Thomas 

Kaiser · Oliver D. Doleski

Advanced
Operations
Best Practices for the Focused
Establishment of Transformational
Business Models
Advanced Operations
Thomas Kaiser · Oliver D. Doleski

Advanced Operations
Best Practices for the Focused
Establishment of Transformational
Business Models
Dr. Thomas Kaiser Oliver D. Doleski
Siemens AG Fiduiter Consulting
München, Germany Ottobrunn, Germany

Translation: Global Translation Services (GTS). The translation costs from German into English
were borne by Siemens AG.

ISBN 978-3-658-27584-6 ISBN 978-3-658-27585-3  (eBook)

https://doi.org/10.1007/978-3-658-27585-3
Springer Vieweg
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This book Contains

• Guidance concerning the structured selection of fields of application having a

bearing on competition that will be critical for commercial success in the con-
text of digital transformation
• Assistance with the careful combination of use cases to achieve holistic busi-
ness objectives
• Description of a structured transition from the simple to the complex based on
realistic expectations of outcomes
• Presentation and explanation of an effective phase model for the focused
establishment of digital business processes and models
• Assistance with the development of competitive business models

v
Foreword

This book originates from a chapter of the book “Herausforderung Utility 4.0-
Wie sich die Energiewirtschaft im Zeitalter der Digitalisierung verändert” (“The
Utility 4.0 Challenge—How the Energy Industry is changing in the Age of Digi-
talization”), which was published by Springer in 2017 and appeared in the same
year as a self-contained essential. The book, which amounts to 40 chapters in all,
contains contributions from prominent authors from the academic and hands-on
spheres illuminating key digital transformation issues in the energy sector against
the background of the fundamental transition from an analog to a digital energy
business. The authors do not limit themselves to an abstract depiction of a the-
oretical digitalization concept for the energy sector, instead offering the reader
a comprehensive insight into selected concepts, smart technologies and concrete
business models for the digital energy system of tomorrow.
This text is a translation into English of the complete revised and updated
version of the chapter “Digital transformation, but how?—from ideas to realiza-
tion planning” written by Thomas Kaiser. The original text had a particular focus
on the energy industry, but this has been replaced with a broader, cross-sectoral
perspective for publication in the Springer Vieweg. The other main change to
the original text, alongside this move to a wider focus addressing all sectors and
industries, has been the addition of a substantial amount of new content covering
relevant questions and factors in relation to business model development.

vii
viii Foreword

This book begins with a clear and concise introduction to the principles of the
key term advanced operations. Thanks to its convenient format, this book is able
to set out the principal elements of the advanced operations concept in concen-
trated form over just a few pages.

Munich Dr. Thomas Kaiser

September 2019 Oliver D. Doleski
Contents

1 Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Target Scenarios for Digitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Commercial Motivation for Digital Change . . . . . . . . . . . . . . . . . . . 6
2.2 Filling in the Detail of a Target Scenario Suitable as a
Guide for Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Organization of Digitalization Initiatives. . . . . . . . . . . . . . . . . . . . . . 10
3 Development and Management of the Digital Use Cases . . . . . . . . . . . 15
3.1 Evaluation and Prioritization of Identified Use Cases. . . . . . . . . . . . 15
3.2 Standard Procedure for the Focused Establishment
of Digital Initiatives. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4 Implementation-Related Success Factors. . . . . . . . . . . . . . . . . . . . . . . . 25
5 The “advanced operations” Transformation-Capable
Business Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.1 Starting Point: The Business Model. . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.2 Advanced Operations as a Business Model. . . . . . . . . . . . . . . . . . . . 32
5.3 Pragmatic Hypotheses for Advanced Operations. . . . . . . . . . . . . . . . 40

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

ix
About the Authors

Dr. Thomas Kaiser  serves as Senior Vice President

for Siemens IoT Consulting Group headquartered in
Munich, Germany. Based on his vast experience he
became a trusted advisor for digital transformation
to many management board members and across
various sectors. Having been Managing Director for
an US based global consulting firm before he
embraced the full management and operational con-
sulting experience—from its very early stages of the
Big Data hype to the professional routines of IoT
and digital related use cases in the meantime. Dr.
Kaiser earned his doctorate degree in Economics
while he strives for the balance between the inspira-
tion of conceptual learnings versus their pragmatic
applications in operational business life.

xi
xii About the Authors

Oliver D. Doleski is a management consultant

active in a wide range of industries and founder of
Fiduiter Consulting. He studied economics in
Munich and has held various senior positions in
public service and with the German global market
leader in the semiconductor industry. Today Oliver
D. Doleski is particularly interested in digital trans-
formation, process management and smart markets
and his main area of research at the moment is busi-
ness model development. He shares the expertise
accumulated from his hands-on experience and
research as the publisher and author of numerous
publications and specialist books.
Introduction
1

This book discusses conceptual models and approaches suitable for use in opti-
mizing—from a business perspective—a digitalization process that is still in a rel-
atively early phase. While disruptive changes can already be identified in business
models originally based on data, a broader, more evolutionary development of the
digital use of data is also taking place that could well end up having equally revo-
lutionary implications. Certain sector-specific patterns are becoming apparent and
these will be addressed in greater detail later on.
Rapid innovation in infrastructural technologies, data processing and data
media have paved the way for potential applications that would once have been
virtually inconceivable. Factors including the following as well as the vastly
increased volume of data available are opening up new application horizons:

• The largely automated exchange of data between machines. A phenomenon

usually discussed in specialist circles in connection with the generic term
internet of things (IoT) that also sits at the heart of the Industry 4.0 concept
(cf. Brödner 2015).
• The ability to retrieve information in real time, which is not just transform-
ing the quality of human decision-making but also taking artificial intelligence
into new dimensions. The energy industry’s smart meter technology provides
a prominent example of a firmly established real-time application (cf. Aichele
and Doleski 2013).
• The development of mega-clusters such as New Health, Fintech and Smart
City as a result of the increasing dissolution of conventional sector bounda-
ries. Examples of this include the fusion of health care, finance and insurance
or infrastructure management with modern information and communication
­technology.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 1

T. Kaiser and O. D. Doleski, Advanced Operations,
https://doi.org/10.1007/978-3-658-27585-3_1
2 1 Introduction

• The possibility that now exists of harmonizing unstructured and even dirty
data to facilitate the subsequent recognition of predictable patterns.
• And finally, a user-friendly (complexity-reducing) visualization of findings as
a basis for improved decision-making.

New horizons such as these are, it can be seen, enabling new service provid-
ers—especially companies rooted in the world of data—to make inroads into
long-standing markets with their now compartmentalized value-added steps. Dis-
placement is driving the redistribution of market share, with new service provid-
ers from the world of data radically carving out a place for themselves in value
chains previously considered to be stable (cf. BDEW 2016 for example in the
context of the energy industry).
The multifarious changes amplify each other’s effects and can lead to an wor-
rying openness to the future that causes discomfort in some quarters in the con-
text of investment decisions already made. Some of the changes based on data
technology outlined above threaten disruption to future commercial success, in
other words.
Whatever uncertainty exists, however, and despite the wide range of assess-
ments offered on the subject (including by the authors of this text), it is vital
not to narrow considerations down to the much-described new business models.
These new business models are better regarded as a separate dimension or sepa-
rate challenge, extending and complementing the traditional business models and
the core processes derived from them.
Across sectors (as will be addressed in greater depth later on), change phe-
nomena can be recognized that will also transfer in corresponding trends over the
course of time. The energy industry mentioned as an example above, for instance,
has in common with the financial industry, which—with certain other regulatory
parallels—is also feeling the shock of digital change. The blockchain applications
that are infiltrating the traditional core banking world and revolutionizing digital
checking and payment procedures in the financial industry, for example, are ripe
for transfer to the full range of transactional support processes in all other indus-
tries.1

1Cf. a recently compiled study from the Konrad-Adenauer-Stiftung, Hübner (2017), for an
interesting suggestion regarding such a possible sector transfer.
1 Introduction 3

Generally, the active shaping of digitalization with focused utilization of

advanced data analysis2 in coordination with refined IT infrastructure, organiza-
tional and staffing solutions will become a cornerstone of competitiveness. This
management task, which represents the operational core of an essential innova-
tion offensive, needs to be anchored in a future-proof business model conceived
along advanced operations lines.

 Definition Advanced Operations Advanced operations are transforma-

tion-capable business models whose capability is based on the strategic use of
data analytics innovations (advanced analytics) and that aim to optimize customer
benefit, market performance and competitiveness.

The following sections of this publication address the principal issues involved in
this context in a chronological order, providing illustrative explanations from the
point of view of the decision-makers:

• Initiate: Chap. 2 explains how a strategic target scenario for digitalization is

created in a systematic procedure and how solution models offering a corre-
sponding level of legal assurance, scalability and cost-efficiency can be devel-
oped.
• Realize: Chap. 3 describes how selection and (per se) analytical and tech-
nical development and initiation of the advanced analytics use cases can be
approached on this basis.
• Stabilize: Chap. 4 fills in the remaining details of the medium-term concept
presented here with selected success factors for optimizing implementation,
which, addressing the strategic stipulations and taken in tandem with the use
cases, mark out the way for a well-managed digitalization initiative.
• Business model transformation: Chap. 5 extends and simultaneously con-
cludes this book by assuming an integrative business model perspective that
considers the strategic benefit of advanced operations and, with it, lasting busi-
ness success in a new digital normality.

How to establish advanced operations is thus the object of the following four sec-
tions of this book. A diagram showing how the content of this book is structured
and ordered is presented for clarity in Fig. 1.1.

2Referred to in the following as “advanced analytics”.

 4

INITIATE REALIZE STABILIZE

Evaluation and Continuous change

Motivation for change
prioritization management

Standard procedure
Specifics

Organization

Section 2 Section 3 Section 4

TRANSFORM Advanced
Section 5 Business model
operations

Fig. 1.1   Content structure of the book (schematic)

1 Introduction
Target Scenarios for Digitalization
2

A particular danger exists, during phases of upheaval in which digital change is

on everyone’s lips, that businesses will be led into erring in their decision making.
This applies to timing—decisions may be taken too quickly, before the organi-
zation affected has been properly prepared, or too slowly—and also to the level
of penetration and the extent of innovative data analytics applications in terms of
their implications for organization, staffing and IT.
A comprehensive, holistic concept, which should be embedded in a system of
medium-term and annual revolving business planning (cf. systematically Dole-
ski 2015), is therefore of central importance and is accordingly given precedence
over the more specific considerations in the following. Expressed in more simple
terms, every interested party, irrespective of their sector, should be able to benefit
from the negative experiences of other sectors. All too often, isolated pilot pro-
jects set out with the backing of the highest levels of the corporate hierarchy only
to founder on the pressures of day-to-day operations or the combination of high
costs and a lack of plausible benefit gains from the commercial perspective.
Given the target group of this publication, most readers will probably still
remember the misplaced investment of the dot-com years at the end of the last
century. The system described in the following may seem rather bureaucratic in
places but what this amounts to is a clear plea to let entrepreneurial caution and
discipline prevail even if the creativity of the changes could easily bring other
ideas to mind.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 5

T. Kaiser and O. D. Doleski, Advanced Operations,
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6 2  Target Scenarios for Digitalization

2.1 Commercial Motivation for Digital Change

When considering the target scenario, it is important first to clarify the commer-
cial motivation for digital change. Ideally there should be more to it than just an
instinctive response to a competitive impulse: action should follow on from a
broad-based assessment of the opportunities and risks paying particular attention
to customer/market, competitive and regulatory factors.

 Readers are recommended in this connection to make use of intensive

workshops (involving various specialist groups, generally from rele-
vant disciplines) to help create a logical target scenario covering the
probability of success and the likely gains to be achieved.

The categories in which gains are expected can be specified in advance (prior to
the initial situation assessment) or identified from the results of this assessment.
Typical examples (not subject to any further grouping in the following) of
such specified gains might include:

• A general search for innovative business areas, including well beyond the
established sector boundaries.
• The integration of state-of-the-art technologies such as machine learning
(ML), internet of things (IoT) and robotic process automation (RPA) into the
in-house service portfolio.
• Connectivity or even accentuation in the context of cross-sectoral initiatives
such as New Health, Fintech, Smart Cities and electromobility.
• Integration of digital sales models into the process landscape.
• On-demand tapping of procurement and sales markets.
• Systematic cost savings and enhanced flexibility of the output of relevant oper-
ating and service processes with optimization steps based on forecasts.

This generic list is of course by no means exhaustive. Addressing the question of

motivation, however, is sufficient only to produce a vision, at best, and certainly
not a target scenario suitable for realization.
2.2  Filling in the Detail of a Target Scenario Suitable as a Guide for Action 7

2.2 Filling in the Detail of a Target Scenario Suitable

as a Guide for Action

Experience indicates that the next step is to embed this vision in a context that
supports decision-making and can guide actions. This is illustrated with an exam-
ple in Fig. 2.1.
The actual target scenario, or rather the target scenario suitable as a guide for
action emerges only once at least the following questions (backed up with plausi-
ble hypotheses) can be answered:

• For which fields of application do we want to use analytics?

• What analytics expertise do we want to maintain or develop?
• What objectives are we using analytics to pursue?
• What is an expedient level of centralization for our organization?
• Do we want to develop and/or buy in analytics expertise?

The term target scenario is thus used in this publication to denote the typically
early-stage plan of how to plausibility-check the interdependent issues of the

Questions Values

For which fields of Research

Sales and Production Strategy and Human
application do we want to and ...
after-sales and logistics planning resources
use analytics? development

What analytics expertise

do we want to Descriptive Diagnostic Prognostic Prescriptive
maintain/develop?

What objectives are we

Efficiency Risk Capital Quality
using analytics to Income gains ...
gains reduction optimization enhancement
pursue?

What is an expedient
level Central Local Virtual Glocal
of centralization for our model model model model
organization?

Do we want to develop
and/or buy in analytics Make Buy Opportunistic
expertise?

Fig. 2.1   Target scenario

8 2  Target Scenarios for Digitalization

t­argeted digitalization initiatives consistently so as to be able to prepare effec-

tively and efficiently for their implementation.
The five key questions set out above are considered in detail in the rest of this
second section as a way of systematically filling in the detail of the target scenario.

For which fields of application do we want to use analytics?

First of all, the fields of application are weighed up in an initial analysis and
a provisional order of priority is fixed. This straight away makes it possible to
explore in greater depth which organizational units could be materially affected
or responsible (this encompasses a broad range of vertically- and horizontal-
ly-acting units in the generic diagram presented).1 Only once the field of applica-
tion level has been reached can the more detailed features of the target scenario
be derived. The relevant fields of application are consequently selected on the
basis of the specific strategic benefit anticipated from analytic digitalization and
then considered in greater detail. Serious errors can be avoided by taking steps
at an early stage to prevent the sort of top-down chaos that can be triggered by
conducting “lab tests” on a scale that precludes effective coordination. The selec-
tion function contributes to the necessary focusing of the overall process in this
respect.

What analytics expertise do we want to maintain or develop?

The most significant decision—in data analytics terms—regarding the fields of
application selected is now made by assigning the four different areas of exper-
tise possible in each case. The term “expertise” is significant here, as it will tend
to determine not only the added value from a data analytics standpoint, but also
the number of potential users in day-to-day operations. There is usually a nega-
tive correlation in each case between the added value and the number of users, as
illustrated using the energy industry as an example once more:

• “Descriptive” denotes the question (familiar from so many different situations

in life): “What happened?” One example from the energy industry would be
smart meter transmission data that provides real-time fault indication under
an advanced metering management solution with the object of facilitating
efficiency and quality gains. The realization of this (quite obvious) solution—
discussion of which must wait for a later phase—will clearly involve a large
number of potential field service users.

1For a broad and inspiring overview, see the BARC study, Bange et al. (2015).
2.2  Filling in the Detail of a Target Scenario Suitable as a Guide for Action 9

• “Diagnostic” provides added value in respect of the question: “Why did some-
thing happen?” One example here would be the analysis of a cost overrun in
the context of an otherwise always very accurate operations plan for a power
plant. There now exist applications for automated data handling that overcome
the traditional problem of incompatible operating databases as well as provid-
ing real-time or better on-demand functionality. The conventional scorecard
systems, with their monthly snapshot of efficiency generated in arrears, appear
obsolete by comparison. The more rapid operational corrections thus facili-
tated doubtless make a positive contribution under all of the target categories
in the diagram. The user group, already limited in any case, also becomes
clear: use is probably to be kept just to power plant management functions.
• “Prognostic” further increases the benefit to be gained from the data. The
transition from traditional yet already highly professional analytics, which
has still to become fully established in practice in some respects, to genuine
advanced analytics throws up the question: “What might happen?” Potentially
highly attractive areas of application include predictive expertise in relation to
electricity markets as well as the oft-mentioned network load optimization in
connection with the weather-related imponderables of the renewables sector,
for example. Quite clearly, exclusive access to the relevant data is going to be
essential in order to gain a competitive edge by this means, which in turn dic-
tates a correspondingly minimal number of users.
• “Prescriptive” might be described as the supreme discipline of analytic dig-
italization: “What should we do?”—coupled with often automated machine
analysis, decision-making and action/execution, with all features of the
aforementioned areas of expertise, from real time to pattern recognition to
forecasting intelligence, typically included. Examples (drawn from a rapidly
advancing technical field) could include preventive maintenance intervals with
autonomous execution in the turbine and generator train. The automated pro-
curement and delivery of replacement parts in the context of an end-to-end
fault clearance chain exhibits similar characteristics. It is worth noting, as
an aside, that it is in this prescriptive domain that ongoing digitalization will
make the most radical impact, with platforms for sales-level transactions that
have previously been inherently monopolistic in nature suddenly becoming
replaceable.

The areas of expertise categorized here, with their assignment to the fields of
application (to be selected on business grounds) and their use cases as already
illustrated, indicate the need to align the in-house organization accordingly and
give thought to the development of the required expertise. Some of the questions
10 2  Target Scenarios for Digitalization

cannot be answered finally until more is known about the specific use cases, but
experience shows that appropriate guidelines are essential for successful imple-
mentation. Such guidelines are generally shaped by the size of the company, typ-
ical investment behavior, compliance requirements pertaining to data and IT and,
of course, the constraints imposed by law (including, in Germany, employees’
codetermination rights).
These points—with the exception of the legal issues (relevant literature is indi-
cated2 but the issues themselves are not discussed)—are addressed in detail in the
following.3
The following general trends regarding forms of organization and the shaping
of expertise need to be considered briefly to help identify—at least initially/provi-
sionally—the right approach in terms of the extent of centralization and sustaina-
ble in-house analytics expertise.

2.3 Organization of Digitalization Initiatives

The term “organization” is used in the context of digitalization initiatives primar-

ily to denote their management and coordination in terms of structural organiza-
tion, clear areas of responsibility and the collaborative arrangements sought.

What is an expedient level of centralization for our organization?

The evidence so far being by no means conclusive, the scope for definitive nor-
mative statements is decidedly limited. It appears reasonable, in cases in which
the matter is uncertain, for company practitioners to seek guidance in relation to
orchestration from analogies involving successfully completed sales campaigns
or restructuring programs. The following general statements can be made in the
manner of a heuristic evaluation:

• Central model: Small to medium-sized enterprises (SMEs) should favor cen-

tralized models when developing analytics units. A small core team of data
analysts should be created and should, as far as possible, have central contact
with executive management. This core team identifies the fields of ­application,
with a moderating role in the management dialog, implements use cases and

2Extending well beyond the German Federal Data Protection Act (BDSG)—for example
(and just for illustrative purposes) the current EU data protection reform.
3Also see again Fig. 2.1 in this connection.
2.3  Organization of Digitalization Initiatives 11

coordinates the implementation roadmap. Manageability, the synergistic

effects generated over time, cost-bearing capacity and the fast, practical chan-
nels involved all speak in favor of this approach.
• Local model: Large companies, with their diverse departments and existing
wide range of fields of application, should move quickly to back up their ana-
lytics competence center with local analytics teams. These teams, which are
entrusted with the implementation of the specific use cases, provide their own
local solutions and simultaneously pursue inquiries about additional solutions
and empirical experience. There emerges a centrally coordinated marketplace
that promotes overall implementation and also increases the probability of
success of individual projects.
• Virtual model: As a digitalization initiative becomes more mature, it can
increasingly be cast as a virtual organization. Driven forward by independ-
ent local application teams confident in their own ability, an interactive and
collaborative structure—ever more firmly established in operational terms and
fueled by operational activities—comes into being and there is an element of
job rotation between the organizational units and application teams. The result
is the emergence of virtual competence centers (although these are a phenome-
non incompatible with some management cultures).
• Glocal model: The somewhat awkward term glocality, a hybrid of global and
local optimization, is not entirely free from overlap with the forms already
mentioned, but is certainly relevant for units to be linked up centrally that each
stand in need of analytic digitalization. The glocal model includes central stip-
ulations concerning data security and the general IT strategy. The latter has
triggered an ongoing factional dispute among IT professionals between the
proponents of bimodal IT structures and those who prefer more traditional
IT concepts built around stability and reliability. Those in the bimodal camp
believe operating existing IT solutions generally introduced for the medium-
to long-term side-by-side with new solutions capable of providing the agility
required represents the right way to facilitate the change processes, which can
sometimes advance at a very rapid pace, while keeping risk to a minimum.
Without wishing to express anything amounting to a general vote of support
for this view, the authors would point out that the sheer extent and complexity
of the installed IT base constitutes a strong argument in its favor.
• Normative context: It is important to consider the legal and ethical context
as well as the technologies involved (to be specified centrally). Develop-
ments in data protection law must be observed continuously and transferred
into a company-wide code of conduct, the updating and monitoring of which
must be made a central plank of compliance and internal auditing activities.
12 2  Target Scenarios for Digitalization

Other forms along the global-local continuum can be developed in the spirit
of democratizing digitalization with data analytics. Rules at a level below the
compliance threshold must be established to govern the self-managing organi-
zation of analysts and users, their roles and interaction via the internal market-
places and their managed integration into business processes.

In summary, the following factors (described in illustrative terms) are relevant for
decisions on organization: management (manageability, communication, moti-
vation, policy equilibrium and decision-making ability), the tapping of potential
(focus, interfaces, specialization and synergies) and implementation (costs, iso-
lated piloting, overall effect and resistance).
Whatever answer is found to the question of organization highlighted here
should always respect the status quo for the people already in place in existing
roles and their development plans and career paths. It would be a grave error, in
the face of all these technological, systematic and data-related optimization path-
ways, to overlook the importance of employees and managers as simultaneously a
success factor to be wielded and a challenge to be managed. Indeed, initial expe-
rience suggests that such a misjudgment can be a significant contributor to even-
tual failure.

 Integrate employees and managers properly into the organization’s

efforts to ensure transformation. Make sure the people affected are
actively involved!

Do we want to develop and/or buy in analytics expertise?

One of the first questions to be addressed in the context of expertise is whether
to establish and develop the requisite expertise in-house (make), procure it from
the human resources market (buy) or optimize it with an opportunistic mix. The
“Data Analyst” job profile in particular has now become established. Data ana-
lysts put a wide range of use cases to work and strive to ensure the added value
indicated for illustrative purposes above is realized in their organization’s day-
to-day operations. Unlike the data scientist role, the data analyst role demands
no knowledge of programming or programming languages. Data analysts imple-
ment roll-out and any operating adjustments to the use cases as identified in the
procedure described in the next section. The role focuses on the operation of the
software selected and preparation (if necessary) and release of the results. Data
analysts function in this respect as something of a local interface to management
with operational responsibility and ‘translate’ data-related questions into specific
application solutions.
2.3  Organization of Digitalization Initiatives 13

Expertise will naturally have to be built up in line with the relevant infrastruc-
ture and software solutions and external expertise can be bought-in on a task-
by-task basis for this purpose, but it is important not to lose sight of in-house
development.

 Devise the most precise expertise profiles possible for all relevant
positions involving analytics expertise based on long-term considera-
tions and the target scenario.

Related operations need to be sustainable in terms of the rate of advance: it

appears that further technological development surges can be expected to occur in
generations of three to five years and these will tend to be not just revolutionary,
but also to represent evolutionary loops, so building up and developing expertise
in house is vital. Being reliant on third parties and being a laggard rather than a
leader on the competition means forfeiting any kind of edge in terms of entrepre-
neurial positioning (for a general assessment see Kollmann and Schmidt 2016).
Development and Management of the
Digital Use Cases 3

This section presents a description of the methodological/organizational core

aspect of digitalization. This aspect amounts in effect to the engine room of a dig-
italization initiative and also of the ongoing cross-functional program. The lan-
guage used in the following is the data technology management language. This
is a conscious choice made in order to depict the practical fundamentals of what
is actually happening in sharper relief and to emphasize the accompanying busi-
ness calculus. What is required in order to remain fully informed is not so much
the impact of the apparently endlessly evolving technical language as the basic
personal competence to pose the right questions from the top to the bottom of the
organization.

3.1 Evaluation and Prioritization of Identified Use

Cases

What, then, has to be done/has to happen for a target scenario as described above
to be converted into the application(s) in practice?
Along with the implementation planning process to be described in Sect. 3.2
immediately below (which has to be initiated in parallel), the use cases them-
selves are of course also center stage.
Actual development too can only proceed on the basis of a focused selection
and sequencing of use cases compliant with the target scenario. A comparative
assessment must be performed, in relation to which reference is again made to
Fig. 2.1 and the application-related illustrations described there. All manner of
considerations can play a role, but two groups of factors have been found to be
especially relevant in practice. These, as set in Fig. 3.1, are the anticipated added
value and the current or foreseeable availability of the necessary data.

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 15

T. Kaiser and O. D. Doleski, Advanced Operations,
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16 3  Development and Management of the Digital Use Cases

Evaluation of the use cases Selection matrix (indicative)

Evaluation of the use cases with reference to the

anticipated added value and data availability
− Anticipated added value: Indicative estimate of High

anticipated ROI (project costs and costs for a

Anticipated added value

new analytics application plus anticipated
qualitative and quantitative benefit: parameters
derived from comparable internal and external
use cases)
− Data availability: Indicative estimate of data
availability (own or third-party data, customer
consent obtained: yes/no) and access (own or
external systems, system access in place:
yes/no)

Examination of legal factors: Collection (own or Low

third-party data), evaluation (internal or external Low Data availability High
data, domestic or international) and utilization
Use cases
(internal or external purposes), with reference to
Not relevant area
the relevant legal systems

Fig. 3.1   Indicative assessment and prioritization of identified use cases

While the status of added value as a key factor is self-evident (and has
already been categorized in the form of alternative targets such as risk reduc-
tion in Fig. 2.1), there is certainly a discussion to be had regarding the availa-
bility dimension. It should be noted that the weighting of this factor depends on
the maturity level and the digital experience curve. Data collection technologies
capable of generating inexhaustible data resources, typically of external third-
party origin, but practical experience suggests caution is merited. The danger of
drowning in data to the extent that the perspective required for the creative identi-
fication of use cases is lost is simply too great.

 Avoid drowning in data by conducting digital due diligence (a digital

status check), including the indicative specification of the objective
associated with the data acquisition and processing exercise, at the
beginning of every digitalization initiative. A suggested model ideal
roadmap for realization can be found in Sect. 3.2.

The portfolio classifications and conclusions point normatively to a straightfor-

ward relationship: it is quite typical that where a high level of value added is
expected or sought, the concept (on further investigation) is regrettably compli-
cated by sub-optimal data availability. This may be due to a lack of acceptance,
3.2  Standard Procedure for the Focused Establishment of Digital Initiatives 17

for example, or simply to legal restrictions concerning individual personal data.

A balanced mix of different use cases thus appears advisable, from a practical
angle, for a start phase. The following rules of thumb can expediently be applied
to the selection of suitable use cases (here once again with reference to an exam-
ple from the energy industry1):

• It makes a great deal of sense to give preference to existing use cases or use
cases similar to the application in mind and work on optimizing them to real-
ize the full added value. Smart meters again serve as a good example, with
their initial purely descriptive real-time read and billing applications being
evolved into predictive supply optimization or even prescriptive approaches to
the end consumer.
• Then there are the complex use cases, in particular scenarios in which data
availability and legal obstacles create a double challenge. Think of web-based
user and/or generator data that provides price optimization opportunities for
market participants at short intervals or even enables the process to be auto-
mated.
• Finally, there is the very attractive group of straightforward quick win appli-
cations: pilot applications that can be demarcated readily in terms of timing,
location and transactional features and have the attraction that a high level of
rejections can be tolerated. These, in other words, are areas in which initial
trial results can be generated quickly—e.g. initiatives to refine maintenance
intervals and costs by expanding the data pool to include external factors not
previously factored into the models.

3.2 Standard Procedure for the Focused

Establishment of Digital Initiatives

Arguing in favor of one category or another is not the purpose of this text. The
rule of thumb “work from the easy to the more difficult” should nevertheless be
observed so that the in-house organization has the chance to acquire the necessary
process discipline and experience gradually. Irrespective of which of the use cases
roughly planned out above are to realized first and in what order, the procedure
set out in Fig. 3.2 below is recommended:

1Cf.similarly illustrative for the financial sector and the telecommunications industry:
Foreman (2014).
 18

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 Phase 6

Project Data Data Data Preparation of Implementation

planning collection preprocessing analysis results of actions

Construction of an Selection of the

Determination of Structuring of the Selection of the Realization
analytic data visualization
the objective data analysis method planning
model method

QG

People
Derivation of data Planning of data
Data cleansing Analysis Visualization
requirement collection

Documentation of
Clarification of Data collection Implementation of
the cleansing Model testing Recommendations
legal requirements and aggregation actions
process

Determination of Storage of the QG Decisions and Stabilization of the

Process
Model tuning
resources required data approval actions

QG
Selection of Measurement of
Model approval
tools/infrastructure the results

Planning of project QG
Model
setup (team and
management
roadmap)

Technology
QG QG

Legend: QG = Quality Gate

Fig. 3.2   Standard procedure of advanced analytics initiatives

3  Development and Management of the Digital Use Cases
3.2  Standard Procedure for the Focused Establishment of Digital Initiatives 19

As can be seen, in this phase model (the similarity to a project procedure with
rigorous quality gates2 is no coincidence) the areas “people”, “machine” (or tech-
nology), “process” and “data” are realized holistically as value creation elements
in their own right. These four decision-making and action areas must conse-
quently be optimized in a coordinated procedure (see also the remarks in Chap. 4
below).
Although the individual phases of an advanced analytics initiative are on
the whole tackled successively in the standard procedure recommended by the
authors, the open overall design of the phase model architecture represents a prac-
tical combination of the sequential procedure and agile methodology. Changes of
all kinds can still be considered dynamically, in line with the use case and the
progress made in the project, as the innovation process advances. This is done
either with defined decision-making points at the quality gates or with numerous
feedback loops along the implementation pathway.
Back to the phase model: A number of interesting normative statements can
be derived from the prospect of setting aside the aforementioned straightforward
principle of working from the easy to the more difficult (only the most significant
are listed):

1. Approaching digitalization as a chaotic creative laboratory with a set of rules

all of its own will usually fail to produce commercially viable, robustly estab-
lished applications.
2. Failing to involve and embed employees as active users in the higher-level
change process and instead replacing them all with external third parties (in
the belief that this will allow a faster start) will lead to shortcomings in the
necessary transformation process. Ideally, external partners and the in-house
organization should work together in a balanced and equitable relationship
that enables each side to learn from the other.
3. Relying solely on external IT partners (especially partners lacking the req-
uisite sector and process knowledge) harbors a risk of significant misplaced
investment, because the focus of the IT licenses sold is all too often at odds
with the agile and responsive solution actually required to do justice to the
data. Experience shows that there are definite advantages to having the support
of neutral advisors, especially in the initial project phases.

2Originating from the milestone-based approach, quality gates (QG) are defined points in
the progress of a project (typically a development project) at which a go/no-go decision
is made on the following project step based on precisely defined quality criteria agreed in
advanced.
20 3  Development and Management of the Digital Use Cases

4. A clear distinction needs to be maintained between visual implementations of

an application sketched out at the beginning and the outcomes that are found
to be feasible and/or to reflect user requirements once the procedure is under-
way. A multicolored “Disneyland” approach for the perceived benefit of the
senior management tier does not, in and of itself, advance a company’s rela-
tionship with data and digitalization.
5. The targeted added value, in terms of knowledge or automated control, of an
application (plausibility-checked in phase 5 “Preparation of results”) should
not be exaggerated or talked up for the quality gates; rather it should be sub-
stantiated and affirmed in a critical manner with short iteration loops.

These guidelines, which might perhaps appear somewhat destructive at first

glance, have intentionally been placed ahead of the constructive part. They (and
more could undoubtedly be added to them) actually reside at the heart of the typ-
ical phenomenon of the disconnected experimental laboratory, against which the
authors are anxious to warn.
The discussion now moves on to the constructive factors, the principal aspects
of which are presented phase-by-phase below.

Phase 1: Project planning

• Identification of data and data sources.
• The relevant legal background is also evaluated taking account of data pro-
cessing and storage.
• Specific expertise required can then be determined in a correspondingly thor-
ough manner and a use case team, usually involving people from a number of
different departments, is appointed on this basis.
• The expertise and experience within the team dictate what (temporary) exter-
nal expertise needs to be brought in (in particular in the area of new data pro-
grams). External expertise is procured through a concept-based competition in
the form of a request for quotes.
• If recourse is made to external assistance, collaborative solutions mutually
beneficial for all partners must be developed in the sense of a customer value
co-creation (cf. Mütze and Gerloff 2019).
• The business case is calculated based on scenarios and the path for perfor-
mance analysis is defined along with the key performance indicators (KPIs).
• The project plan is drawn up and released, together with the aforementioned
items, through a quality gate.
3.2  Standard Procedure for the Focused Establishment of Digital Initiatives 21

Phase 2: Data collection

• Where is the data and how is it to be made available? Will the collected data
records be complete?
• Is the relevant data also available in archived form? Does the data include a
standardized time stamp?
• Which data is structured (ERP systems, for example) and which unstructured
(text files, tables, etc.) and, as a second dimension, which data is internal and
which external?
• Does the data appear already to be available in sufficient quality for robotic
process automation (RPA)?
• How can the data be transferred, converted and consolidated?
• Is the data compatible with the existing IT systems or are conversion solutions
needed?
• Is the current technology adequate for data transmission?
• How time-intensive will data retrieval be?
• Whose cooperation is required?
• Description of data transmission from the sources identified to an internal stor-
age medium/database
• Proposal for data storage and categorization, in particular, local or cloud?

Phase 3: Data preprocessing

• Development of a concept for the consolidation of different data records and
files
• Creation of a strategy for data cleansing in a collaborative effort between IT
experts and people familiar with the data (for example duplicated data records
vs. records that only appear to be redundant and their formatting to establish
compatibility and commensurability)
• Presentation of a guideline for data cleansing by filling in missing values,
upgrading unstructured and/or corrupt data and purging extreme values
• Selection and utilization of software appropriate for the data cleansing task at
hand, ideally with optional manual checks
• Description of data cleansing as an ongoing process once the application is
operating

Phase 4: Data analysis

• Definition of the requisite data mining methods for the use case selected (for
alternative technical options, cf. Provost and Fawcett 2013)
• Specifically, this entails the deployment of optimal programs for typical func-
tions such as the detection of outliers (such as fraudulent billing), clustering
22 3  Development and Management of the Digital Use Cases

(patterns in consumption data, for example) or sentiment analyses (such as the

influence of weather)
• Creation of a guideline for the performance of such data analyses
• Development of testing and verification models (for example A/B tests) that
enable randomized experiments
• Description of an adjustment process involving the modification of the analy-
sis parameters with the aim of developing an error-free model

Phase 5: Preparation of results

• Determination of the visualization method that will provide the best possible
depiction and thus facilitate a rapid and efficient decision-making process
• Optimization of preparation tailored to specific target groups so that relation-
ships, comparisons, distributions and/or compositions can be presented clearly
where necessary
• Description of how the selected visualization method(s) are to be used
• Guidance as to how appropriate actions should be derived from results with
matched authorization levels

Phase 6: Implementation of actions

• Development of a guideline for the implementation of the application in exist-
ing or new systems and working processes
• Planning of how the model can be automated and integrated into existing sys-
tems
• Proposal regarding any process reorganization to anchor the analytic model
developed firmly within organization
• Planning of personnel capacity to support effective and efficient analytics
operations
• Evaluation of the adjustments necessary to existing IT systems in order to sup-
port integration of the new application
• Evaluation of all implementation parameters
• Introduction of actions into normal operations
• Description of methods to stabilize the actions
• Concept for the continuous measurement of the analysis results

Strictly managed and transparently documented quality gates are usually required
following the completion of a phase in order to reduce the risk of a general fail-
ure or avoidable inefficiencies. Given that even large organizations will only be
able to start a limited number of use cases in parallel in this way (due to limited
3.2  Standard Procedure for the Focused Establishment of Digital Initiatives 23

numbers of experts and the limited management attention available to devote to

the matter), the initial phase in particular should be launched with no more than a
handful of use cases. The same also applies if fast-moving use cases (quick wins)
are preferred.

 Focus your advanced analytics procedure by systematically limiting

the number of use cases from the outset, ideally using a criteria-based
scheme. Starting with a clearly defined selection of success-critical
issues enables you to avoid organizational overstretch and the opera-
tional hectic that usually comes with it.

Following on from these implementation-related considerations at the use

case-specific level, the next Chap. 4 takes another thorough look at the implemen-
tation aspect.
Implementation-Related Success
Factors 4

Some implementation factors—notably organization and personnel planning—

have already been discussed in connection with the elements of a target scenario
addressed above. It must be emphasized once again that general success factors
for similar change initiatives also apply, although this is not in any way intended
to downplay the relevant organization-specific conditions. The purpose of this sec-
tion, then, is to consider additional experience-based values from digital imple-
mentation practice that have been found typically to be significant for a successful
outcome.
Other implementation factors also exist along the deductive “axis”, presented
above, from target scenario as a whole to specific use cases, and these impose
their own reciprocal demands. The point is not to suggest that these are some-
how universal, but rather to draw attention to cross-sectoral trends that should be
understood, first and foremost, and afforded the relative prominence they deserve
along each specific implementation axis. This becomes all the more important as
the effects of the combined influences of novel competitors, legislators content
with the prospect of increased complexity and, not least, flexible consumers grow
more dynamic.
The following implementation-related trends are already apparent and must be
factored into the realization roadmap if it is to stand any chance of success:

• Other experience-based values must be gathered, including within the organ-

ization itself, in areas with a bearing on the targeted hybridization of existing
and new IT infrastructures and the mix of stability and reliability (which may
need adjusting).
• Issues surrounding data protection and data security standards, which are
evolving constantly, must be tracked regularly in compliance management.

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T. Kaiser and O. D. Doleski, Advanced Operations,
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26 4  Implementation-Related Success Factors

• The exploratory model approaches should remain the technological spearhead

and thus set the pace for further innovation steps.
• More far-reaching automation activities covering analyses and robotics solu-
tions in the broad setting of machine learning (ML), database management
(DM), text mining (TM), RPA and, not least, IoT, the use of which will con-
tinue to grow along the value chain.
• Implementation efforts frequently still seem to extend to no more than a
small group of users and supporting IT experts and data professionals, but an
increase in the number of user-friendly applications being developed could
spur the emergence of a broader user base.
• This democratization process opens up new horizons in terms of the wide-
spread use of data-based optimization solutions.
• A corporate competence center to complement the local analytics units will
become essential as implementation spreads to new areas. The virtual aspect
will remain, but a common code of conduct should also be introduced to apply
alongside the relevant legal framework.

These and other trending factors yet to become apparent should be monitored
constantly so that the organization can adapt its own transformation accordingly.
The same applies in respect of the ongoing cost-benefit assessment of the
advancing transformation and of results measurement for the individual use
cases. There are many similarities between a digital transformation program and
the familiar growth and cost-cutting programs, but there is also usually (at least)
one big difference. It is unwise to try to produce exact calculations of the overall
gains to be realized. Yes, business cases should be substantiated in quantitative
terms, but experience-based values and analogies should be accepted at first as an
initial approximation (the boosting of forecast accuracy to 98%, for example, or
the reduction of customer support costs by 30%).
The progress made on the implementation of all use cases should be addressed
at top management level as part of a quarterly discussion, review and deci-
sion-making process.
The transformation and the implementation program should generally also be
reviewed at least annually despite the three- to five-year time frame.
Here too, the typical success factors in program and project management are
fully transferable and consequently need no further examination.
The final point to be considered in the present context is thus one that is often
underestimated (and tends therefore not to receive the attention it merits in man-
agement practice) but—unfortunately—has a bearing on far more than just digital
transformation, namely change management.
4  Implementation-Related Success Factors 27

Countless studies have found that a lack of management support and inade-
quate communication are the main causes of failure in organizational transforma-
tion (cf., for example, Project Management Institute 2014) and—it hardly needs
pointing out—digital transformation is a form of organizational transformation.
The experts and decision-makers in an organization may understand the purpose
and advantages of digital transformation, but the actual potential users are often
denied any such insight. Realizing the transformation is—as described above—a
very technocratic process in any case. Combine this with an inadequately involved
workforce and there is a grave danger of the whole undertaking becoming seen as
exclusive and confined to functional elites in a way that creates a formidable bar-
rier to implementation in practice.
Figure 4.1 shows the integrated necessity of a coordinated view across the
management levels and of targeted change management.
Handled properly, these two factors are mutually reinforcing. Conversely, if
the digital transformation is not sold to the whole of the organization (or, more
precisely, to the employees and managers affected) in definite phases, harm will
be done on both fronts. It should be noted in this connection that at this point, the
traditional phases of continuous change management apply. These phases are
of a quite basic nature and should on no account be confused with the six phases
of the standard procedure for the focused establishment of digital initiatives intro-
duced above in Sect. 3.2.

Management alignment Continuous change management

Level of integration
Management
Top agreement...
mgmt. Momentum
Continuing from
activities continuing
Blockers activities
… to deal with
resistance within Enabling Increase
Middle the company … activities
due to
managed
management
<< outcome

… to secure a
? ! ! successful
Danger of
! ? ! ? Preparatory falling
transformation back into
Employees ? activities
old
into a data-
! ? ! ? ! focused company Start Activating Stabilizing routines
phase phase phase

a b c

Fig. 4.1   Successful change management of digital transformation

28 4  Implementation-Related Success Factors

The start phase in change management

Preparatory activities are to the fore during the start phase, which is accompanied
by the piloting of initial use cases over the typical period for such pilots of six
months to a year.

• Off-site management events are held to elucidate, in a cross-functional and

non-hierarchy-specific manner, the strategic objective of digital transformation
and the fields of application to be selected or to work out and prioritize these
fields of application interactively (in this connection see also Chap. 5 below
and the considerations presented therein concerning the transformation of
business models).
• A special intranet site could in addition be made available for all employees to
enable them to leave comments, questions and answers, suggestions and appli-
cation ideas and also to reveal areas in which more needs to be done in terms
of communication.
• A creative competition, which could be allowed to run for several days, should
be organized for the expert level, specifically including, at the initial stage, the
first potential users. Such competitions can generate ideas for innovative and
often mobile solutions very quickly and these can then be tested for applicabil-
ity with an eye to the software aspect.1

The activating phase in change management

The activating phase is concerned mainly with enabling activities. This phase
may overlap with the start phase. Typical enabling activities include:

• Workshops and similar forums about digital topics and initial application
examples intended to build trust
• Media-based implementation results in the form of changed tasks and working
processes
• Broad-based, organization-wide employee dialogs and events

1The portmanteau term “hackathon”—from “hack” and “marathon”—has been coined to

describe this sort of creative collaboration.
4  Implementation-Related Success Factors 29

The stabilizing phase in change management

Finally, new routines should be brought to employees’ attention, so that they can
be experienced and learned, in a stabilizing phase approximately two years later,
by means of:

• Incorporation of corresponding digital transformation target variables, mile-

stones and degrees of fulfillment into target agreements combined with the rel-
evant incentive systems
• Development of a training curriculum to enhance employees’ knowledge and
capabilities strategically—certifiable learning solutions should be established
if scope and complexity so indicate
• Complete communication routines to ensure that knowledge (primarily via
digital channels), emotional appeals (primarily via campaigns and PR) and
news of opportunities to become involved (primarily via expertise platforms
and communities of practice) are always spread effectively

Stabilization through application routines in day-to-day operations is not the

end of the matter, however, and it is important also to mention certain overar-
ching considerations of a fundamental nature for business. So far, the focus has
been “just” on a pragmatic decision-maker’s perspective of how an organization
operating in a competitive environment should begin to tackle new opportunities
(with risk in mind) and/or take on new competitors successfully. This in no way
relieves management of the fundamental duty to review, adapt and develop the
overarching business model.
The next section, which is also the last, discusses two different ways to
approach this aspect.
First of all, there is the seamless process of “telling the story” of how the stra-
tegic core of the business model should be optimized, after the initial learning
curve, in line with the successful use cases. This introduces further considerations
into the digitalization target scenario procedure from Chap. 2.
Alternatively, the framework introduced below can also be used to highlight
the strategic train of thought when configuring a business model in respect of a
new, “unconventional” competitor with expertise in the data sphere.
The “advanced operations”
Transformation-Capable Business 5
Model

This section aims to introduce the reader to the basic idea of advanced operations
as best practice for the focused establishment of transformational business mod-
els. It begins with a brief look at the general concept of business models.

5.1 Starting Point: The Business Model

It seems advisable, prior to embarking on a more detailed discussion of com-

mercial approaches for realizing new, digital business ideas in the context of
advanced operations, to establish a common understanding of what the term
“business model” actually means.

Defining the term “business model”  A

 business model is a simplified and ide-
alized description of the basic principle of
how an organization’s business activities
play out in practice. It sketches out how a
company creates value and places its wares
in the relevant target markets. Business
models are applied, holistic outlines of all
of a company’s value-creating workflows,
functions and interactions that create cus-
tomer value and thus generate revenue to
secure the company’s economic existence.
Put another way, a business model fills in
the detail of the business idea on which it
is based (cf. Doleski 2014, p. 652).

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 31

T. Kaiser and O. D. Doleski, Advanced Operations,
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32 5  The “advanced operations” Transformation-Capable Business Model

The upheaval caused by the impact of digitalization in virtually every area of

society and commerce is creating a pressing need for new and radical solutions.
Digitalization is making it all but infeasible to continue running a business on
the basis of conventional analog operations to the extent that strictly traditional
approaches are verging on the obsolete. The advent of digitalization is both a
blessing and a curse for businesses because while it opens up new opportuni-
ties with one hand, it threatens to kill off existing business models with the other
(cf. Schallmo 2016). The foresighted development of business models fit for the
future is thus an existential priority. Business models generally create the con-
ceptual framework for the systematic realization of digital business ideas and the
opening up of new business areas and therefore represent the practical toolkit
available for implementation in advanced operations initiatives.
Economists and business practitioners have devised countless business model
concepts capable of developing and growing a business. Business models are of
course explored in great detail in the literature and there is thus no need for a
more detailed discussion of the relevant concepts in this book. Readers who
wish to pursue this aspect further and have a knowledge of German are advised
to seek out Business Model Canvas by Osterwalder and Pigneur, Wirtz’s Busi-
ness Model and Integrierte Geschäftsmodell iOcTen (cf. Osterwalder and Pigneur
2011; Wirtz 2011; Doleski 2015).1 These approaches all stem from academic
research in economics, but there are also other practical aids and tools for the
development of business models available including the proven Siemens Business
Model Framework BizMo (cf., once again, Mütze and Gerloff 2019).

5.2 Advanced Operations as a Business Model

Every business model can in principle be characterized comprehensively with ref-

erence to ten elements. These constituent modules together provide a seamless
picture of how revenue is generated and consequently serve to present a complete
description of companies’ business activities. Figure 5.1 depicts the principal con-
tent of these ten business model elements as a guide and an aid to comprehension.
The business activity of a company is actually described with reference to ten
model objects. These model objects together map the normative, strategic and

1For a comprehensive overview of relevant business model approaches, see in particular

Schallmo (2013).
5.2  Advanced Operations as a Business Model 33

Strategic objectives
Financing Elements and their content
Management and
Financing sources
organizational structures
Cost structure
Problem-solving behavior

Partners and partner Strategy Customer segment

channel Customer channel and
Partner relationships Finance Customers communication
Exchange of performance Customer relationship

Corporate philosophy
Customer requirements
Partners Value Market Corporate
Performance
objective/purpose
Benefit
Corporate culture
Processes Revenue
Value creation Market structure
Value chain Enablers Market segmentation
Value chain configuration Competitors

Revenue strategies
Personnel
Pricing policy and price
Knowledge/expertise
Normative Strategic Operational strategy
Resources
dimension dimension dimension Pricing

Fig. 5.1   Ten model objects describing the business activity. Doleski (2017, p. 630)

operational dimensions of management in full, establishing the link between this

approach and the St. Gallen Management Model. The first element, normative
framework, represents the normative dimension of a business model, the value
and strategy elements the strategic dimension. The customer, market, revenue,
enablers, processes, partners and finances elements are assigned to the opera-
tional viewpoint (cf. Doleski 2015, p. 13).
The aforementioned elements represent the generic basic modules of a busi-
ness model and appear in principle in all models irrespective of sector and activity.
Taken together, these ten elements form the core of the iOcTen integrated business
model (see again Doleski 2015 for details).

The strategic core

The operational elements having already been illustrated and described in the
form of practical options in the preceding sections, the intention in this section is
to look at the strategic core of the model in greater detail. The sustainable success
of an initiative (see Chap. 1 through 4) and, even more so, the (subsequent) long-
term innovative capability of an organization will be found to correlate precisely
with this combination of strategy reflected onto the customer value the company
is capable of generating. The term “advanced operations” is used with this very
much in mind: it will not be sufficient in the long term simply to keep on initiat-
ing further waves of digitalization initiatives if the strategic core of the business
(model) does not also undergo a transformation.
34 5  The “advanced operations” Transformation-Capable Business Model

Hypothesis concerning strategic differences between industries

Readers are probably best advised to decide for themselves where their company
sits in the following context and to bear in mind that not all examples will neces-
sarily follow the very same pattern. The distinctions addressed below should not
on any account be mistaken for a degree of penetration and thus for competitive-
ness achieved through innovation per se, although a certain degree of correlation
can be assumed. Reference to and examination of current annual reports reveal
some recurring patterns that enable a rough breakdown to be created as follows:

• Group 1—“radically aligned with market and customer”. A first group of

companies already have data and IT elements integrated into their value strat-
egy simply because this is an inherent part of operating in their particular sec-
tor. Examples include, in particular, companies from the financial services,
media, IT services, entertainment and communication sectors, which have
implemented pioneering fields of application almost automatically simply in
order to remain relevant. The product or service concerned is very much the
focal point here, with its presentation to the customer or user as such playing
a secondary role (cf. standards-based: Glass and Callahan 2015). Numerous
use cases—often referred to as “applications”—have been embedded in the
working and private lives of a digitally literate society for a long time now. It
seems immediately transparent how the operational elements of the business
model must have changed permanently as a result. Or consider the matter the
other way around, as it were: how could the transformation of a bank possi-
bly have succeeded if, for example, the same old procedures with the same
old credit officers and unchanged customer relationships had been retained
despite the managing board having adopted a digital SME strategy years ago.
Various studies show the profound longer-term changes in the working world
(cf. for an exhaustive report the Oxford study by Frey and Osborne 2013).
It can be assumed that disruptive change will remain the order of the day in
these sectors owing to the enormity of the effects on their value creation struc-
tures. Nowhere does the blanket transformation of the business model appear
more comprehensive than in the sectors mentioned, which have seen the core
of their strategic value change significantly as a result—with further change
assured.
• Group 2—“providing added value from within”. A second group is dis-
tinguished by the unanticipated but now trail-blazing influence of data, infor-
mation and application knowledge on the predominant business model. The
original strategic benefit—and with it the tangible or intangible product—
remains the primary differentiating factor, but success is increasingly going to
5.2  Advanced Operations as a Business Model 35

depend on digital solutions (cf. with emphasis on the trend: Davenport 2013).
Typical sectors for this group include: automotive (personal mobility, but now
with telematics-based real-time optimization), logistics (supply of goods, but
now with multimodal environmental optimization), retail (mutually beneficial
exchange, but now with increased transparency efforts and uptake of options on
both sides), industrial and systems engineering (manufacturing and assembly,
but now with life-cycle-optimized early warning system) and tourism (recrea-
tion and experience, but now with context-sensitive attractiveness boost). This
is of course just a very rudimentary survey of selected examples. There is in fact
no need for greater detail, as these examples on their own illustrate how great
the strategic benefit from transformation can be. The advanced operations com-
ponent is just as prominent in this second group but is evident only to a limited
extent in the competitive overprovision of data analytics application innovations
and is (should be) generally used to complement the business model concerned
in a balanced and selective manner to enhance strategic benefit.
• Group 3—“tactical-selective”. A third group appears on the surface to oper-
ate in a more peaceful setting in which oligopolistic or even natural monop-
olistic structures (still) dominate. Examples include the various primary and
utility sectors, the construction industry and fundamental public sector ser-
vices. The obvious (that is to say inherent in the nature of the business) value
strategies are certainly not wholly isolated from innovations in data analytics,
but tend not to be challenged disruptively by new competitors or technologies.
Pressure to adapt business models in this group comes (has come) primarily
from legislation and regulation or in the form of shocks of external origin.
Sudden significant increases in value are uncommon too, with use cases and
fields of application generally advancing in a more incremental manner with a
predominantly internal focus.

This initial breakdown created on the basis of rough sector groupings has concen-
trated on the speed of model transformation so far, using the operational combi-
nation of benefit and strategy as the natural entry point to the interior workings of
the model.

Advanced operations can pursue different perspectives

The phenomenon of the internal perspective versus the external perspective seems
though to be setting the trend. The simplified business model chart (Fig. 5.2) is
intended to help illustrate this brief more detailed examination.
 36

Internal perspective External perspective

Strategy
Efficiency and/or in-house Market and customer
innovation dominates dominate
Finance Customer

Benefit models supported Partner Value Market

by data
Benefit models that revolve
(for example mechanical
around data
engineering):
Processes Revenue (for example the media):
upgraded product ideas
new product ideas
Enablers

For example: Industry 4.0 producon integraon For example: markeng management

Legend: Direcon of transformaon

Trigger of transformaon

Fig. 5.2   Perspectives for advanced operations

5  The “advanced operations” Transformation-Capable Business Model
5.2  Advanced Operations as a Business Model 37

The model, as can be seen in the right-hand side of the octagon, emphasizes the
external perspective concerned in operational terms with the organization’s posi-
tion in respect of the market, customers and revenue. The left-hand side covers the
internal relationship between the operational elements plus the efficiency-side of
business operations.
Interestingly, there seems to be one clear tendency that sets apart the first
group mentioned above—the business models that have traditionally focused on
data information (the financial sector, for example)—from the other sector groups
and that is the triggering element. Target scenarios for the other groups are trig-
gered by efficiency considerations or a desire to optimize costs, whereas in this
first group it is new product and solution ideas that lead the way (see Chap. 2).
Refer for examples to the broad-based BARC study for the German-speaking
region (cf. BARC study, Bange et al. 2015), which provides evidence to substan-
tiate this theory. These sector representatives consequently take a closer interest
in fields of application associated with sales success, marketing, customer seg-
mentation, customer relationships and customer retention. The transformation
of the business model (to reach advanced operations) is triggered from the right-
hand side of the diagram and the operational elements on the left-hand side—in
particular the value chain—have to comply with the change taking place all the
way to a state of disruption.
The industries of the second group, in contrast, tend to favor a balanced align-
ment. This is particularly true of retail and mobility sectors, which are quite
distinct from those in the same second group (mechanical and industrial engineer-
ing, for example) and, even more prominently, the third group that concentrate
on internal digitalization. In this latter instance it is innovative process optimi-
zation efforts in manufacturing and logistics or controlling and risk management
that dominate the agenda. In this case too, the two sides of the model can be seen
to interact, although the impact is less disruptive and has a less radical effect on
the speed of transformation. One notable example is the Industry 4.0 concept (cf.
Brödner 2015 for a balanced presentation), which strategically taps new benefit
categories (such as ML and RPA) with pacesetter technologies (advanced analyt-
ics applications) and is based on the organization’s own value creation and tech-
nology expertise. The result, from the provider angle, is a new pattern of market
and customer segmentation, extended revenue strategies and strategic forward
integration that represents a genuine transformation of an organization’s business
model and can therefore also amount to the same, over time, for representatives
of the customer market.
38 5  The “advanced operations” Transformation-Capable Business Model

As a prima facie conclusion this demonstrates:

• Business model transformations and the recognition of their necessity by man-

agement can have endogenous or exogenous origins.
• The speed of transformation correlates positively with advanced analytics
applications directed from and to the outside.
• It feels (and this can probably even be measured) that these applications
impacting directly in the customer markets clearly dominate in terms of
awareness, popular legend and admiring recognition in the literature—and
the stronger the “digital” element of the customer relationship experience, the
more powerfully this effect comes to bear.
• It should therefore come as little surprise to realize that the more communica-
tive and enthusiastic approach to spreading the word among US stakeholders
combined with the apparently inexhaustible advanced analytics lab that is the
West Coast has made the US a dominant ecosystem of opinion leaders (cf.
Keese 2014). Particularly popular applications from US-based companies like
Amazon, Tesla and Alphabet consequently occupy the limelight.
• While they certainly merit this status, it would be a mistake to equate profile
and popularity with the quality and adequacy of the business model transfor-
mation: advanced operations as an innovation-friendly digital transformation
model does not necessarily have to be spectacular, it just—and this goes for all
sectors—needs perfect integration.

Advanced operations are perfectly integrated

A competitive aspect not examined in any detail in the preceding discussion,
perfect integration can also serve as a quality seal for successful business model
transformation and thus for advanced operations. The real winners from digital-
ization are and will be those organizations that understand how to integrate the
possibilities perfectly.
Perfection is achieved by focusing the best technologies of advanced analytics—
using the model nomenclature chosen here—on the “core strategic benefit”. This is
why, in fact, the authors considered it so essential to include the illustration of the
concept in Chap. 2 and the explanation regarding methods for ensuring its realiza-
tion in Chap. 3. An additional phenomenon that was already a familiar success-crit-
ical factor under the old (analog) regime now comes into the picture alongside this
design flexibility, which is aligned with the competitive strategy—and thus takes
account of the normative framework.
5.2  Advanced Operations as a Business Model 39

Advanced operations create an exclusive technology element

This process ultimately yields an exclusive right of disposal—a module of what
is now a digital value chain—starting with the recipient of the value and return-
ing to the recipient of the value. Advanced operations have thus understood
how to create a “place”, a “section”, a “bottleneck” and/or an “exclusive terri-
tory”, permission for entry to or participation in which is subject to self-created
and enforced rules. These rules are themselves defined and protected technologi-
cally—either disruptively withheld from the traditional “players” or successfully
incorporated into the existing business model.
The following examples are intended to provide an illustration, at least, of
advanced operations in practice:

• Amazon is degrading bricks-and-mortar retail with its own always-open global

ordering platform of unprecedented size, reach and purchasing power.
• The elite of the research-driven pharmaceutical manufacturers use the fastest
self-learning algorithms in perfectly selected test phases of clinical trials (for
the parts not outsourced).
• Google’s application assuredly needs no further explanation.
• Leading insurers and re-insurers are able anticipate which tangible risks will
predominate faster than their competitors thanks to their exclusive investment
in learning models.

It is the space constraints of the present format rather than the lack of suitable
examples that prevents this list going on and on.

Advanced operations use advanced data technologies (advanced analytics)

There is thus a common characteristic both in the action and in the result: an
integrative way of looking at the existing or targeted business model facilitates
the conquest, defense and development of the perfect mechanism, which leaves
the rest of the players to let them not opt out for this new game—which usually
means to let them pick up a share of the costs. In our model, it is accordingly
the changing of the revenue strategy that so often serves as a quality seal for
advanced operations.
To reiterate, this trademark has been sought-after forever in every competi-
tive sector—it is “just” that the dynamism of the change and resources involved
have become disruptive. The scale effects here easily become incommensurable
at the relevant scales: the sheer volume of data involved—we talk about “big
data” for a reason—opens up new benefits, new strategies, new customers and
markets and also new revenue strategies to which the competition has no option
40 5  The “advanced operations” Transformation-Capable Business Model

but to respond. Technological progress on the path to artificial intelligence

appears unstoppable and will soon produce new mechanisms and new scale
effects through self-referential learning. A very interesting overview and outlook
regarding the machine learning-artificial intelligence continuum can be found in
the study “Maschinenlernen im Unternehmenseinsatz” (cf. Böttcher et al. 2017),
which the authors recommend.
Readers are also recommended to ponder on the hypotheses concerning the
principles of advanced operations derived in the concluding Sect. 5.3 and check
them rigorously against the situation with their own decision-making and appli-
cations.

5.3 Pragmatic Hypotheses for Advanced Operations

A few clear-cut hypotheses formulated on the basis of the many factors raised in
the wide-ranging discussion above, which in this particular publication format are
often derived from experience and feedback rather than being comprehensively
underpinned by science and theory, are set out in the following. They augment
the guidance on operational implementation at the level of a digitalization initia-
tive presented in the preceding sections with long-term considerations regarding
corporate strategy aspects of the realization of advanced operations as the concept
has been introduced here.
Specifically, and not necessarily in any chronological order or order of priority:

1. The speed of change and shifts in customer expectations do vary from sec-
tor to sector, but the sectors that (still)—wrongly—believe changes driven
by digitalization or data analytics are someone else’s concern need to be very
sensitive to their situation and the developments affecting it.
2. Establishing advanced operations is not about the fastest possible penetra-
tion of all organizational areas (breadth) nor purely about leading-edge tech-
nologies (depth), but rather about accurate choices, based on situations and
predictions, in relation to all original aspects of value generation and their
efficient transformation through the organization’s own value chains.
3. The identification, definition, defense and/or conquest of revenue-generating
mechanisms—which stand at the core of advanced analytics—have top pri-
ority. Corporate return on investment thus comes before the play instinct.
5.3  Pragmatic Hypotheses for Advanced Operations 41

4. The focus on internal efficiency gains that predominates at the moment (the
left-hand side of our model in Fig. 5.2) appears advantageous in operational
risk minimization: setbacks are not really accompanied by disappointed cus-
tomer expectations.
5. On the other hand, conceptually underilluminated market- and customer-side
applications/focuses are marked by a strategic negligence in terms of risk
that could become toxic.
6. Balanced portfolio management and constant data science tracking inte-
grated with the organization’s own innovation pipeline is therefore recom-
mended.
7. Advanced operations never stop and are always ready for (measured) action
if customers, competitors or exogenous factors change the game (advanced
requirements).
8. Organizations should strive for the leading edge—in the form of artificial
intelligence—sooner rather than later because volume, speed and intelli-
gence as such mutually reinforce each other.
9. The implementation recommendations (in terms of legal, organizational and
practical decision-making factors) concerning effectiveness and efficiency
presented in the operational sections must not be neglected. Strategy papers
and universally understood business models and their transformation do not
in any way reduce the gravity of elementary implementation errors.
10. Anyone troubled by the novel term “advanced operations” should feel free to
replace it with their own better alternative: this modest compendium makes
no claim to authority in the matter.
Takeaways from this book

• A good understanding of fields of application that have a bearing on competi-

tion and are likely to be critical for commercial success in the context of digi-
tal transformation
• Assistance with the structured transition from the simple to the complex with
reference based on realistic expectations of success
• An explanation of an effective phase model for the focused establishment of
digital business processes and models
• Structured instructions for digital business model transformation

© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 43

T. Kaiser and O. D. Doleski, Advanced Operations,
https://doi.org/10.1007/978-3-658-27585-3
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