Next-generation operating models for the next normal (2023)

physical distancing, remote work,Travel barriers and the psychological effects of isolation have changed the behavior of stakeholders in all organizations and created unexpected challenges. While it is still too early to predict the long-term outcomes and trends of the COVID-19 pandemic, the most likely scenarios suggest that businesses will operate in a near-normal environment for the foreseeable future.

Changes in the behavior of internal and external stakeholders mean that companies may need to reconsider the way they operate and act now to emerge stronger from the pandemic. This could include beginning to reflect on and map out your transition to a next-generation operating model that is better suited to the next normal.

Impact on the three main stakeholders

These next normal changes will affect the behavior of three main groups of stakeholders in different ways: customers, employees, and suppliers and partners.

Customers may change their shopping preferences to avoid physical channels, embrace more digital services, and charge more from delivery services. Customers can also adjust their consumption patterns by consuming less, focusing on what matters most, and delaying upgrades to devices and services, excluding those that now help consumers stay connected to the outside world, such as computers and smartphones, as well as entertainment packages and long-distance communications. . COVID-19 can also impact client psychology in the form of increased anxiety and boredom. For example, customers might feel a greater need to own items than to rent them for reasons of hygiene.

We've also seen people make new and renewed commitments to values ​​and goals (e.g., balancing work and family time) and preparing to make meaningful commitments that will shape their life choices long after the current crisis has passed . . At the same time, people balance value and risk in everyday decisions about who to spend time with, where to go, what to do and what to buy. In an insecure environment, people take control of their lives wherever they can (e.g., diet, spending, and the environment) to feel safer, more comfortable, and to protect their future.

The way employees work is changing as they adapt to remote work and virtual interactions. McKinsey research shows that employees with a stable and secure work experience who work remotely report greater effectiveness and positive well-being at work. However, employee experiences are mixed, and families working from home and those who don't have remote working options need additional consideration. In addition, job cuts can make the labor market more competitive, with wider implications for employers.

Suppliers and partners may consider reducing activities and operations, focusing on short-term activities, deferring non-essential investments, and attempting to reduce costs. They may be more socially responsible, putting mitigation of the human impact of the pandemic before optimizing profits. At the same time, suppliers and partners can move to digital channels, reducing the need for on-site customer visits.

In recent discussions with executives, we found that a majority believed that the bulk of customer demand for business creation, nurturing and renewal would be met online via digital, mobile devices, video and chat, while only a minority believed that future business would be continued . virtual. Organizations also face additional productivity challenges: More than half of the people we work with believe their organizations will be under pressure to increase productivity by more than 10% year over year to make up for the loss.

Changes in customers, employees, suppliers and partners impact the entire value chain, impacting products, sales and channels, services and support. They also affect staffing models, office operations, and vendors and partnerships.

This article uses examples from around the world to examine some of these behavior changes in more detail.

Distribution and Channels: Away from the big outlets

To adapt to changes in customer buying behavior, businesses can move from one large point-of-sale (POS) to a few small, uncrowded POS and promote digital channels. Many companies made this change before the pandemic, others are only seeing it now. Logistics giant DHL has rolled out contactless payment and delivery via automated collection points, while a well-known auction house is now conducting VR-enabled sales through digital channels. A leading European automotive group uses pop-up stores to present new products in relevant places at relevant times, using artificial intelligence. A major telecom giant simplified its marketing efforts by reallocating its budget to digital channels.

Amazon is another strong example of this trend, as its brick-and-mortar Amazon Go stores offer innovative and unique customer experiences. Amazon Go customers scan a smartphone app when entering the store, the only point where a phone is needed.

Bluetooth beacons on shelves automatically recognize items being picked up by customers, adding or removing products to their digital shopping cart based on data from the shelf's weight sensors. When leaving the store, the customer receives a price list of the products purchased, and the amount displayed is then debited from their Amazon account. This approach not only provides convenience, but also meets customer demands to minimize human interactions while shopping.

In another example, a telco migrated the sales process for pricing package upgrades to a mobile-first channel. This simplified the 14-step workflow into a more personalized three-step process, resulting in significantly higher conversion rates.

Product: Simplify to drive digital sales

One way to meet ever-changing customer demands is to simplify products to drive digital and remote selling. For example, Zain Saudi has rapidly developed digital products that meet the changing needs of its customers. Zain has launched end-to-end digital operator Yaqoot in Saudi Arabia as an example of "sophisticated simplicity", combining an all-digital connectivity experience with digital gift services. The user base grew rapidly during the pandemic. The contactless customer experience (with e-SIM) is an example of a new-age service, while physical distancing is part of everyday life. The operation is part of a Kuwait-based telecommunications group.

Simplified products are better suited to selling on digital channels, making them much better suited to the next normal.

In addition to simplifying their products, many companies are trying to create pricing models that encourage customer loyalty, rather than short-term promotions that tend to put you off at the end of the promotion.

Service and Support: Go to Remote Digital Service

Organizations can change their services and support to meet the changing behavior of their customers and employees. Singapore-based DBS Bank, for example, serves customers through ATMs and virtual kiosks rather than physical branches.

The Russian bank Tinkoff, a digital native, has set up cloud-based call centers with freelancers. Focused entirely on remote support, the bank launched the cloud contact center in 2012 and today has 14,000 call center operators, 6,000 of whom make 500,000 customer calls daily from their homes. Most operators are non-bank employees in cities where salaries are lower than in Moscow and they have flexible working hours.

The cost of selecting, managing and training Tinkoff's operators is offset by savings in office and equipment rentals. The cost reduction also allows the bank to pay higher salaries: Tinkoff employees who work remotely earn 30% more than regional employees who work in the office. From 2012 to 2017, the bank more than doubled its credit card portfolio.

In telecommunications, companies are starting with purely digital offerings that have redefined the customer experience and are gaining significant traction. The all-digital value proposition is powered by customer data, resulting in 100% of customer interactions occurring through digital channels and more than 80% of all customer care activities being conducted entirely online. In this model, online referral programs become a major source of customer acquisition, accounting for up to 15% of total sales.

Personnel: Change from stable to flexible personnel models

Organizations can adapt to the changing needs of employees by moving from a stable workforce model to a more flexible one. For example, an online grocery delivery service has introduced a fully variable, performance-based compensation system.

A UK subprime lender offers door-to-door lending (credit cards, home loans, online loans and personal car finance) operated by an independent staff. Agents called Customer Experience Managers go door-to-door to market small unsecured loans and collect collections using wearable technology to track loan origination, track customer referrals, and file complaints.

In the case of this lender, managers visit clients weekly to review and collect payments, following a flexible working model and receiving commissions based on sales and collections. Vendors suggest the face-to-face model has resulted in lower default rates as lenders build closer relationships with their more than 800,000 customers.

Office: Switch to digital operations in the remote office

Organizations have already transitioned to digital branch operations and have begun holding large-scale meetings and events remotely as the standard modus operandi. Many digitization projects have been prioritized as organizations strive to minimize disruption and create real-time value while building a strong foundation for the future.

A leading insurance company adopted automation of routine tasks, deploying 13 software bots to perform repetitive administrative tasks such as B. Submitting customer correspondence to the claims department. The bots extract information from customer correspondence and combine it with account details, successfully completing the task in 42 seconds instead of the four minutes it takes an agent. This frees employees to perform higher-level tasks and focus on more complex claims that require experienced professionals. The robots are now assisting the client with property claims, industrial property and liability department teams. This automated solution saved 18,000 man hours, which translates to approximately $173,400 in productivity gains.

Meanwhile, agile ways of working, which typically involve the physical proximity of team members, have proven effective in a remote work environment. Many face-to-face Agile practices, including quarterly business reviews and meetings, take place online without disruption.

Companies have also established new standards and working models. For example, one telecom company has introduced flexible working hours (two-hour shifts) that also allow employees to work at preferred locations, while other companies use efficient office approaches including hot desking.

Suppliers and Associations: Shift to collaborative lean associations

Businesses can adapt to the ever-changing preferences of suppliers and partners by migrating to more collaborative and flexible partnerships that can take many different forms. For example, a leading IT consulting firm is working with vendors remotely rather than on-site to reduce the vendor's office and travel costs. In another example, a cosmetics company works with its customers as partners in the design, production, sale, and delivery of products. Other organizations enter into agreements with specific vendors to build long-term relationships and opportunities; For example, the Alibaba Group supports small and medium-sized suppliers with extended credit lines.

Some automotive companies use a design-for-value (DtV) approach to radically optimize costs while maintaining a win-win relationship with suppliers.

When redesigning the wiring architecture, an automaker used discussions with existing customer and product teams and competitive analysis to underpin its approach. With a tighter and more structured focus on end-user value and a collaborative partnership with suppliers that included cost-cutting workshops, the automaker was able to achieve significant savings.

Another leading European automaker held more than 50 follow-up meetings after each supplier workshop to prioritize ideas and plan for implementation. In addition, it conducted DtV workshops to compare high quality parts with those of major competitors. The company generated and monetized more than 80 ideas daily and established cross-functional teams of OEMs and manufacturers.

We have also seen a trend where partnerships are formed based on a complementary understanding of customer needs, where both partners can combine their expertise to create value. Recently, a partnership between India-based Jio Platforms and Facebook's WhatsApp has redefined how the telco can create value with the social platform: JioMart, Jio Platforms' small business initiative, and WhatsApp now enable customers to engage directly with businesses connect and buy products. through a seamless mobile WhatsApp experience. This idea will be further expanded to connect other businesses, shops and products purchased through WhatsApp.

Management systems of a new model

Faced with the uncertainty of the new reality, companies began to look for accelerated ways of adapting to virtual management models. A key component of this adaptation is the need for a clear distinction between processes that remain physical and those that move fully or partially to virtual space. Organizations can design remotely deployed productivity controls that perform thorough and regular inspection of digital sites. In addition, executives can maintain management and training systems as well as agile methods in combination with collaboration software.

Enabling IT travel, including cybersecurity and operational risk mitigation

To respond effectively to the rapidly changing environment, companies can consider using automation, advanced analytics tools, and digitized processes to improve the customer journey and quickly respond to fluctuations in customer demand. New capabilities will be created based on expanded human-technology interactions, and these interactions will also help organizations collect data and insights for IT-driven productivity growth.

New operating models will inevitably bring new risks that need to be addressed. By including appropriate controls in the model design rather than after implementation, organizations can take a more proactive approach to risk mitigation. In next-generation operating models, risk management must be embedded in all operations function processes, with specific practices for in-person, remote, and digital activities.

How to deal with the post-COVID-19 operating model change

Even as restrictions related to COVID-19 are gradually being eased, businesses are faced with a new reality. Those who adapt quickly gain first-mover advantages and can conquer untapped niche markets.

Our research into operating model changes suggests that it is critical to define a clear objective for the operating model, linked to strategic priorities and future needs. Certain changes such as B. physical distancing, increasing digital acceptance or changes in demand for less spending power are evident and many are responding with solutions. But go one step further to understand how the observed behavior of customers, employees, and contractors has changed. Examine the fears and unmet needs of new customers and consider whether each component of the operating model meets the new expectations or whether a specific change is required.

Be inspired by best practices. Learn how companies are changing their operating model and try to identify common patterns. Some changes can be tracked as emerging best practices: digitizing sales and service channels, ensuring appropriate physical distance between customers and employees, working closely with partners to save costs, and attempting to maintain remote work and collaboration. There is also room for new ideas. A very pragmatic approach might be to look for examples in other industries and test them in your company's operating model.

Preparing for the post-pandemic world

While the outlook for COVID-19 and the shape of the new normal is difficult to predict, organizations have several options to adapt to changes in stakeholder behavior (see our recent article: “Ready, steady, go: Redesigning the organization for speed in the post-COVID-19 era"). Many trends related to physical distancing and remote working will continue after the crisis ends, and organizations can now prepare for these emerging long-term trends. The changes will affect customers, employees, and vendors or partners in many ways, and businesses are already adapting to these trends, from migrating to radically simplified digital products to embracing remote office operations. Organizations may need to develop a robust approach to help them transform their operating model to meet the demands of the next normal for all stakeholders, a process that can give any organization an edge in the post-COVID-19 world.