Digital operating models

How leading companies achieve

results in the digital world
Why do some companies consistently
outperform their peers?

Digital technology continues to transform the enterprise of disciplinary and organizational boundaries within the
in powerful and profound ways. It is transforming the enterprise and across its extended value chain—all of
way we work, the way brands perceive and present which requires a massive shift in thinking about how
themselves, even the structure and behavior of entire to execute and operate. Digital is no longer just about
organizations. This transformation is happening at a marketing and the customer experience, while those are
lightning pace that is only accelerating. still important. The employee experience also needs to be
reimagined in a digital world, as do all production, supply
Today, many organizations have moved beyond chain, and service operations.
pondering digital strategies. Now, executives are asking:
“How do we achieve results in a digital world?” That’s a We’ve been studying this evolution for nearly a decade
key difference, because “digital” is no longer something through our Digital IQ research and have identified
distinct. Rather, it is a force that crosses a wide range what sets leading organizations apart. Now, we seek

Top barriers to executing digital strategy

34% 30% 29% 26% 24%

Inflexible or slow Integration of Lack of properly Ineffective third- Lack of alignment/
processes new and existing skilled teams party partners clarity on roles and
technologies responsibilities relating
to digital ownership
Source: PwC, 2015 Global Digital IQ® Survey; Base: 1,988
Q: What is the leading challenge to your organization achieving its digital vision?

Digital operating models—How leading companies achieve results in the digital world 2
to dive deeper and uncover what makes them tick. sense, digital disruption impacts the enterprise itself,
For this report, we identified a dozen global companies not just the markets in which it competes. This can (and
that have cracked the digital code—turning high-level should) affect the entire mindset of the enterprise. For
talk about digital strategy into meaningful, high-quality, one retail company in our study, that meant transitioning
operational action across the enterprise in a consistent, from thinking of itself as a food company to becoming
fast, and predictable way. These companies are globally an ecommerce company that specializes in food and
located and span major industry sectors, including investing in a coherent set of capabilities that reflect this
consumer goods, travel and hospitality, financial services, strategic shift. These kinds of changes don’t happen
healthcare, and retail. Our goal was to learn from these overnight, and any organization hoping to follow in the
digital exemplars and identify the leading practices of footsteps of these leaders should expect to expend
a digital operating model. considerable effort on the transition.

One of the most fundamental characteristics of a digital Our analysis uncovered six key findings—all actionable,
operating model is the recognition that digital, properly operational tactics—that can help organizations better
executed, is not a new department in the company. execute on their digital strategies. These are not
Rather, it is a set of enabling technologies and new ways necessarily universal behaviors—not every company we
of working that fuses analytics with human-centered interviewed undertakes every one of these six actions—
design that influences the organization across the board. but they are all leading practices of this cohort. Adopting
As such, success requires revolutionary changes to the as many of these operating model practices as possible
way work is done, not evolutionary baby steps. In this is a sure step toward digital success.

Six leading digital operating model practices

1. Redefine what digital 2. Appoint a Chief Digital 3. Focus on platform

means to the enterprise. Officer or equivalent. capabilities.

4. Invest in digital hubs. 5. Build and optimize 6. Prioritize talent

agile delivery pods. recruitment and retention.

Digital operating models—How leading companies achieve results in the digital world 3
1. Redefine what digital
means to the enterprise.

Digital operating models—How leading companies achieve results in the digital world 4
 “
A strong digital operating model begins
by re-evaluating the very idea of digital.
This can be a complex undertaking
because digital is a term with no set
definition. What it doesn’t mean is Digital includes not only
consumer marketing but also
simply developing a mobile app and
upgrading the corporate website.
Today, digital goes beyond the front-
end customer experience and extends
deeply into the enterprise and impacts
the way we collaborate with
our customers.
every facet of the business. It can take
some effort to digest that idea and set
priorities for what capabilities to build
and how to operationalize them. Vice President, Global Customer Marketing, Consumer Products

What defines digital success?

How can digital capabilities be leveraged to make the overall enterprise more Improving efficiency
efficient and effective? How can digital be used not just to increase the speed of organization-wide
the organization but also to improve quality, lower costs, and mitigate risks? Digital
leaders recognize the difficulty in answering these questions but work to use digital
tools to improve efficiency organization-wide. As a corollary to this, digital leaders
expect their business ideas on emerging technology and digitally enabled innovation
to be implemented in all parts of their businesses, both from a top-down and
bottom-up perspective. The ideal digital planning cycle involves a two- to three-year
horizon, optimally with continual revisions in response to market forces, much as
a software company releases products on an ongoing basis.
Interacting with
Opportunities to improve enterprise efficiency and effectiveness can be found customers and
at every intersection of the digital and physical world. Some leading digital employees
organizations further define digital as every interaction they have with customers
and employees. Even though not every customer and employee touchpoint today
includes digital, digital leaders see this mindset as proactive and a key way of
differentiating themselves from the competition. That does not, however, mean
merely chasing after the latest trends because they have a digital component.

Finally, digital leaders know that in defining digital, it’s critical to look beyond
direct competition. Differentiation can be found by digging into the best practices
of unrelated industries to understand how digital is driving their successes and Learning from and
determining how to adapt those tactics for their own digital operating model. leveraging best
Indeed, customer and employee expectations are defined by their most recent practices from
interactions, regardless of where they occur. other industries

Digital operating models—How leading companies achieve results in the digital world 5
Digital disconnect: how leaders see digital

62%

50% 49% 46%

45% Synonymous with IT
41% 41% 41%
37%
Technology investments
33%
29% in all parts of business

Customer-facing
25% technology activities

14% 13% Technology innovation-

11%
related activities

Data andanalytics
activities

CIO CMO CDO

Source: PwC, 2015 Global Digital IQ® Survey; Base: 1,988

Q: How does your organization define digital? Select up to two statements that best describe your company.

“…this has been a “improving employee

challenge to define” processes and ways
of working”

“an internal setup to “positioning our business

enable employees with to operate with a
IT to connect with the competitive advantage in
customer” a world that is digital”

Digital operating models—How leading companies achieve results in the digital world 6
2. Appoint a Chief Digital
Officer or equivalent.

Digital operating models—How leading companies achieve results in the digital world 7
Chief Digital Officer (CDO) is still a long way from designed to head up development of digital products for
becoming a standard job title. Of the world’s largest online channels. All told, PwC’s Strategy& research has
public companies, less than 10 percent have a CDO, uncovered five different archetypes for the CDO role,
either in name or responsibility, while more than half of which can range from sales-centric positions to jobs that
the digital leaders we studied do. Digital leaders by and focus more on how digital disrupts operations and the
large do tend to recognize the importance of this position, supply chain.
however, though titles other than CDO are common.
Generally, a CEO will create a CDO position when the Regardless of the specific title and responsibilities, having
financial effects of the company’s digital challenges broad support for the CDO and for digital initiatives within
become tangible and to encourage a more enterprise- the C-suite is critical to success. It’s worth noting that
wide approach to digital efforts. a CDO does not and should not replace the CIO. When
a CDO is present, a healthy collaboration between the
What does a CDO do? Well, that varies too, but ultimately CMO and CIO is still critical to building the organization’s
the job involves accountability for anything related to digital capabilities and driving new ways of working in the
digital technology and experience design. At a financial organization. It is the explicit endorsement of the CEO
services provider, the CDO position was created to that enables a CDO’s leadership to permeate all aspects
unite two digital teams that had evolved separately. of the business and to deliver impactful solutions across
Now the web and mobile teams work together under disparate teams, data, and third parties.
a single banner. For a retailer, the CDO position was

“
The CDO is a bridge between
tech and marketing.
VP Ecommerce, Retailer

“
[The team is] still small enough
that the CDO has the pulse on
every major project.
Chief Digital Officer, Retail and Consumer

Digital operating models—How leading companies achieve results in the digital world 8
3. Focus on platform
capabilities.

Digital operating models—How leading companies achieve results in the digital world 9
Digital leaders leverage digital to inform the overall a massive amount of time and invariably leading
perspective of how the company operates. This can to an inconsistent user experience. As part of the
involve some profoundly “big bets” that change the entire company’s upgraded digital strategy, these sites were
focus of the organization. Like the food company that all consolidated under a single platform, which helped
reimagined itself as an ecommerce one, a well-known accelerate building out a more coherent set of capabilities
toy company we studied changed its organizational focus and experiences.
to being an entertainment company that also happens
to make physical toys. Platforms work in tandem with agile methodologies,
which are another essential component of a high-
These kinds of sea changes are also part of what functioning digital operating model. Without a platform
digital leaders define as shifts to the platform, and in place, agile is unlikely to take root, and the company
building out the capabilities of that platform is a major is prone to fall back into traditional, waterfall-like
focus of these organizations. This platform approach development methodologies. Failure to develop a
varies from company to company though it often platform limits architectural options, the depth of services
revolves around the concepts of consistency and the organization can provide, and its overall ability
standardization—establishing consistency across code to innovate. Conversely, with a platform in place, the
bases, standardizing processes and development tools, organization is more likely to overcome inertia in building
and consolidating technical platforms. These types of more scalable and repeatable methodologies that can be
activities are key because they free an enterprise to look applied across the board in a variety of scenarios, even
at the bigger picture. When the IT organization is stuck in when third parties have to be brought into the fold.
the weeds, too much effort is often wasted on low-level
maintenance and bug fixes. When a proper platform is Remember that the platform is abstracted from the day-
developed, resources can suddenly be reclaimed. to-day of development. It is not the place to add a new
feature to the company’s mobile app but rather a place
For example, at one financial services firm, the company’s for the development of company-wide digital strategies.
technology audit uncovered over 100 different websites More tactical development activities like this occur in
being operated under different brands. Each site had to specific organizational structures, which we’ll describe
be maintained separately. If one piece of data changed, within the next two sections.
it had to be updated on each site individually, requiring

“
Over two decades of product development
had been distributed across various business
units, causing resource duplication, process
redundancies, and inconsistencies.
Chief Information Officer, Financial Services

Digital operating models—How leading companies achieve results in the digital world 10
4. Invest in digital hubs.

Digital operating models—How leading companies achieve results in the digital world 11
Digital leaders are driving a new concept in the way all communication with other hubs and headquarters
kinds of work is structured, through what is known as is not problematic.
the digital hub.
This is a surprising and possibly even counterintuitive
The digital hub is a way of enabling digital operations, idea given today’s focus on virtual teams, a globally-
and it works through the principle that physical proximity located workforce, and flexible work structures. But
can remove unnecessary hurdles that slow the agility of digital leaders have shown that this concept works by
the enterprise. This is an outgrowth of agile development creating more consistency in delivery, improving the
methodology, but the digital hub takes this idea to a predictability of long-term planning, and lowering the
much deeper level by actually placing cross-functional overall cost of doing business. Leaders say that digital
teams in the same physical environment, where they hubs foster an environment of creativity and collaboration
can work together, side by side, using the same across team members and aid them in identifying new
methodologies and tactics while learning from one opportunities and solutions to problems. Digital hubs
another. These hubs can be distributed geographically also foster a closer relationship between digitally-focused
around the world rather than being exclusively located talent and other cross-functional team members on key
in offshore zones. Hubs are best located where pockets initiatives. Hubs can be dynamic and exciting places for
of digital talent already exist and in areas where those who work in them; hub-based employees are often

Digital operating models—How leading companies achieve results in the digital world 12
 “
[Hubs] help prevent a clash
of roles and responsibilities
between digital initiatives.
Chief Digital Officer, Financial Services

excited to come to work there, and they tend to be more Building a digital hub—or, for larger organizations, a
engaged than workers in traditional environments. number of digital hubs in different locations around
the globe—is not without significant challenges. Some
One key aspect of digital hubs is that they need not be hubs may be located far from company leadership.
located in the same place as corporate headquarters, As well, the hub’s inherent integration may result in
and in many cases it’s actually more productive if they an exclusionary atmosphere that may be hard for
are not. Critically, having flexibility in locating digital hubs other groups, including management, to penetrate.
can give organizations better access to key talent. For Coordinating activities among multiple hubs can be
example, one consumer goods company discovered it particularly difficult; one leader describes multi-hub
was unable to attract talent to its home base in a rural coordination as the greatest challenge she faces in
zone. By working to construct a hub in a major urban dealing with hubs. There’s also the question of whether
center (in another country), it gained instant access to hubs can be virtual instead of physical. One company
some of the brightest and most digitally savvy workers studied for this report has had some success with
in the region. this through the use of sophisticated telepresence
technology, though this represents a substantial financial
Note that the digital hub isn’t merely a satellite office. It
investment (considering relocation costs, real estate,
is a place where the organization locates key talent and
furnishing, telecommunications needs, and more) and
drives new methods for how this talent works with the
requires a significant change to working habits.
rest of the organization. As teams are developed, org
chart lines begin to blur (just as the line between business However a hub is organized, digital leaders say that hubs
and technology has begun to blur), and the methods of enable the creation of more effective, tactical working
recognizing, motivating, and compensating these workers teams. We’ll discuss those small, operational teams—
is typically altered as well. delivery pods—in the following section.

Digital operating models—How leading companies achieve results in the digital world 13
5. Build and optimize
agile delivery pods.

Digital operating models—How leading companies achieve results in the digital world 14
Agile methodologies continue to rise in prominence, company creates a pod with the goal of analyzing and
and agile has become a mindset that now applies well improving booking conversion, it will always be tasked
beyond the software development team. In digitally with that goal. Finally, pods must maintain continuity
leading companies, agile has become the basis for an in scoping estimation—business product owners must
alliance among business, IT, and third-party vendors, and be involved in every step of the process and the pod’s
support from the C-suite is driving its adoption across the original team members should never be removed from
enterprise as part of an ongoing evolution. the process. The aim of this continuity is to prevent lost
functionality, mistranslated specifications, or scope creep,
Digital leaders are using the principles of agile to change with the ultimate business goal of improving customer
their business culture. Nowhere is this more visible than satisfaction and reducing time to market.
in the concept of delivery pods, which are small teams
made up of cross-functional employees that follow Pods have to learn to work in new and sometimes
consistent rules in regard to reporting, planning, and groundbreaking ways, but having them work together,
the definition of roles. While pods are designed to be with access to a common set of information (like
repeatable and consistent in structure, they maintain analytics, business rules, and so on) lets them execute
a level of autonomy in the way they distribute their much more quickly than traditional organizations. For
workload. Not every pod will have the same estimation example, an enterprise may integrate security and
hierarchy or sprint schedule, but they will all be required quality assurance processes into its pods’ development
to report on activities in the same way. methodology in order to speed up production while
reducing errors. Empowered to make decisions in real-
One of the key aspects of successfully creating and time, the typical cycle of emails, meetings, action plans,
managing delivery pods surrounds the issue of continuity. and status reports is avoided. In fact, pods may have no
Key roles, such as scrum masters, must be kept need for meetings at all, since they work in a co-located
consistent, and the specific responsibilities of a pod space wherein they are always connected to one another.
must be consistent as well. For example, if an airline

How often organizations use agile

28% 27% 18% 7% 7% 13%

On more than On 10% to On all projects On a pilot basis Not at all Don’t know
50% of projects 50% of projects

Source: PwC, 2015 Global Digital IQ® Survey; Base: 1,988

Q: To what extent are you currently using agile approaches in your organization?

Digital operating models—How leading companies achieve results in the digital world 15
 From dispersed teams to agile delivery pods

Analytics
team
Scrum Product
masters owners

Delivery pod
Quality
assurance Developers
specialists

Pods can be thought of as essentially smaller components rest of the company. However, the internal structure
within digital hubs. A pod structure can vary considerably of the pod allows it to adjust and execute more quickly
depending on the organization or product. One leading within this framework, eliminating redundancies and
enterprise limits pods to eight to 12 people. Others improving communication. In essence, pods are the
manage pods of closer to 20 people (though often they lowest common denominator in getting a product from
cite a goal of decreasing this size). Critically, within an inception to the market.
organization, the roles within each pod are consistent,
which helps with the mobilization and blueprinting of new Pods are designed to be highly visible archetypes of
work. While different pods may scale roles differently, the working that the rest of the company can learn from
overall structure of these pods will generally be the same. and eventually model. Having strong internal managers
Consistency should be maintained, even across different included in the pod is a key to success. While pods
locations, in order to ensure the structure is repeatable should not be saddled with having to develop detailed
and scalable. business cases and should be freed from the red tape
of such bureaucratic items as business requirement
Note that pods are not renegade groups that operate free documents, leading companies continually reprioritize the
from corporate oversight. In fact, one of the major goals initiatives that pods are working on, and some of these
of delivery pods is to work in a fully transparent manner are subject to more rigorous business cases before initial
and to develop consistent operational methodologies funding or the release of new funding. These challenges
that can be repeated in other pods. Pods still have have led to the rise of new operating model frameworks
aggressive goals to meet and must generally adhere that help organizations scale agile.
to the agile practices (scrum, etc.) established in the

Digital operating models—How leading companies achieve results in the digital world 16
 6. Prioritize talent
recruitment and retention.

Digital operating models—How leading companies achieve results in the digital world 17
The common thread in all of the above is talent, and it is improve their workplace experiences. The structures of
having consistent, diverse, and multi-disciplinary talent digital hubs and delivery pods can be a big help here.
that makes these other actions possible. Again in contrast
to emerging trends in the enterprise, digital leaders are Finding this top talent, of course, isn’t easy. Digital
not using third parties or contractors to fill key roles leaders naturally look for specific technical skills in new
and complete mission-critical work, though dedicated hires, but they also understand the importance of finding
staff may be supplemented with freelance talent and employees who will work well together and demonstrate
ecosystem partners in periods of demand spikes and a strong cultural fit with the organization. Once hired,
when specialized talent is needed. Digital leaders have keeping these employees engaged is of paramount
found it is essential these teams remain consistent in importance.
order to drive predictability and continuity. Digital leaders are constantly questioning whether it
Digital leaders use any number of methods to attract makes sense to retrain and develop non-digital workers
and engage top-tier talent. Having a strong brand and or hire new digital talent outright. Educating and training
progressive culture is naturally a big help here, as is the disparate groups of people throughout the organization
ability to pay a premium for this talent. To get the right on digital skills they don’t possess can be a costly and
employees, digital leaders are increasingly adapting to time-consuming endeavor, so enterprises must weigh
the demands of top talent as these employees seek non- whether to retrain internal staff or hire digital natives
traditional roles, benefits, incentives, rewards, pay scales, on a case-by-case basis. In general, a combination of
and workplace environments. Empowerment is absolutely approaches is often used to raise the overall Digital IQ
critical to motivation: Digital employees are increasingly of the organization.
given ownership over new initiatives and the leeway to

“
The men and women I am hiring
want to change the world.
Chief Digital Officer, Financial Services

“
We have to get the people who
will love working here.
VP Ecommerce, Retailer

Digital operating models—How leading companies achieve results in the digital world 18
The path forward

Digital leaders have identified and adopted some key And yet, the hardest part of all of this is that these changes
behaviors, and many of these make immediate, intuitive must be marked by revolution, not evolution—that an
sense. Of course having strong, formally identified enterprise wishing to adopt a high-functioning digital
leadership will help to drive success, and concepts like operating model cannot afford to spend years tinkering
agile and a focus on building platforms have taken hold with incremental process changes. Change must be quick
in a large portion of the enterprise world. and permanent, or else it is likely doomed to failure.

But some of the other behaviors of digital leaders are less Even digital leaders admit this can be a difficult task.
obvious, and will require extensive rethinking on behalf of Executive behaviors are not transforming at the pace
the enterprise when it comes to organizational structure, of digital, and rogue development projects remain a
human resources, and C-suite leadership. The concepts of problem. Onboarding parts of the business that have
digital hubs and delivery pods represent a massive shift in historically been disconnected from digital operations
day-to-day operations across numerous lines of business. can be particularly difficult. But overcoming resistance
A shift away from outsourcing and offshoring—tactics so to change, well, that’s just another characteristic of true
popular in business today—requires new and different digital leadership.
thinking about the enterprise’s overall business strategy.

What do digital leaders have in common?

The organizations we studied don’t behave identically, and their policies, actions, and strategies tend to vary in some ways.
That said, there are some universalities. Here’s a look at the traits and actions (good and bad) that all digital leaders share.

Key actions Key pain points

§§ Set strategic roadmaps with horizons of two to three §§ Entire enterprise is still not agile, despite enterprise
years; executive leadership sets overall priorities. projects being developed with agile methodologies.
§§ Additional priorities are set within digital steering §§ Heavy investment in new talent required.
groups (Marketing, Sales, IT, Operations, Legal, etc.). §§ Reluctant to train or give responsibilities to pre-agile staff.
§§ Evaluate priorities every few months. §§ Slow to incorporate employee enablement priorities,
§§ Use some form of agile as a backbone. which can lead to rogue development that threatens
§§ Operate (or have plans to operate) several digital hubs. long-term efficiencies.
§§ Strategies are less about capabilities and more about §§ Too many digital demands with too little supply of talent.
desired customer experiences. §§ Many core IT updates still run on waterfall processes.
§§ Employee enablement is becoming prioritized §§ Major IT programs create operational dependencies.
and streamlined. §§ Ongoing friction between functional siloes requires
§§ Digital talent will ultimately be universal across execute commitment to change management.
the enterprise.

Digital operating models—How leading companies achieve results in the digital world 19
digital.pwc.com

Thank you to the executives and organizations that participated in our digital operating
model study. For an in-depth discussion of what we learned and how you can apply
these leading practices to your organization, contact:

Matthew Egol
Principal, Digital Services
+1 (212) 551-6716
matthew.egol@pwc.com

Timothy Mattix
Principal, Strategic Technologies
+1 (312) 320-4400
timothy.mattix@pwc.com

Mark Baker
Manager, Digital Services
+1 (214) 754-5459
​mark.baker@pwc.com​

Study methodology
PwC has been studying digital strategy and execution since 2007 when its Digital IQ study originated. For this study, we identified a dozen exemplars and dug
deeper to understand how leading organizations across multiple industries are structured to deliver efficient, predictable, and quality digital products. The goal
was to identify who is ultimately responsible for digital within an organization and to understand how these organizations are structured to deliver consistently
and quickly. From November 2015 to May 2016, we interviewed dozens of key members of the digital organizations across these companies to drill down and
develop the digital operating model.

© 2016 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see
www.pwc.com/structure for further details. Digital IQ® is a trademark of PricewaterhouseCoopers LLP US.
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 157 countries with more than 208,000 people who
are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at www.pwc.com.
PricewaterhouseCoopers has exercised reasonable care in the collecting, processing, and reporting of this information but has not independently verified, validated,
or audited the data to verify the accuracy or completeness of the information. PricewaterhouseCoopers gives no express or implied warranties, including but not
limited to any warranties of merchantability or fitness for a particular purpose or use and shall not be liable to any entity or person using this document, or have any
liability with respect to this document. This report is for general purposes only, and is not a substitute for consultation with professional advisors. 206343-2016 LL