Let’s Get Digital – Operating Models

This is from the “Accounting Makes Cents” podcast episode #25 released on Monday, 31 October 2022.

In this episode, we’re going to discuss the five digital operating models that a company can choose from when they are planning to digitalise. It is important for a company that it understands its goals and objectives. The selection of a digital operating model is heavily dependent on the strategy that the company wants to undertake. And you’ll see this more as we discuss each of the digital operating models.

Jump to show notes.

Customer-centric model

Our first digital operating model is called the customer-centric model. This model focuses on the customer, their experiences, their journey, their satisfaction over our products and services. If the company is striving to create this model, then the company should focus on gaining insights into the customers wants and needs and fulfilling those. This could be done by developing products and services that the customer will find necessary or make the customers’ experience more convenient. It could also involve marketing campaigns that are specifically created and run with the target market and audience in mind. An example of this type of model could be the introduction of self-checkouts at your local grocery store.

Extra-frugal model

Our second digital operating model is called the extra-frugal model. This model is built on the concept of “Less is More”, less of the input, but more out of the output. Companies generally will have to achieve standardisation of processes to optimise production, supplies, and results. The goal is to achieve a higher quality of products or services at a lower cost. This could be achieved perhaps by leveraging technology to make things run easier, faster, and better. An example of this type of model could be how airlines analyse routes and fares to consolidate trips, etc.

Data-powered model

Our third digital operating model is called the data-powered model. This model allows the company to collect and use data and analytics. It’s obvious in today’s world that information is really an important resource for a company. And with this model, the company is able to use information to better its decision-making capabilities, especially decisions revolving around profitability and performance. A good example of this type of model is how social media or internet searches seem to have this eerie understanding when you are wanting to do something. Think about when you are searching for flights to a certain destination and all of a sudden when you visit your social media pages, you’ll find advertisements related to that particular destination, and offers of flights and tours and packages. That’s one way a company uses data to target its audience.

Skynet model

Our fourth digital operating model is called the Skynet model. This model uses automation to increase productivity or introduce flexibility within production. A bit of pop trivia, if you’ve ever seen the movie Terminator, you will know what Skynet is. Skynet is the AI force behind the terminators in the Terminator movies. Skynet created the terminators. Anyway, going back to the Skynet model, this digital operating model normally thrives in a manufacturing setting, because in manufacturing, there’s a lot of machinery and equipment involved and there is really that opportunity to use the machines to alleviate the work. Some common examples of how this digital operating model is introduced in a company is when automation is found in the warehouse, using automation for inventory management, and such.

Open and liquid model

Our last digital operating model is called the open and liquid model. This model creates and uses the ecosystem to develop better value in the products and services offered to the customer. The ecosystem involves the company, its various stakeholders like suppliers and even customers to figure out how to better the products and services. What happens in this model is that it becomes more of a collaboration effort instead of just the company taking on and figuring out everything by itself. There is a constant flow of information between the collaborators, which ultimately improves what is being offered to the customer. An example of an entity using this model could be the World Economic Forum, which is an independent international organisation bringing individuals together to discuss issues affecting the global economy. 

Last note

As a last note and something to remember here is that while we talk about selecting a digital operating model, companies are not normally constrained or limited to just one model. A company should be able to evolve into these models as the company fulfills its goals and objectives over time.

Show notes simplified

The business landscape has been revolutionised by the advent of Internet of Things, is it really a surprise that businesses are expected to adapt to these changes? In this episode, MJ the tutor discusses the types of digital operating models a business can choose from.

“Ding Ding Small Bell” (https://freesound.org/s/173932/) by JohnsonBrandEditing (https://www.youtube.com/channel/UC1RImxnsbfngagfXd_GWCDQ) licensed under CC0 Licence.

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