This operating model offers business leaders the opportunity for wins in customer experience, cost reduction, and prospects for growth.
As digital becomes the way of life in industry after industry, company leaders are going to be required to reevaluate the customer journey from end to end. With the next-generation operating model, they have a new way of thinking through the necessary changes. In this episode of the McKinsey Podcast, senior partner Alex Singla and partner Elixabete Larrea Tamayo speak with McKinsey’s Barr Seitz about the next-generation operating model and how it can help executives navigate the disruption of the digital age.
Barr Seitz: Hello and welcome to this episode of the McKinsey Podcast. I’m Barr Seitz, global publishing lead for McKinsey’s Marketing & Sales and Digital Practices. I’m very pleased to be joined today by Alex Singla, a senior partner based in McKinsey’s Chicago office, and Eli Larrea, a partner in our Boston office. They both are deeply involved in McKinsey’s work on digital services and are also the coauthors of “The next-generation operating model for the digital world,” by the way, among the most popular articles we’ve published in the last couple of years.
I’ll be exploring with them what the next-generation operating model for the digital age is, what the management challenges are in running one well, and what it takes to make it work. So let’s start the conversation. Eli, I’d like to start with you. What do you mean when you talk about the next-generation operating model? Can you bring it to life for me?
Elixabete Larrea Tamayo: Yes, of course, Barr. And hello to everyone. The way we think about the next-generation operating model, it’s actually as a mechanism to help us address the challenges that most of the executives are facing in the digital age, as you were mentioning.
In almost every organization these days, there’s some type of digital initiative that’s under way. They have probably been experimenting with advanced analytics in the last few years, and are most likely figuring out what to do in terms of robotics, automation, and how to capture the most value out of that. All of this is happening at the same time and, very often, led by different people within the organization—quite honestly with different agendas, aspirations, pace.
Implementing this next-generation operating model is a way to bring some order and discipline to that process while also making sure that it focuses on building value. When we think about an effective, next-generation operating model we really think about two things. One is organizing the efforts around the end-to-end customer journeys, as well as some of the internal back-office processes. This means identifying the critical journeys and providing the perspective on the customer journey end to end and where the value is. The second element is moving away from individual technologies and operations capabilities in a piecemeal and siloed way to applying them to these journeys in combination and in the right sequence. So that’s moving away from the silo thinking that we have had for years in the organization.
For example, in insurance, the first notice-of-loss process, which is right at the beginning of the claims end-to-end journey. This would mean, for example, combining advanced analytics, like adding some type of predictive modeling to flag claims and to rehash them to the right person with automation.