Digital Operations Strategy work is changing
diego navia digital operations

By Diego A. Navia

Strategy is about choices; choosing what you do and what you don’t do. 

Digital Operations Strategy seems like another of those made up terms combining three hyped up words. But the reality is there is real meaning and what’s most important, a real impact in formulating or not this type of Strategy. Let me explain. 

Strategy is critically important when you have many options. Business strategy typically defines which customers to serve, what geographies to play in, what pricing and promotion actions to adopt, which employees to attract, how to compensate employees, etc. 

Operations has a different context. For decades companies hired people for jobs and added layers of managers to ensure work got done; and by the way, they all had to be physically together to be able to communicate and handoff documents and information. A relatively simple model where business scaled by adding people and layers of management. 

Historically companies formulate strategy somewhat statically and bring it to life daily through execution and operations. 

Digital Transformation Failure

Digital Transformation is the process of adopting technology to make business more competitive and profitable. The list of Digital Transformation meanings, associated technologies, hyped-up results and real failures is long. There are many reasons for this but one of the main ones is assuming it’s all about picking winning technologies and implementing them to make processes and operations faster and cheaper.  

These technologies are typically adopted in piecemeal fashion by individual departments or functions, following IT, Compliance and Security guidelines. Of course time has shown that this silo digitization/automation approach does not work beyond a couple of case studies that shows positive ROI for some specific processes. It does not deliver value because Digital Transformation in Operations requires a big picture in mind and a true focus on value. 

Time and time again, hyped up technologies have proven to be the biggest disappointment years down the road. Examples abound and many organizations get it wrong before they get it right. ERP, CRM, Cloud computing, Artificial Intelligence, Machine Learning, Data Analytics, Process Mining. The latest example is Robotic Process Automation which in a handful of years became the hottest trend, drove companies with multi Billion dollar valuations only for some to consider it dead in 2022 – which is not true of course. 

The reasons behind these Digital Transformation failures following a technology/silo centric approach tend to be consistent: 

  1. Lack of understanding of the technology
  2. Empty promises by vendors
  3. No fit for purpose analysis
  4. Misunderstanding of other pre-requisite technologies 
  5. and, of course, the favorite money maker for consultants and corporate politicians: Change management and adoption. 

The Case for Operations Strategy

Digital changes everything, introducing many work execution options. Work can now be done by both computer software and people. Tasks can be executed and supervised from any physical location. Less skilled people can do the job or share jobs. Entire work steps and tasks have become unnecessary, particularly as task handoffs can be greatly reduced. These long list of options is what drives the need for upfront choices, and upfront options are strategy. 

Digital Operations Strategy can be defined as the choices a company makes as to what, how, who and where work gets done as a digital business, yielding a Digital Operating Model

Strategic operational choices should be driven to improve cost structures, organizational agility and competitive market positioning in a cohesive Digital Operations Strategy.

The traditional people-centric approach leveraged wage arbitrage via BPO/ Outsourcing and  management and organizational theory to arrange resources so organizations could deliver value. In fact more progressive models like Global Business Services that seek to address a global footprint still have a heavy focus on labor and wage arbitrage. 

In the digital age, people-centric operations value has been redefined by integrating software into operations. As time progresses computers perform entire tasks or jobs, regardless of whether the nature of the work is structured, unstructured, repetitive or even discretionary decision making. 

Digital Operations tend to be geographically distributed, executed by humans and machines alike, binded by varied contractual agreements; an end state also called Operations 4.0 or Next-Gen Operations

4 Key questions

 

In order to move forward with modern Digital Operations, it is important to step back and think about how the business will operate. This can be done by assessing available options and answering the four types of questions below. Answering them will yield a picture of how the business will operate, otherwise known as a Target Operating Model. 

 

Making these choices is a process where no “size fits all” and it’s not a one time shot. It is ok not to know all the answers and simply make some decisions in one or two dimensions and come back with a revised set of decisions once you learn more as you make progress.

Strategic choices across these four areas define your Target Operating Model, a “picture” of how you will operate 

WHAT work gets done

What companies do has two main components, the activities we perform and the responsibilities we have. Activities include:

General responsibilities are associated with team managerial/supervisory roles. They entail a combination of the activities described above and include: 

So, why bother with this distinction? because the nature of the work defines who can do it (i.e. skilled person, bot, software, etc) as well as define boundaries on how and where it can be done

Nature of work defines WHO can do it (i.e. skilled person, bot, software, etc) as well as define boundaries on HOW and WHERE it can be done

Work can be executed in many ways. This is why it’s important to understand the level of worker discretionality in executing a piece of work. The more defined (i.e. standards, user guides, process flow sequencing, etc) a piece of work is, the easier it is to develop software, automate or train people to do the work effectively. 

Standardization also reduces delivery costs, drives predictable outcomes/quality, enables operational scalability  and builds IP assets at the corporate level. It also sets the stage for analytics by defining standard data structures that can be mined and analyzed.  

Although standardization may be perceived as inflexible, what it actually does is reduce unpredictability given that even decision trees can be structured. Of course some exceptions can’t be predicted and those are dealt on a case by case basis.

HOW work gets done

How you execute the work defines whether or not it can be automated and what tool is best suited to do the work (WHO); It also defines how broadly the solution applies

WHO does the work

Job specs have traditionally defined who does a particular job. Depending on the organization, these specs look for overqualified people that can develop over time, low skilled people that can learn on the job at low cost and many other variations including total detachment from the job at hand. 

Nowadays work isn’t performed just by Full-time Employees. It can be contractors, consultants, service organizations (i.e. BPO, CoE, SSC, Outsourcing, etc). More importantly parts of the job and even full jobs can be performed by Software, bots and entire systems.

Whether an Individual, a Service Organization or Software, they all bring to the table related business knowledge, an IT foundation and a compliance element. And, of course, the legal relationship between these “work executioners” and an organization must be governed by a contract: an employment agreement, service agreement based on outcomes and SLA’s, or an On-Demand contract

Options to get the work done have exploded and include individuals, third party service organizations and software, governed by varied legal arrangements

One of the most impactful aspects of the technological revolution is connectivity, the ability to work productively from any location at any time. With the advent of COVID, the Work From Home trend accelerated and became a mainstream reality erasing fears while also providing visibility into real shortcomings and benefits.

The physical work space and the geographical location is the main element but hardly the only one. A remote workforce must have the right technological infrastructure, sense of belonging and team engagement mechanisms to make remote work effective and employment relationships sustainable.  A Digital Operations Strategy articulates the locations where its best to deliver work and how they specialize and integrate as a delivery network. 

WHERE the work is done

Defining WHAT, HOW, WHERE and WHO for the portfolio of services and functions in scope drives a Target Operating Model and defines the Digital Operations Strategy

As we embrace technology, we should consider the Digital Operations Strategy choices described in this article to converge around a common Transformation journey that leads to the implementation of a fully functioning  Digital Operating Model, starting with its design and validation via a a Target Operating Model. 

 

Additional resources are available  here to help move forward.

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