Building a next-gen operating model
In today’s volatile and disrupted economic environment, organizations face tremendous pressure to improve enterprise performance and increase competitive advantage. Keeping pace requires relentless pursuit of improvements to drive new levels of efficiency, optimize stakeholder experiences, and enable transformation and innovation. To achieve these performance levels, organizations can no longer rely on incremental improvement initiatives. They must take bold, accelerated action to adopt digital capabilities and transform their operating model to one that can sustain Digital World Class® performance levels and agility.
The Hackett Group® can help. Through our acclaimed business benchmarking studies with the world’s leading organizations, we have developed projections of performance levels that companies can unlock through accelerated digital transformation. Our consulting services and executive advisory programs help our clients to adopt the strategies, implement the technologies, and apply the best practices that enable world-class performance.
Challenges of the traditional operating model
The traditional functional operating model focuses on business support, program expertise and standardization for the function. But this approach presents several critical challenges for the enterprise.
- The traditional top-down structure inevitably results in functional fiefdoms and a command-and-control operation. This model tends to inhibit decision-making ability, agility and innovation.
- Traditional models promote an insular function-first perspective, rather than a customer-first business orientation and a focus on service. This prevents organizations from achieving a level of proactive partnering that business stakeholders need.
- Disruptions – such as COVID-19, supply shocks, political upheaval and cyberattacks – require a more fluid operating model that can enable rapid and coordinated responses, rather than a hierarchical operating model that limits agility. With a more highly skilled and trained project resource pool, resources can be directed quickly to address enterprise risk or large business value opportunities.
- Traditional operating models tend to have hard organizational silos between shared services/global business services and information technology/functional operations. This creates significant friction when organizations seek to automate and eliminate transactional work with technology.
- Centers of excellence in traditional models result in pockets of experts who are focused on delivering the function’s remit. This inevitably limits the potential of centering for skill and scale to provide true cross-enterprise business impact.
Transforming operating models with The Hackett Group
The Hackett Group is an intellectual property-based strategic consultancy and leading enterprise benchmarking firm. Offering a wide range of services, solutions, exclusive assets and technologies, we help companies accelerate implementation of best practices to achieve digital transformation.
Our teams assist leaders in finance, IT, procurement, HR and other areas of the business to transform their operating model to one that enables a more fluid, agile organization. The objective of the next-generation operating model is to maximize impact, responsiveness and decision-making velocity, creating stronger business value generation capabilities for each function.
Supported by service delivery best practices, a next-gen model incorporates five service nodes led by a CXO executive.
- CXO for function. Chief function officers and their direct reports support a more fluid, agile and less hierarchical organizational model. CXOs are highly connected and networked across all operating model nodes, overseeing business enablement leaders, specialized function team leaders and selected enterprise capability centers.
- Business enablement leaders (BELS). BELs are acknowledged experts in function and business acumen, as well as strategic and quantitative analysis. The bulk of their time is spent on value-accretive activities, and they’re highly connected and networked across all operating model nodes.
- Specialized functional teams. In this service node, large corporate functions collapsed to a set of agile, function-specific virtual teams comprised of highly skilled and experienced experts. Team members located where business needs or personal preferences dictate, ensuring higher job satisfaction and retention specialized function teams are highly connected and networked across all operating nodes.
- Digital operations. A hybrid enterprise at a digital operations organization provides master data management and data hub services, cloud-based application strategy, manual transaction best practices automation, smart automation factory, self-service tool implementation and adoption, and technology implementation and program management services to enable functions at corporate, business unit, and local service points.
- Transformative execution. Enterprise transformative execution organization (TEO) provides a pool of highly trained resources that can lead or staff a project role on a moment’s notice. Team members are acknowledged experts in project management methodologies and are directed by a global enterprise transformation with functional sub-leads.
- Enterprise capability centers (ECCs). Ranging from three to 30 highly skilled resources, ECCs provide world-class capabilities on a cross-functional and enterprise basis. Functions include talent acceleration, organizational effectiveness, business analytics, learning and development, enterprise risk management, corporate social responsibility, mergers and acquisitions, and business development.
Advantages of a new model
The benefits of a next-generation operating model and Digital World Class business functions can be measured in several ways.
Higher revenue growth
While the three-year average growth rate for traditional retail channels is 3%, for example, digital channels have grown by 20% in the same period.
Companies that excel at digital transformation have 3X more projects that exceed or achieve ROI targets. Superior data and analytics is a critical differentiator, providing a more accurate understanding of financial risk and return.
Better customer service
Digital World Class functions directly impact the customer experience, helping to increase loyalty, customer intimacy and ease of doing business.
Lower operating costs
For example, the procurement organization for the average $10 billion company delivers $144 million cost savings. The Hackett Group estimates that a Digital World Class procurement function could deliver $371 million in savings.
Because they are twice as effective at creating actionable analytics and insight, Digital World Class companies can accelerate innovation and product development.
Digital operating capabilities are highly correlated to agility, with agility leaders 3.6 times more effective at responding to disruptive events.
Why choose The Hackett Group?
The Hackett Group is a leading global strategy and operations consulting firm with expertise in performance benchmarking and business process change. Our services include implementation of leading enterprise cloud services and applications, workflow automation, third-party risk management, integrated business planning, and advanced analytics that enable Digital World Class performance.
Our services and best practices are based on unparalleled IP and more than 25,000 benchmark studies with the world’s leading businesses. These include 97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of the DAX 40 and 52% of the FTSE 100.
Founded in 1997, The Hackett Group is publicly traded on the NASDAQ as HCKT and has global offices in the United States, Europe, and Asia-Pacific.
What is an operating model?
An operating model is a blueprint for how a business will operate as it creates and delivers value for customers. An operating model brings a business model to life by specifying how strategic objectives will be achieved using people, processes and technology.
What is a next-gen operating model?
A next-generation operating model applies advanced technologies and integrates sophisticated methods to ensure continuous improvement in business processes and customer journeys.
What is The Hackett Group?
The Hackett Group is a leading global strategy and operations consulting firm that provides expertise in performance benchmarking and business process change. Through executive advisory programs, consulting services, exclusive assets and leading technologies, we help global companies implement best practices for a wide array of initiatives, including zero-based budgeting, robotic process automation, order-to-cash optimization, business partnering, working capital management, process mining and more.