The State of Digital Operations 2021: An Overview
Operations leaders are fully aware of the pressing need to build digital operations capabilities in order to remain competitive in the future.
Even prior to the onset of the Covid-19 pandemic – which has rapidly accelerated the push to remote work and remote business operations models – operations teams across industries were moving rapidly to digitize both internal and external operations processes. According to pre-pandemic research from early 2020, 91 percent of organizations surveyed were already engaged in digital optimization initiatives.
Only 40 percent of those organizations surveyed, however, have brought their digital transformation efforts to scale, suggesting that the majority of business operations are still done manually, and there is still much digitization work to be done.
The pressing need to digitize
Ops leaders also know that investing in digital operations is not just about improving day-to-day workflow efficiency. The push toward greater digitization of operations processes comes also in response to ever-increasing customer and market expectations.
In the era of same-day delivery, operations teams are forced to go beyond the automation of existing processes in order to remain viable. That generally includes:
- Reducing total steps in operations processes
- Incorporating customer feedback
- Digitizing required documentation
- Fully reengineering processes end-to-end, if necessary.
Where before, digitization could be defined by opportunism created in the wake of new, emerging technologies (IoT, cloud, process automation, AI, etc.), the reality facing executives today is a great deal more urgent: digitize your business operations, or your competition will put you out of business.
The rising cost of status quo operations
In truth, growing businesses cannot afford the cost of running operations in the status quo. A recent Accenture study of 1,800 senior business managers reported that 54 percent of their total working time was lost to administrative management and coordination tasks, such as status meetings, email coordination, reporting, and scheduling.
Accordingly, less than 46 percent of their total working time was allocated to core senior management responsibilities, including strategy and innovation, problem-solving, employee development, and competitive intelligence.
Managers aren’t alone in the business-as-usual struggle. According to the 2019 Anatomy of Work Index survey conducted by Sapio Research, an estimated 60 percent of skilled worker time is lost to coordination, leaving less than 27 percent of their time for execution of the skills-based role they were hired for.
And how exactly is the excess coordination work perceived? The study compares responses across Australia, Germany, Japan, New Zealand, the U.K., and the U.S:
- One-third of all employees regularly log overtime hours to respond to emails, chats, follow-up meetings, and tracking down missing input.
- Employees feel that two-thirds of scheduled meetings are unnecessary.
- Over 10 percent of an employee’s day is spent on tasks that have already been completed, either by themselves or by another colleague.
- Nearly half of all surveyed employees do not understand how their weekly output contributes to the business objectives, mission, or growth.
Geographical differences reveal interesting and equally daunting findings:
- German employees spend over 270 hours a year on double work, the most of any country surveyed.
- 68 percent of employees in the UK are tasked weekly with something perceived as “not adding value to their business objectives”, more than any other country surveyed.
Taken across the board, an overwhelming majority (83 percent) of surveyed employees believe that their teams are not as effective as they could be, owing to a lack of clear processes in place to manage their work, and adequate systems in place to support those processes. Clearly, for both managers and employees alike, the impetus to transition into a better way of doing business operations is there, and companies are acting fast.
And with good reason - according to _Harvard Business Review, _the cost of excess coordination in the U.S. economy alone amounts to more than $3 trillion dollars in total lost economic output. That represents around 17% of total American GDP. Operations leaders need to act quickly and strategically to liberate their teams from the weight of excess coordination and design a more execution-focused approach to day-to-day operations.
Onward to Digital Operations
When executed well, the benefits of digitized operations can be substantial. McKinsey & Company cites numerous examples spanning multiple industries:
- a bank that digitized its mortgage application and decision process, cutting the cost of a new mortgage by 70 percent and reducing preliminary approval time from several days to just one minute
- a shoe retailer that built an in-store inventory management system, which enabled floor staff to know immediately whether a particular shoe or size was in stock, saving time for customers and employees;
- an insurance company that digitized a process to automatically settle a large percentage of its simple claims, allowing them to provide better customer service, reduce manual operating costs, and ultimately, offer lower premiums.
By digitizing information- and step- intensive processes, total costs can be cut by up to 90 percent, and turnaround times can be improved exponentially.
These statistics represent the sort of performance outcomes that operations leaders are shooting for in 2020 - the standard 1-2 percent over year operational efficiency gains are no longer making the cut.
In spite of the long list of benefits to digitization, and the strong evidence against the status quo, the unfortunate truth remains: most companies are still struggling to digitize. There are numerous reasons – both cultural and technological – to account for the collective failure, but the fact remains: in order for operations teams to remain competitive in 2020 and beyond, the digital path is the way forward.
Adopting new methodologies, tools, and corporate mental shifts are the next, necessary steps toward achieving truly strong, digital operations.
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