The agile organization in 4 stepsA connected enterprise approach enables agile operating models that easily adapt to rapid change

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Change and disruption are watchwords of today’s business environment.

© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

ustomers’ expectations and behaviors are evolving far faster than most organizations can address. A new generation of workers possesses values markedly different from their predecessors. And perhaps most significant, startup companies can go from zero to full-scale more rapidly than ever before, giving rise to new

competitors seemingly overnight.

Organizations need to adapt quickly to navigate these shifting currents. That means adopting an agile operating model that can turn these challeng-es into opportunities. Embracing agility throughout the organization can help companies swiftly adapt to new customer demands, create inviting cultures for prospective employees, and reinvent themselves to fend off rising competitors.

Businesses can facilitate this agility by becoming what we call a “connect-ed enterprise”—that is, a company that has become truly customer-centric by connecting the front office with the middle and back office, enabling the entire enterprise to deliver creative customer experiences that are relevant, differentiated, and profitable. This entails breaking down organizational barriers to align people, operations, and system with the enterprise-wide customer experience strategy to capture business value.

Executives are becoming increasingly aware of this imperative to focus on the customer experience. Over the next five years, 89 percent of companies expect to be competing on customer experience, while 86 percent of leaders believe the customer experience is vital to success. In pursing this goal of customer centricity, the most successful companies are getting connected by investing in eight specific capabilities that span all attributes of the customer experience (See sidebar). Compared with organizations that haven’t invested in these capabilities, connected enterprises are more than twice as likely to see an acceptable return on their investment in omnichannel initiatives, according to KPMG’s research.2 What’s more, organizations that embrace these capabilities have been shown to have a 9.5 percent year-on-year sales increase, instead of the average 3.4 percent.3 They experience lower annual per-customer contact costs, typically a 7.5 year-on-year decrease compared to 0.2 percent for laggards.4 And these companies also benefit from better customer retention, with 89 percent of customers retained, compared to 33 percent for companies with weak omni channel strategies.5

While each company will have its own path to creating the ideal agile operating model, here are four steps that every business should consider as it works to enable agility throughout the organization.

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1 A study conducted by Forrester Consulting on behalf of KPMG, July 2016.

2 Commissioned study conducted by Forrester Consulting on behalf of KPMG International, July 2016, of 1,290 global professionals involved in omni strategy decisions at their companies.

3 Google

4 Aberdeen Group

5 Ibid

2XIt pays to become a connected enterprise.

Organizations with a customer first outlook are 2X more likely to see greater overall success.1

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© 2018 KPMG International Cooperative (“KPMG International”). KPMG International provides no client services and is a Swiss entity with which the independent member firms of the KPMG network are affiliated.

Product, pricing and customer strategy: Delivering relevant, valuable, consistent and targeted products, services, experiences, pricing and offers

Experience centricity: Delivering a seamless and personal customer experience that continually meets evolving expectations across channels

Seamless commerce: Delivering a convenient, secure, integrated and consistent transaction experience across channels

Advanced data and analytics: Using data insights to engage and execute across all touch points while also protecting privacy and security

Technology architecture and enablement: Leveraging technology systems and expertise to deliver cross-channel experiences, enable employees, and synchronize with the broader digital ecosystem

Organizational alignment and people capability: Marrying the vision, culture, organizational structure and performance management approach to customer needs and perspectives

Responsive supply chain: Leveraging advanced, analytics-driven demand planning, inventory management and distribution to enable customers to select, receive and return products and services conveniently

Partnerships, alliance and vendor management: Leveraging third-parties to increase speed to market, reduce costs or deliver on the customer promise

Eight key capabilities of connected enterprises

1 5

2 63

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Step 1Clarify and communicate what agility means to your organization.Agility means different things to different companies. For some organizations, agility may refer to speed of decision-making—such as, which markets to prioritize, how much inventory to carry, or how to quickly adapt to a market change. For others, it may be about cross-functional collaboration between departments that previously didn’t work with one another. Still others may see agility as an approach to innovation that rewards experimentation and risk-taking.

Make it real

But leaders cannot stop at merely defining agility for their company. Leaders also must deliver against that definition, so as not to fall into the trap of “all words and no substance” and thus lose credibility with their teams. If an organization sets out to create an agile culture without changing the underlying processes, systems, metrics, or incentives associated with the customer strategy, its efforts will likely fail.

Successful leaders, on the other hand, model the right behaviors to continue reinforcing their vision of agility. Maybe they build a new approach for flexible resource allocation or show the courage to shut down an initiative that’s not working. Others may set up a new rewards system that enables employees to be agile. Or they simply relocate their office from the executive floor to get involved with their teams.

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Step 2 Determine the capabilities you need from your workforce and how to organize your operationsTraditionally, organizations have visualized their operations in terms of functions, such as human resources or finance. Agile companies, on the other hand, break down these silos and focus on capabilities. They organize their operations based on the end-to-end customer journey they are trying to achieve.

Take integrated business planning, which involves people in marketing, sales, supply chain, and finance. In an agile organization, these people don’t conduct activities within a function. Rather, they play roles in a process that was designed from a customer-centric perspective, helping the organization make better decisions.

From silos to swarms

Instead of organizing people around traditional roles and responsibilities, think about the capabilities you need—and how to summon them. This can involve the concept of “swarming,” where employees with the right skills, regardless of function, are called in to address a problem, rather than tapping specific departments, such as finance.

An important part of that approach is using tactics such as journey mapping to help employees and external partners understand where they fit into the process. For example, instead of thinking, “I am a finance person” or “I am an HR person,” members of an agile organization think, “I work in this part of the customer journey” or “I help facilitate this part of the transaction.”

At one auto manufacturer, agility requires employees to “swarm” on the factory floor as needed to address critical challenges related to car design. To enable this kind of agility, companies need to think beyond functional silos and instead design systems and processes—aligned to new objectives and incentives—that allow for employee initiatives such as swarming. It’s also important to assess the financial return from swarming and, accordingly, build a human resource model with the right level of investment, ensuring adequate resources for day-to-day work as well as on-demand projects.

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Step 3Consider the right sourcing model for your flavor of agility.As companies pursue agility, they need to address how to organize third parties, such as partnerships, alliances, and vendors, into a nimble ecosystem of services around the customer.

Based on your definition of agility, consider the capabilities you have and those that you need. For example, does your organization have the flexibility to turn on a dime? If you need to build a capability quickly, can you do it in-house or does it make more sense to work with a service provider?

From standardized to customized

In traditional shared services and outsourcing, companies focused on standardizing processes for scale and efficiency. But in the Age of the Customer, companies are moving toward global business services—the seamless integration of service delivery models, including internal and external resources—to meet customers’ needs in a more customized way.

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Step 4 Revisit your governance structure.As companies move from functions to end-to-end processes, they will need an effective governance structure to ensure the organization can flex to the needs of the market—and do so profitably.

In designing these new governance structures, organizations need to consider questions specific to the kind of agile operating model they are trying to create. For instance: How do you stay out of the “Wild, Wild West” when you have people swarming all over the place? What kinds of behaviors reflect your company’s definition of agility? How are those behaviors incentivized? What are the shared metrics? These are the kinds of questions an agile governance organization needs to answer.

In terms of measurement, part of governance is revisiting the definition of agility and considering whether the company is making progress. For example, is the organization making faster decisions? Is it increasing speed to market for products and services? Are people reporting more collaboration?

Keep in mind that you don’t always need a number to gauge agility. Consider also soft measures: Do team meetings have a diversity of opinions? Do people view failure as a step forward? When you announce the next big change initiative, how do people respond?

In a successful agile organization, people don’t roll their eyes. They are excited about what’s next.

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Today’s customers are better informed, better connected and more demanding than ever before. Customer experience is overtaking price and product as the number-one brand differentiator. Organizations are investing record amounts on customer-related initiatives, but not all are seeing a credible return on investment.

KPMG combines expertise in strategy and implementation—as well as far-reaching industry and functional knowledge—to create better customer outcomes that produce better business returns. That means looking beyond the front office to a wholesale transformation of functions such as marketing, sales, and service—and linking them to the middle and back office. The resulting organization is closer to customers and can deliver interactions that are seamless, responsive, relevant and consistent, helping companies build greater loyalty and share of wallet. From ambition to implementation, KPMG works alongside organizations on their journey to become customer-centric, balance cost against customer satisfaction, and maximize opportunities to increase revenue.

Why work with KPMG?

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG can help your organization evolve into a connected enterprise that meets the demands of today’s informed, connected consumers. Focused on helping make the right investments and maximizing return, we work alongside organizations across their entire journey to become customer-centric: from strategy to design to implementation to improvement to governance. We help them reshape people, operations, systems and processes to connect entire enterprises more closely to their customers, employees, partners and products—and realize the value.

Why us? We know how your business works and we know how to get things done. Our global network of talented professionals combine technical expertise with practical business experience in consumer-facing industries, helping your organization address each capability across the connected enterprise—down to the detail—in the right context for your business functions.

KPMG is a market leader on evolving into a connected enterprise:

– Forrester Wave™: Business Transformation Consultancies, Q3 2017

– HfS Blueprint Report: Digital Technology Strategy and Consultancy Services, 2017

– IDC MarketScape: KPMG a leader in digital transformation consulting and systems integrations services

Get connected now!

Is your business a connected enterprise?

Try our free diagnostic tool to find out.

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© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Connect with us to find out how we can help you build a customer-centric organization with a connected enterprise approach:

Julio Hernandez, PrincipalHead of Global Customer Center of ExcellenceUS Customer Solutions Practice LeadKPMG Advisory juliojhernandez@kpmg.com

Duncan Avis, PrincipalCustomer SolutionsKPMG Advisorydavis@kpmg.com

Kim Huddle, Managing DirectorShared Services and OutsourcingKPMG Advisorykhuddle@kmpg.com

Leila Shin, DirectorPeople & ChangeKPMG Advisorylshin@kpmg.com

Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates or related entities.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the US.

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