The Reinvention of Business: New Operating Models for the Next–Generation Enterprise

Companies that transform their operating models can achieve both efficiency and growth.

Companies are caught in a paradox. They have to standardize their business processes and practices — to achieve operational excellence and cost leadership — and they have to be able to adapt those processes and practices easily to differentiate and be responsive to customers and the market.

A new generation of technology tools for virtual business operations is enabling some companies to resolve this paradox, helping them achieve their most important goals and change their operating models in ways that drive both efficiency and innovation. This is a key finding of an exclusive new survey of 558 Harvard Business Review readers in large organizations around the globe.

Companies that are aggressively deploying these new technologies and integrating them into their operations are realizing greater benefits than are organizations that are just experimenting with the new tools (and that described their use as limited) or using them in an ad hoc fashion (describing their use as moderate). These leading users are achieving higher levels of innovation, lower costs, faster time to market, and increased productivity/efficiency.

These benefits are derived not simply from the technology; the technology drives new ways of organizing and operating. Leading users, who are taking a more strategic and systematic approach, offer a view into the changes that must take place in order to gain a competitive advantage. These include developing more flexible business processes and technology infrastructures and building stronger, more fluid connections among employees and with customers and suppliers.

However, even companies that understand the benefits of the new technologies struggle with the perceived risks and other barriers to adoption. For many respondents, concerns over data security, the cost of deploying new technologies, the existence of organizational silos, and cultural resistance are slowing things down. Still, given that more than half believe that technology–enabled virtual business operations will provide them with a competitive advantage in the future, determined companies will find a way to address these concerns. Leading users indicate that a commitment to communication, training, and change management are keys to success.

The markets of the future look different, as well. As technology becomes increasingly embedded in companies' product offerings and delivery channels, companies find themselves confronting new and sometimes surprising competitors. For example, in some countries, large telecoms are both critical suppliers to and serious competitors of traditional banks when it comes to banking transactions; software companies now compete with existing clients in the electronics and building–controls industries. From their side, the “traditional” players within a given industry are themselves morphing into a kind of hybrid provider of tech–enabled products and services. In fact, 29% of respondents to this survey reported that they provide some form of IT or consulting services in next–generation technologies – and fewer than half of those identified their industry as IT, telecom, or professional or business services. In other words, not only is technology changing organizations' operating models, but it's changing their business models as well.

As these changes evolve, the ability to respond to new opportunities and adapt to changing conditions will be key to survival. But such massive changes do not come easily. Successful companies will have clear strategies and goals while remaining open to new developments that inevitably arise through the process of innovation. They will move quickly from experimentation to integrating new capabilities into the core parts of their businesses. They will learn how to secure critical data in a more porous, networked environment.

And they will support the many changes taking place, with the right culture and strong communication and change programs in order to sustain momentum – without getting out ahead of what the organization as a whole is ready to absorb.

Key Survey Findings

• New technologies are driving new ways of organizing and operating, including more collaboration; more flexible business processes and technology infrastructure; the ability to make (and dissolve) spontaneous connections with customers and suppliers; the need to accommodate employee– and customer–owned technology and processes; and new, more fluid, and less hierarchical organizational structures and reporting relationships.
• Companies that aggressively deploy these new technologies achieve higher levels of innovation, lower costs, faster time to market, and increased productivity and efficiency.
• These new technologies make it easier for companies to respond to today's changing business climate – to standardize for operational excellence and cost leadership while also being flexible and adaptable to changing market demands and conditions.
• As technology becomes embedded in more industries' products, services, and delivery channels, the distinction between buyers and sellers of IT is becoming much less distinct.

For more data from this ground–breaking new survey, read the full white paper, The Reinvention of Business Models for the Next Generation (PDF) or learn more about embracing new ways of working from Cognizant Business Consulting.