Why Establishing A Center Of Excellence Can Accelerate Digital Transformation

Originally published on Forbes Technology Council.

Over the past few years, global organizations have embraced digitizing aspects of their business operations and planning capabilities to help create greater efficiencies and optimize their businesses. McKinsey researchers found that 89% of global enterprises have embarked on a digital transformation within their company, but only 25% have achieved cost savings. Many organizations are in various stages of their transformation journey, from piloting projects at specific locations to deploying a platform across their organization, and are experiencing firsthand that large-scale change can be challenging and ever-evolving. Market leaders are embracing the mindset that digital transformation is an iterative process. Once their business has achieved the phase one milestones that set the foundation for their digital transformation journey, they allocate more funding and time to continue building their company’s digital capabilities.

McKinsey researchers also found that the gap in digital transformation maturity between market leaders and laggards has increased by 60% over the past three years. One of the reasons why market leaders are gaining a sizable advantage is their continued investment, implementation and improvement of their digital capabilities.

The Role Of A COE In Digital Transformation

As global enterprises continue to advance in their digital transformation journey and move beyond the pilot programs and rollouts to additional markets, they want to see continued ROI and improvements from their transformation efforts. An organization’s leaders and stakeholders may consider establishing a center of excellence (COE), or an entity within an organization that acts as a knowledge hub and provides leadership guidance, best practices and training opportunities in specific areas.

When a COE is established with a focus on digital transformation, it enables an organization to take ownership and accountability of multiple aspects of digital transformation, including technical, functional and governance processes. It can ultimately help achieve more significant cost savings and reduce dependency on external resources.

Aligning the entity within an organization’s governance structure, selecting stakeholders who can drive innovation across the organization and setting objectives and key performance indicators (KPIs) early in the planning process is essential to helping ensure that a COE meets its goals.

The Benefits Of Establishing A COE

Here are three more benefits that establishing a COE can bring to your organization’s digital transformation.

Increased In-House Knowledge And Expertise

As a COE is being developed, companies are likely at a stage in their digital transformation where they depend on the expertise of their platform providers. However, as the COE becomes more established within the organization, there's an opportunity for relevant knowledge to start transferring to internal teams. This knowledge transfer can be facilitated through the COE via training courses that are tailored to team members' specific roles. Once core team members are proficient in using platform features and best practices for workflows or processes, the training and development can be extended across the broader workforce.

In time, in-house teams can test workflows to ensure accuracy and work with project deployment teams to understand and develop specific best practices. An example of this that we’ve seen among our own clients is a global technology company that now has a 50-person internal team dedicated to facilitating continuous improvement in-house with a high level of satisfaction from its business teams.

Greater Collaboration And Value Generation

Because a COE is a centralized entity, it can serve as a hub for building expertise and best practices across multiple functions within a business. As a result, a COE can facilitate greater collaboration and information sharing between in-house and external teams engaged in a multiphased digital transformation and accelerate its progress.

Additionally, as a COE evolves, this entity can drive continued transformational improvements, as the best practices and strategies set within the COE can inform the long-term vision for continued value creation. This can include the development of formal career advancement tracks and guiding how future technologies and tools can be deployed to enhance operational excellence. As an example, a multinational brewing company developed an internal “university” within its COE and administers basic, intermediate and advanced coursework and certifications for numerous business functions across the organization.

Accelerating The Maturity Of Your Transformation

As your organization’s digital transformation evolves, developing a COE also provides an opportunity to evaluate and refine your transformation at each stage of progress. Additionally, some vendors may offer a dedicated program that helps support your COE as your organization embarks on more advanced transformation initiatives.

A hybrid model COE that includes both in-house and vendor-led resources could provide greater agility and flexibility to adjust the size of a COE team based on the phase of the transformation. Additionally, a hybrid model can help avoid some of the skill development challenges that can emerge in COE models that are 100% sourced in-house.

Conclusion

As your organization’s digital transformation continues to evolve and progress, so will your COE. By setting a strong foundation for your internal teams to gain the necessary training and continued education, your organization will become more self-sufficient, strengthening functional capabilities and technical expertise.

Ultimately, you'll be able to derive value-driven insights and align them to your organization's business initiatives and priorities.