By Atul Subbiah, Advisory Partner, KPMG LLP
Operational transformation is a familiar issue in the business world. Costs keep going up, competition increases, and CIOs need to continually improve performance, enhance processes, and streamline their IT infrastructure.
So what’s the “new news” about operational transformation today? More to the point, what do CIOs need to know that will help them transform operations for the IT function and their organization as a whole?
Short-term cost-reduction initiatives such as reducing headcount and offshoring tasks are no longer enough. Organizations are also facing significant structural changes to their business model that require new strategies based on “running IT as a business.” As a result, CIOs should think about operational transformation through the eyes of their customers and the business model they want in the future. Increased competitiveness will come from modifying processes in a manner that can help improve customer benefit. This process enhancement can, in turn, influence the design of the product portfolio and an operations infrastructure that can scale up or down with market trends.
Driven by internal and external customer needs, operational transformation should involve a combination of standardization, consolidation, process improvement, the reuse of operational infrastructure, and the development of new approaches for businesses. Structural changes to the business can include a convergence across products, markets, and services; the reexamination of previously profitable areas; and the diversification of IT service providers to help mitigate risks.
In all cases, operations and technology should be highly automated, low cost, robust, and scalable. At the same time, operations and technology should also be extendable to other parts of the business.
Failure to manage people well during a change program is the primary reason for falling short of the original goals of an operational transformation initiative. Problems include underestimating the intensity of the effort and resources required, conflicts among change initiatives, a lack of motivation for change, and mixed or confusing messages about change.
To avoid these and other issues, CIOs can ask themselves the following questions:
- Have I examined my organizational structure to identify departments or major divisions in operational areas that could benefit from technology innovation and integration?
- Do I have a clear understanding of my business imperatives and operational requirements to develop new IT approaches to address competition and a difficult market environment?
- Do I have the organizational buy-in to help ensure that transformational decisions involving technology are implemented smoothly, both during the implementation phase and on an ongoing basis?
- Are my IT services in line with my internal and external customers’ needs?
- Can I classify my most profitable products, services, segments, channels, and markets?
Companies are facing challenging times, and they need to transform their operations to be able to support the rapidly changing marketplace. Properly designed and implemented, operational transformation can result in a differentiated product portfolio and a scalable operations infrastructure that can help companies tackle today’s tough markets and gain true competitive advantage.
Hear more about issues related to Operational Transformation in the KPMG AdvisoryInstitute podcast: Operational Transformation in Financial Services featuring Atul Subbiah, and the KPMG whitepaper: Rethinking Operations: A Closer Look at Operational Transformation.