture and Supply Chain

The third key foundation is proactively aligning organizations' dynamic capabilities, processes and business information to strengthen the delivery of business products and/or services. It is about converging people, processes and digital technology (tools). Therefore, it is essential to identify key priorities regarding trends, barriers and future customer requirements to which your business may have to respond.

Furthermore, it is critical to clearly define the key business performance indicators and ensure consistent alignment with the business strategy. It is about building a more agile, customer-focused, smart integrated operational architecture, aligned system architecture and supply chain efficiency. This architecture will deliver 'just-in-time', ‘just-in-place’ or ‘just-in-sequence’.


For example, Amazon is not a “brick-and-mortar” company but an internet retailer that utilizes its website as a sales channel. Through its technology platform, it operates as an online store and e-commerce provider. Amazon competes with traditional and internet retailers for selection, convenience and price advantages. It offers a positive customer experience through Amazon Prime and Syndicate Stores programs (e.g. Waldenbooks).

Amazon has a multi-tier supply chain, a three-echelon inventory system that maintains distribution centers using robotics, vision systems and software, and mechanical innovations. Also, Amazon ships products directly from suppliers and pulls inventory from wholesalers to fill orders which they then deliver directly to the consumer. Amazon is one of the most successful Internet retail companies.


Key Foundation 4: Development of Dynamic Capabilities and Competencies

The fourth key foundation is closely linked to the culture change of employees’ development and qualifications. The development of relevant competencies revolves around the capacity to be more agile, people-oriented, innovative, customer-centric, streamlined, and efficient and leverage opportunities to change the status quo and tap into various data sources. Employees need to be trained to use the latest technologies effectively. Empowered and engaged employees will assume responsibilities they might not otherwise undertake. Teamwork, empowerment and commitment contribute to creating, maintaining and sustaining integrated operations and operational excellence. This increases reliability, minimizes errors and boosts productivity in the organization.


For example, Netflix is today's pioneer and global leader in streaming television and movies through Amazon Web Services (AWS) cloud network technology. Netflix's values can be summarized by saying, “People over process.” They also rely on the idea of a dream 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 requiring people to “act in Netflix’s interests”. Furthermore, Netflix makes hiring and promotion decisions based on the values integral to the company's success: Judgment, Communication, Impact, Curiosity, Innovation, Courage, Passion, Honesty, and Selflessness. Netflix’s structure and culture build its personnel's skills and capabilities to adapt and respond to customers quickly.


Conclusion

A path to success and survival in today’s digital-agile business environment is putting the four key foundations in place. Furthermore, foster product excellence and recognize that employees are the most critical asset in your company. Lastly, having a constant stream of excellent, innovative, high-value products and/or services your customers want to buy is equally essential. The most effective way is to use an Integrated Operating Model (IOM) and utilize your internal business processes and supply chains that support them.



Floyd Mac Donald

Floyd Mac Donald BPE MSc MBA is the founder and principal at Mac Donald Consultancy. We inspire and coach clients to use an integrated and multi-perspective approach. Combined with an adaptive mindset and our integrated services, we identify and assist in solving clients' challenges and improving their business effectively.





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