Critical Components of the Digital Operating Model in Health

As history demonstrates, organizations must continually transform to remain competitive. In fact, an estimated 90 percent of all organizations are currently undergoing some kind of digital transformation, according to McKinsey research. Yet, in healthcare, only about 40% of payers and providers feel prepared to react to and address transformation trends.  

In a growing value-based care environment, payers and providers are under increasing pressure to enhance patient outcomes, comply with regulatory changes, and boost efficiency. To combat these pressures, companies are investing significantly in modernizing technologies, optimizing EHRs, finding ways to adopt Artificial Intelligence and Machine Learning, and building digital patient engagement tools.  

Each of these activities are essential inputs towards digital transformation. Yet, in our experience, the long-term success of digital transformations relies on assessing, developing, and implementing a robust digital operating model. Since digital transformation fundamentally reshapes how an organization operates, a well-designed operating model is crucial for building competitive advantage and enhancing experiences.

Inputs to a Digital Operating Model

A digital operating model is the strategic and comprehensive framework that aligns technology, people, processes, and culture to achieve digital transformation in organizations. It is the critical link between the company’s business model and its capabilities to execute the vision, describing how to best organize resources to deliver on promises. An operating model works with the organization's capabilities, such as people, process, data, and technology to realize value, and plans for the capabilities of the future to scale.

To determine how to shape your resources and structure an operating model, you must first assess and evaluate several critical inputs, starting with the overall digital transformation strategy.

Strategy & Vision

• What is the overarching digital transformation goal and vision?
• What are the key focus areas that describe success (such as improving patient outcomes, enhancing operational efficiencies, improving remember retention, etc.)?

Technology & Architecture

• What platforms, tools, or algorithms can support the vision?
• To what extent have you adopted these tools today, and what remains to be done?

Data & Analytics

• How defined is the organization’s data strategy?
• Are you able to quickly access insights to drive key business decisions?

Processes & Workflows

• How defined are current processes and workflows?  
• Do teams have adequate visibility into the work and jobs to be done?

Talent & Capability

• Is there a digital skills gap that will need to be addressed to make use of the new technology, data, or workflows?
• Are plans in place to foster a culture of innovation and continuous learning?

Organizational Culture

• Do organizational silos prevent or stall momentum?
• Is change management a well-versed organizational capability?

Governance & Risk Management

• Is a risk management strategy in place?
• Are governance standards able to be met?

Measurement

• Has the organization agreed upon how success will be measured?
• Can data be accessed regularly to ensure you are delivering on outcomes?

Crafting a Digital Operating Model

For an operating model to drive the most value, it must be designed to solve key challenges, gaps, and missing capabilities from the checklist above. Taking time to conduct the assessment above in granular detail is essential.  While there are several categories of operating models that have been tested across industries, a clear sense of strategic ambition coupled with a heavy dose of the existing state is what is needed first to shape and promote the new structure when adopting digital strategies.

Operating Model Types

From our experience, nascent and emerging organizations typically consider standing up some combination of Centers of Excellence, shared services, or internal agencies to structure rapid change, spur adoption, and ensure value creation can be measured. Regardless of the operating model that the organization chooses, the operating model must be designed to be customer-centric, placing the consumer at the center of the strategy to ensure value is realized.

Centers of Excellence

Digital strategy, training, and governance are organized within the COE, while execution resides within the services, lines of businesses, or specialties. Centers of Excellence require significant alignment but can often be stood up with minimal effort. They are a good option for nascent organizations to gain momentum in digital transformation but are often not enough to permeate an organization at scale. 

Shared Service

Execution is the primary capability that is centralized, with some strategy provided by the shared service. Much of the strategy and prioritization comes from services, lines of businesses, or specialties. Many large organizations already have shared service organizations, such as marketing, IT, or talent & culture. However, digital shared services must be able to span across these capabilities as digital touches all aspects of the business. Setting up or modifying shared digital services can be helpful in organizations that have a strong strategy but lack clarity regarding the jobs to be done, however shared services often barter for time and experience difficulty prioritizing. 

Internal Agency

Both digital strategy and execution are done centrally, with the centralized model driving at least 80% of the strategy and execution for all services, lines of business, or specialties. Some organizations may need to stand up both strategy and execution layers rapidly and centrally to digitally transform. Internal agencies can be a good option for smaller organizations to grow quickly and gain agility, however they can be expensive to stand up, and often with hyper-centralization lack scale.

Example Operating Model Considerations: Case Study

To better illustrate these concepts, let's dive into a representative case study focusing on a mid-sized fictional healthcare B2B organization that aims to grow market share rapidly.

Context & Challenge

For this HealthTech organization, Digital transformation is already underway. Strategies have been set to improve sales and retention metrics. Critical decisions and actions have also been made, such as selecting technologies, implementing solutions with partners, and executing experiences to drive a planned return on investment.

The business case included ideal customer success metrics for digital transformation outcomes. However, they continue to miss projections. The initial investigation highlighted struggles with the following: 

• Disputed strategy & vision, requiring alignment on the key elements of success
• Implemented technologies, but the tools have yet to fully be adopted
• Integrated data available for analysis but not fully tapped
• Little to no processes to support digital transformation across the organization, slow-moving with little agility
• Talent that needs upskilled and provided with training
• Culture that is resistant to change, slow to no momentum
• Regulated industry that requires improved governance
• Defined KPIs to measure transformation success, primarily surrounding financial performance, operational efficiencies, and customer satisfaction

The Solution

After assessing both the organizational challenges and existing capabilities, teams determined that the following change in structure would alleviate many of the identified challenges:

• Centralized CSO / CXO functions to set a unified direction and vision
• Centralized & vertical incubators & change management groups to drive adoption of tools & technologies, set processes, and upskill talent
• Customer-focused lines of business that deeply understand and know their consumer
• Some shared services to scale across lines of businesses, like centralized operations teams and managed services

A mock-up of the operating model was delivered, emphasizing the impact to the consumer experience by ensuring product, marketing, sales, and account management are de-siloed.

The immediate goals / outcomes from formalizing this structure included improving and reducing the overall time to launch and release campaigns and experiences. The organization also hopes to improve acquisition and retention metrics.  

Keep in mind that this is an example structure – the operating model that is developed for your organization must be uniquely attuned to the culture and capabilities that exist today. Additionally, discrete jobs to be done must be outlined, mapping existing roles and teams into the model and identifying gaps as you plan. Measurement and outcomes must naturally follow.

The Path Towards Scalability

Operating models must be continuously strengthened and improved to match organizational maturity. As organizations mature and digital transformation evolves, they tend to move away from centralized models to more focused, specialized capabilities. But these tendencies do not always support long-term scalability.

As you consider organizational readiness towards digital transformation and developing an operating model, it’s preferable that each of these inputs are mapped out over time with a transformation roadmap. The roadmap should include key “unlocks”, or dates by which the organization should have new capabilities that drive value. On each of these dates, the operating model should be evaluated to consider areas for improvement.

Thinking Critically and Getting Started

Adopting a digital operating model is essential for healthcare organizations to achieve meaningful digital transformation. It ensures that the transition from legacy systems to digital platforms is not only about technology but also about transforming the way care is delivered, operational efficiency, and the overall patient experience.

Your organization is most likely to experience success with digital transformation and operating model adoption when your model is:

• Geared towards breaking down silos (democratizing information across the organization and improving communication)
• Focused on generating value (avoiding shiny objects and focusing on critical jobs to be done)
• Empowering the teams involved (incentivizing talent towards change and encouraging decision making)

Most critically, placing the customer in the center of your strategy will consistently align teams on a north star vision, aid in prioritization disputes, and ensure teams understand how their work impacts the organization and the consumer.