The 5 Elements of a Digital Operating Model — Part 3: Capabilities

Capabilities ultimately bring an organization to life and are vital to have processes and decisions work out the way they are designed as per the above.

This article is part of our series “Why Corporates Need a Digital Operating Model” — Read the first part here

Digitalization drives the need for a whole new set of capabilities, some more technology-focused such as programming and digital marketing capabilities, some more soft such as agile team management. Capabilities are also probably the hardest to change and build in a sustainable manner.

Future processes and decision making logic should guide the future setup of capabilities and define which capabilities are and will be needed.

Based on that, capability gaps and redundancies can be identified. Ultimaltely, building the right set of capabilities should follow a specific approach to ensure they fit with the process and decision requirements.

1. Craft the capability target picture

Based on the digital strategy, the processes and the decision logic, a holistic set of capabilities needs to be defined, encompassing topics like digital marketing, advanced analytics, app development, agile project management, etc. (we typically work with a set of 30–40 capabilities).

Put into a capability framework, the target picture will give clear guidance on which capabilities are needed in which quality and quantity to enable the digital operating model, stringently aligned with the strategy.

2. Understand the capability as-is situation and spot gaps and redundancies

Often eye-opening, mapping the current state of digital capabilities (along the abovementioned framework) and comparing it with the target picture reveals substantial need for action. A heat map shows where quality and quantity are in line with the target picture vs. where biggest needs are.

Often, these are — amongst others — in the areas of digital development, where neither enough, nor good enough people are on board to build the products and prototypes needed in the future. Also, the analysis may show capabilities (like outdated IT development capabilities) that are not needed in the future and may need to be reduced in capacity.

3. Build a realistic plan for action

In line with the staged development of the digital operating model and linked with the digital strategy, a step-by-step hiring and training plan needs to be set and acted upon.

Comparing with how companies have built capabilities in the past, building a new set of digital capabilities typically requires a substantially adjusted hiring approach, using different channels (such as social media) and different messaging (e.g. designed for the generation Y).

As with any outsourcing question, the criticality and availability of talent for each capability needs to be assessed and an internal/external sourcing decision needs to be made. Often, critical capabilities may not be available for hiring (e.g. agile coaches are currently sought after and many prefer to work in a freelance mode).

The following visual shows an example heatmap of existing and lacking digital capabilities that are necessary to transform the operating model. Red would typically be used to indicate a more urgend need for action.

If you want to learn more about how to develop and implement a digital operating model for your company, follow our page and visit our website at www.excubate.de to stay up to date or get in touch directly via info@excubate.de

If your are interested in our work, you should read through our story “What is excubation?”. To find the first part, just click here