Everything You Need to Know About Centers of Excellence
Access to Expertise is More Important Than Ever
Today’s enterprises face unprecedented pressure from more nimble startups, volatile market trends, and a global health crisis. Those that thrive will be hyper-focused on driving value in the long term, innovating and adapting to changing conditions faster than their competitors.
However, most organizations simply aren’t built to succeed this way. A recent PwC Survey found that leaders are extremely concerned about their organization’s rate of innovation. In fact, 44% of CEO’s felt their speed of technological change was insufficient, and 32% did not possess the availability of key skills. KPMG found that 57% of CEOs are concerned that their organizations don’t have innovative processes to respond to rapid disruption, and in a separate study PwC discovered that 61% of companies say the solution to reaching strategic goals is collaborating more across functions, paired with faster decision-making.
It is clear that organizations are failing to innovate rapidly because they lack fast access to expertise. Gartner learned in one study that 75% of organizations will fail to achieve the full potential of the internet of things (IoT) due to lack of access to data scientists and another 80% of companies that expected to employ AI by 2019 failed for similar reasons. Meanwhile, McKinsey found that only 20% of companies have maximized their potential and achieved advanced analytics at scale, even while most companies understand the importance.
Even beyond leading-edge technologies, access to expertise remains a challenge for enterprise leaders. In 2018, McKinsey found that organizations that move top talent to high-priority initiatives quickly were 2.2X more likely to return shareholder value than their slower counterparts.
Centers of Excellence Streamline Access to Expertise
Centers of Excellence were designed to improve the reach of critical expertise throughout the organization, agnostic of geographical location or business unit. For functions like IT or Operations, centers of excellence already have a strong track record of success.
Gartner shows that 95% of organizations that establish a Cloud Center of Excellence will deliver measurable cloud transformational success through 2021. McKinsey learned that 60% of top-performing companies in advanced analytics have a “center of gravity” to drive their analytics efforts forward, and in a separate study Garter found that 50% of organizations with more than three AI projects will establish a Center of Excellence for AI by 2022.
So what is a Center of Excellence, how can you stand one up in your organization, and what are the benefits they deliver to the bottom line? Read on to learn everything you need to know about Centers of Excellence.
Center of Excellence Definition: What is a COE?
A COE (Center of Excellence) is a centralized unit of dedicated people with a mission to streamline access to scarce, high-demand capabilities for rapid execution across the business. This group hones expertise in a specific subject area, standardizes best practices for wide-scale adoption, and provides thought leadership & direction in their area of expertise.
According to Gartner, COEs exist to “concentrat(e) existing expertise and resources in a discipline or capability to attain and sustain world-class performance and value.” These virtual or physical centers combine learning and oversight in a specific area, driving the organization to shift across multiple disciplines together.
For instance, you may have the heads of various marketing-related functions from across different product lines gather in a COE around implementing best-in-class social customer care for their customers, with shared customer history, multiple types of customized content, and more relevant content production. Therefore, the COE would focus on providing training, best practices, and resources for all of these different teams, while also gathering the data and learnings from all of the teams to create a positive feedback loop.
Six Requirements for a Successful Center of Excellence
In order to successfully stand up a COE, organizations must take a multi-part approach to development and implementation. In working with clients that have effectively deployed COEs throughout the organization we have identified the six requirements necessary for long-term COE success:
- Strategy-Work Alignment & Prioritization
- Standardization of Execution Paths
- Effective Resource Management
- Value Management, Capacity Planning & Coordination Across Teams
- Demand Management, Risk Mitigation & Continuous Improvement
- Centralized Tracking, Auditing, & Reporting to Enterprise Management
Center of Excellence Defined
We use the term Center of Excellence as a blanket term for groups that optimize the ways work gets done. However, businesses will use many names for these groups, including:
- Shared Services Center/Shared Services Organization
- Global Business Services/Multifunctional Shared Services
- Global Insourced Center
- Global Shared Services Organization
- Center of Excellence (COE)
- Competency Center/Global Competency Center
- Capability Center
These groups and names can overlap between three core mission areas: Run the Business, Grow the Business, and Transform the Business.
The Center Of Excellence Model: Purpose, Intent and Value Proposition
COEs have evolved to have different missions, some more tactical and some more strategic. Their three primary mission areas are: Run the Business, Grow the Business, and Transform the Business.
- Run the Business: Run the Business COEs are focused on enterprise efficiency and driving bottom-line impact. These efficiencies can be found in reducing administrative transaction costs or enhancing operational decision support. Examples with the Finance unit include A/P, A/R, expense reporting, and tax accounting. Within HR these can be payroll or benefits and for IT they can include service desks, network infrastructure, and ops.
- Grow the Business: The shared services of a Grow the Business COE affect change in enterprise effectiveness, working to make productivity improvements. They will be tasked with improving enterprise competitiveness and cost optimization, as well as optimizing internal service delivery. These types of COEs can take the form of integrated business services, analytics services, or application development. App development for ERP and other specialty competency centers would be another example, as well as internal consulting organizations.
- Transform the Business: A Transform the Business COE looks at enterprise transformation through strategic contribution and alignment. They will drive innovation at the business as well as uncovering new strategic capabilities, markets, products, and/or business models. These COEs manifest as innovation centers or specialized R&D groups.
Types of Centers of Excellence
As we can see Centers of Excellence can touch a wide array of business units throughout an organization. Due to their specialized nature, COEs can vary widely in subject matter. Examples include:
- Internal Consulting
- Continuous Improvement
- Operational Excellence
- Supply Chain
- Quality Assurance
- Business Analytics
- Artificial Intelligence (AI)
- Robotic Process Automation (RPA)
- Internet of Things (IoT)
- Advanced Digital
- Finance and Accounting
- Agile Development
- Innovation and R&D
Center Of Excellence Framework: Where Does it Lie in an Organization?
One important distinction to remember is that Centers of Excellence are separate from the business units they serve. This is by design to ensure maximum agility in deploying the COE across an organization. When visualizing an organization chart the COE often lies within the Corporate Strategy Office, above respective business units.
Where Center Of Excellence resides in an Organization
Center of Excellence Implementation
Now that we understand where the Center of Excellence lies within an organization we can look at the primary stakeholders involved in forming and running the COE. Executive sponsorship and ongoing support are essential for success, because the perception of the COE is critical for wide buy-in and adoption; not to mention the need for ongoing funding from executive-level strategic planning and budgeting processes.
While broad, collaborative, cohesive support is key, the cross-functional team that is ultimately responsible for governance will depend heavily on the underlying purpose of the COE, which will vary from case to case. For example, a COE for robotic process automation likely has broad representation in supply chain, manufacturing, operations, and IT. Alternatively, a COE for customer experience likely has representation in marketing, business intelligence/analytics, customer service, and delivery teams.
The make-up of the actual COE generally includes internal and external subject matter experts, as well as internal stakeholders with a nuanced view of the business (processes, functional groups, product lines, etc.) In addition, high-potential employees with interest in the subject area and enthusiasm for the mission with a proven ability to learn and deliver can be included.
How COEs Drive Value for Organizations
Centers of Excellence can add value to organizations in myriad ways across all business units due to their specialized subject matter expertise and operational agility. Let’s look at four major ways in which COEs have driven value:
- More efficient use of resources: By centralizing scarce, high-demand capabilities like knowledge, skills, and experiences COEs are able to widen the reach of those capabilities and streamline their access across the organization.
- Faster delivery: COEs are able to eliminate bottlenecks by streamlining access to critical capabilities which in turn increases speed of delivery, development, and maintenance of critical business processes.
- Cost optimization: COEs eliminate inefficient practices and decrease costs by streamlining processes, creating reusable assets, and reducing redundancy.
- Increased quality of services and products: By standardizing best practices across the organization COEs enable uniformity of service and product delivery, along with tight, end-to-end customer experiences.
Example: The Belts Program at Anheuser-Busch InBev
One example of a large organization successfully implementing a Center of Excellence is the Belts Program at Anheuser-Busch InBev. The name of the program, and the community of internal consultants that staff it, is derived from the Six Sigma Black Belt certification. The program was created to drive operational excellence and continuous improvement across the business.
AB InBev has a global network of ~2,500 employees trained in Lean Six Sigma methodology that makes up this Belts community. This community of internal consultants allows leaders across AB InBev to tap into the expertise of these resources, who sit across various functions and geographies.
The Belts Program at AB InBev is designed to advance and transform our business. The projects we lead drive results, develop leaders, and improve our company. Ideal engagements should be high-profile opportunities for the expert to apply their skills and drive business value.
Dave McMullin, Global Director of Continuous Improvement
How the Catalant Platform Enables COE Success
The Catalant platform helps Centers of Excellence thrive in several ways. Catalant empowers COE leaders to manage strategic objectives, workstreams, and resource allocation from a single, easy-to-use digital system. The software also comes with fast access to more than 70,000 independent consultants who can help fill in gaps in expertise.
Our customers stay competitive with best practices that collectively enable getting from strategy to execution faster and more efficiently. Partnering with more than 30% of the Fortune 100 has taught us how high-velocity companies execute strategy and deploy Centers of Excellence.
In our experience working with these organizations, the minimum requirements for successful strategy execution include:
- Making certain that ongoing work is aligned with strategic initiatives and objectives
- Having reliable data on what work is being done, the capabilities required to execute it, and who has those capabilities
- Being able to dynamically access and deploy resources with the right capabilities, from both inside and outside the organization
- Having real-time visibility into what work is happening, who is doing it, and the progress of work
- Being able to effectively intervene, when needed, by reallocating resources or altering the course of work
- Getting actionable insights into how work and resources are collectively contributing to strategic initiatives and objectives
But how does the Catalant Platform enable an organization to run an effective COE with respect to each of these minimum requirements? If we look at the Six Requirements for a Successful Center of Excellence from earlier, we can map them to these six minimum requirements.
Aligning Work and Business Objectives
The Catalant Platform helps COE leaders align work with corporate strategic objectives, including prioritization of high-impact work in the face of high demand from business units. COEs can use the platform to set strategic objectives and align execution of work with key metrics.
Standardization of Execution Paths
Catalant helps COE leaders to standardize how they engage with their internal clients and provide an understanding of the work to be done and resources available to do the work. COEs can use the Platform to define, break down, and organize work to identify the capabilities needed to execute.
Effective Resource Management
The Platform will help the COE to access and deploy capabilities against a changing slate of work. Because COEs can have variable volumes of work, they need elastic resources and often need to leverage external resources to do the work. The Platform allows the COE to access these external resources seamlessly in conjunction with internal resourcing.
Value Management, Risk Management & Coordination Across Teams
The platform helps the COE to gain visibility into how work is impacting its top objectives, ensuring accountability to stakeholders across the organization. The Platform gives COEs visibility into how bodies of work contribute to business objectives and KPIs.
Demand Management & Continuous Improvement
Catalant helps the COE to identify execution gaps and areas for greater investment, enabling resource reallocation to get work back on track and improving pipeline management. The Platform allows the COE to see the skills and expertise that the business needs and where gaps exist. It can then reallocate resources as needed.
Centralized Tracking, Auditing & Reporting to Enterprise Management
The Platform will help the COE to uncover insights from completed work to increase operational efficiency and forecast ROI with greater accuracy over time. COEs get visibility into performance trends, and can drill down into how work and resources affect growth and efficiency targets.
Learn more about how your organization can leverage our Platform here, how you can dynamically access external resources through our Expert Marketplace here, browse our Content Library here or learn more about who we are here.
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