Why you need a digital operating model

In the new world of work, success depends on information, convenience, and exclusivity

The digital revolution is pushing companies to replace siloed structures with digital operating models.

We are living through a digital revolution that will leave no company, industry, or market untouched. The revolution is pushing companies to replace siloed structures and outdated metrics with new operating models powered by data, speed, and dynamic insights.

This trend accelerated during the pandemic, as companies around the world leaned on digtital platforms to streamline operations, manage distributed workforces, and create new business models.

Examples of these new revenue streams are everywhere. Think of Heineken selling beverages direct to consumers instead of through brick-and-mortar stores, Peloton delivering virtual workouts to a global community of fitness enthusiasts, or Disney launching a new streaming service that helped offset revenues lost from shuttered theme parks and movie theaters.

To capitalize on digital business opportunities, companies need to start by transforming their core. They must deliver great customer and employee experiences powered by automated workflows that connect front, middle, and back-office functions. The shift to delivering everything as a service requires new metrics around renewals, customer success, and adoption. In short, enterprises need digital operating models.

If data is the new oil, all organizations need to get better at extracting and monetizing their data.

Digital operating models depend on information, convenience, and exclusivity. Start with information. If data is the new oil, all organizations need to get better at extracting and monetizing their data. For example, streaming media services and online retailers are adept at using reams of data to deliver differentiated customer experiences and higher revenue growth.

In many other industries, organizations sit on decades of archived information that they have so far failed to effectively digitize and monetize. And in some cases, enterprises have created digital services without instrumenting the observability required to understand customer behaviors at every touch point.

Every industry needs to emphasize convenience. For example, airlines have generated significant revenue in recent years by offering travelers ways to more easily navigate the cumbersome process of buying tickets, checking into flights, and upgrading their seats.

Digital operating models also allow companies to build customer loyalty by delivering exclusive, personalized experiences. Through online membership/loyalty groups, retailers offer their best customers first crack at new or limited-edition merchandise. Streaming services like Disney+ and HBO Max already allow subscribers to see films the same day they are released in theaters. In some cases, services have allowed subscribers to see movies before they debut to the general public.

New markets, new metrics

In an increasingly digital economy, all companies need to adjust their performance metrics. For example, streaming services like Netflix and Amazon have disrupted how Hollywood measures the success of films and television shows. Instead of reporting box office numbers or Nielsen ratings, streaming services report how many new subscribers they have attracted to their platforms.

[Read also: How industries transform]

Similarly, many brick-and-mortar retailers still operate their digital and physical stores as separate operating units. Yet a sale is a sale, no matter where it comes from. And many retailers continue to measure sales at stores open for at least a year, otherwise known as same store sales. But as sales from physical stores continue to shrink while digital sales grow by double digits, retailers need new ways to measure performance.

To capture the reality of e-commerce, retailers need to focus less on same store sales and more on metrics like daily and monthly active users, engagement scores, renewal rates, and adoption rates, along with gross and net retention rates. In short, they need a new scorecard with new KPIs. Similar principles apply to any company, in any industry, that’s transitioning from a traditional operating model to a digital one.

Connected customer service

Modern customers access products and services from multiple touch points throughout the day and night. To reflect that “always on” reality, companies need consistent, integrated customer service operations that span mobile, virtual agents, live chat, and social media platforms.

We all know the pandemic severely hurt the travel sector, including airlines and hotels. Changing a travel booking on the phone often meant waiting for hours to speak to a service agent. But consumers could get what they wanted by contacting the airline through Twitter or Facebook or by messaging through an AI-powered chatbot. This trend will only accelerate as the global economy recovers.

Today most people don’t have landlines and rely exclusively on a smartphone. But what happens if a consumer loses that smartphone? Obviously, they can’t call a customer service agent or access a mobile app. That means companies must also offer robust customer services through desktop web and social media experiences.

Companies should also use advanced analytics to track customers before a sale, and also to observe what they do after a sale. Are they actually using the product or service they purchased? How often? How likely are they to renew their membership or subscription? These are all key aspects of a digital operating model.

Digital futures

One major benefit of digital services is the ability to access information and offer products and services beyond the confines of geography and space. In healthcare, for example, digital operating models can help providers transition from reactive to proactive care.

Today a visit to the emergency room typically requires patients to fill out endless, repetitive forms. That’s because hospitals still don’t have access to patient histories when they need them. Separately, patients and providers waste uncounted hours on in-person visits that can often be handled remotely.

From hospitals and outpatient clinics to pharmacies and rehabilitation centers, AI-powered telemedicine can allow providers to seamlessly share information and offer each other’s services and expertise to patients wherever they need them.

New times, new models

You can’t create lifesaving vaccines in record time using a toy chemistry set. Similarly, you can’t apply old-school models and metrics to modern business challenges. High performing companies need digital operating models powered by data, speed, and dynamic insights.

In a complex, constantly changing world, we all need to streamline operations, manage distributed workforces, and create new business models that deliver delightful, intuitive experiences at mass scale. Our customers and employees expect, and deserve, no less.