9 minute read 15 Oct 2021

Just as enterprises have been transformed by the pandemic, so has the COO. COOs must now be pivotal in accelerating a purpose-driven economic rebound.

A Building site neon city

The COO Imperative: Will you define transformation or be defined by it?

By Steve Krouskos

EY Global Managing Partner – Business Enablement

Enabling EY to create long-term value. University of Florida alumnus. Son, husband and father of four.

9 minute read 15 Oct 2021

Just as enterprises have been transformed by the pandemic, so has the COO. COOs must now be pivotal in accelerating a purpose-driven economic rebound.

In brief
  • COOs now have an opportunity and an obligation to become more active architects of corporate strategy.
  • Changing customer expectations and digitized operations are driving a new era of direct connectivity between customers and the COO.
  • COOs are forging agile operations and supply chains into decisive, global competitive advantages.

The impact of the COVID-19 pandemic continues to upend the world of the Chief Operating Officer (COO). Workers have gone remote, supply chains remain fractured, at times production lines have frozen, and customer demand has plunged and soared. 

Now COOs – perhaps more than any other executives – are taking the lead in rebuilding their enterprises. But the best are not just building back. Some of the most forward-thinking COOs are learning from the crisis to forge more resilient, more agile and purpose-driven companies than those that existed before.

The COO Imperative Series, part of the Imperative Collection, addresses critical issues and actions that help COOs reframe the future of their organizations. C-suites across the globe are grappling with the question of how to put their company back on track to growth and at the same time create long-term, sustainable value for a broader set of stakeholders.

In a recent EY article, we explored how CEOs can plan for more sustainable growth by focusing on four cornerstones of a purpose-led growth strategy: trust, trade, technology and sustainability, each with humans (employees and customers) at the center. Here, we’ll outline four ways the COO can, and should, take center stage in initiating this purpose-driven economic rebound. COOs, your imperatives are listed below. 

Use your position to more actively build the strategic vision

Traditionally, the COO’s role was internally focused on operations and implementation, and the heavy lifting on strategy development was left to other members of the C-suite. Those days are over.

Disruptive forces, all accelerated in a post-pandemic world, have put your role at the intersection of functions essential to strategy definition. COOs have unique insights into customers. Customer relationships are increasingly technology-driven – from sensors in products to chatbots providing customer support. These digital interfaces give you highly current insights into customer wants and behaviors.

  1. You control key analytics. In most industries, the majority of data is generated within the COO’s domain – production runs, customer fulfillment, product performance, and the like. Working with the CIO, CTO and the technology team gives you a deep data-driven perspective on the enterprise.
  2. You control the operational heart of the organization. With oversight of flexible manufacturing and agile systems, you are in the driver’s seat in providing a strategic response to competitor moves or market shifts. 
  3. You understand the risks. COOs are responsible for many of the cross-border activities of the firm, including in-bound supply chains and outbound exports. Your operations are highly exposed to geopolitical risk, trade barriers and sovereignty rules – which makes you a valuable contributor to strategic planning, especially around trade, a critical cornerstone of any sustainable growth strategy.

COOs should use their unique insights – in data, operations control, and in risk management – to step up and take a seat at the corporate strategy table. There is no going back – the COO is a key strategist for the enterprise.

  • Case study: A COO driven transformation for a traditional manufacturer

    A global HVAC (heating, ventilation, and air conditioning) company operated highly crowded and commoditized market. The COO and their team had a different idea.

    Under the COO’s direction, the engineering team installed sensors, a robotic arm, and wireless transmitters to monitor performance – allowing them to sense and directly respond to customers’ energy needs.

    Within two years, the company was in the energy management business. They leased the units and earned revenue from savings accrued to the clients. They significantly reduced the carbon footprint of their customer base as well.

Become a customer-centric COO

The traditional COO focused on internal processes and left the customer relationship to colleagues in sales and marketing. The COVID-19 crisis accelerated trends that are driving customer centricity into the COO’s domain.

First, customers have changed. Online channels have raised customers’ expectations of product availability and delivery times. They are demanding and expecting solutions that are customized to their needs. In digital relationships the “competition is always just a click away,” creating the need for higher value-add and “stickier” customer relationships.

Second, your relationship with the customer has changed. The pandemic accelerated adoption of technologies (the Internet of Things) and techniques (flexible manufacturing) enabling production teams to create smaller batch orders, customize products and speed turnaround times. Furthermore, the embedding of sensors into products and services has created a real-time flow of customer information. Now you may consider yourself a natural extension of the sales and marketing function, actively collaborating to address customer needs.

The result is a new customer-centricity for your role. COOs should step forward and become a part of the customer experience. They should participate in the sales of complex products. They will lead in delivery of services. Finally, through digital channels they can be a critical part of the ongoing customer relationship.

  • Case study: A COO’s strategic vision for pay-as-you-go insurance

    For decades, insurance companies could only guess at consumer driving habits. But in the early 2000s a COO’s team installed wireless monitors into cars that collected hyper-accurate data on duration, time, speed, and other driving habits.

    This information was first aggregated into more accurate actuarial tables. But the COO persisted in creating a vision of a pay-only-for-what-you-use model of insurance coverage – now a fast-growing segment that is revolutionizing the industry.

Use digital operations to be proactively agile, not just responsive

Operational agility – switching out production runs, product co-design, configurable products – can sound like the dry talk of engineers. But this flexibility is the new foundation for the agile company’s competitive edge. 

Traditional manufacturing requires weeks to respond to a customer request. Retailers forecast four quarters ahead to create new lines and products. Financial services companies take years to install and offer new consumer products. These kinds of delays and capital requirements keep traditional COOs in a reactive role of responding to external forces, keeping up with rather than setting the pace.

But operational excellence can be used proactively as a competitive weapon. With agile mindsets and methodologies, you can make your company first to the market, with less expensive products that meet the customer’s specific needs. This is not just a shift in operations – it transforms you into a strategic market-maker. Here are three actions for COOs:

  • Operate a direct feedback loop to customers – use new digital touchpoints to create build a real-time “pulse” of customers for rapid response.
  • Mobilize digital operations and manufacturing to build rapid response – from expedited orders to custom production.
  • Take an aggressive stance in managing volatility – use robotics and automation to scale with disrupted and unpredictable markets.

Building this level of connectivity and agility into operations may sound like a tech-focused approach, but conversely it enables COOs to deliver against a critical element of any sustainable growth strategy – to put humans, in this case customers, at the center of operations, so that every tech investment has a positive human outcome in mind.

  • Case study: Meeting the tastes of the teenage fashion buyer

    The young female teenager is one of the most challenging customer segments – high spenders whose demand for a fashion item can explode and fade in a manner of weeks. The COO of a US-based apparel company decided to build a dedicated production line and supply chain that could deliver new products in less than 20 days.

    Demand forecasting was connected directly to design. An ecosystem of suppliers was linked into a fast-response network. Shipping time was reduced through on-shore manufacturing and air freight. The result was a concept-to-merchandise cycle of less than three weeks – and market dominance of this valuable sector to this day.

Develop a resilient workforce and operating model

In a time of technology-driven change, it is sometimes forgotten that the real success factor in transformation is people. 

The COO’s people challenges come in two dimensions. The first are legacy organizational structures – often multi-layered and siloed – that are designed to support the legacy business but are badly out-of-sync with the new one.

The second challenge is the workforce itself. In many transitioning companies, employees can be fearful of displacement, resistant to change, and may not have the expertise and training for the new world. COOs should respond in three ways:

  • Redesign the workforce – align a map of the future state with the people and skills necessary to support it. Then conduct a full assessment of current skill levels to create a “skills gap analysis” that defines a redesigned workforce. This is your roadmap for change and your key to successful collaboration with your HR and talent management colleagues.
  • Motivate the workforce with a purpose-led vision of the future – today’s most valuable employees are not just working for a paycheck. They are motivated by career opportunity, personal responsibility, and long-term values of equity and sustainability. These goals need to be demonstrated as part of your transformation.
  • Futureproof the workforce – as technology is driven into operations, you face a dual people challenge. First, you must compete with CIO colleagues and others for some of the scarcest talent in the world. Second, this workforce must be highly skilled in traditional industries – designing an autonomous car requires both digital skills and deep experience in automotive design.

For many COOs, the answer is upskilling or retraining of the existing workforce. In the near future, even now, your team needs to be managing trainers, curricula, and skills-building to elevate the workforce of tomorrow.

  • Case study: Upskilling the workforce

    A global manufacturer decided to launch an all-autonomous fleet of vehicles within seven years. This created a double challenge – finding digitally-savvy workers that also know heavy machinery design.

    Rather than recruit expensive, untried new talent, the COO launched a program to retain and train up existing talent through in-house and external training. The results were not only a properly skilled workforce but buy-in from the workforce.

Your opportunity

In many companies, the COO is the heir apparent to the CEO. The COVID-19 crisis may have accelerated that succession process – COOs are now better positioned to take on responsibility for strategy, vision, market response and people. In other words, if you’re a COO in this rebound era, you need to act more like a CEO. That starts with strategic leadership in guiding your business toward a successful rebound, not back to where you were, but to a future of more sustainable and purpose-driven growth.

Summary

As companies rebound from the pandemic, COOs are in prime position to lead and accelerate strategic transformation. By using your unique operational perspective and access to data-driven insights you can become key drivers of strategy development. You can utilize new tech to create more direct links between operations and your customers. Now is the time to build agile operations and supply chains that will, through superior market response and cost-effectiveness, create a lasting competitive edge. And throughout all, put people at the center - capitalize on the post-COVID-19 opportunities to increase the skills, productivity and motivation of your new workforce.

About this article

By Steve Krouskos

EY Global Managing Partner – Business Enablement

Enabling EY to create long-term value. University of Florida alumnus. Son, husband and father of four.