The Next-Gen COO

Introduction: the Exponential Enterprise enabled by the Next-Gen COO

In an era of relentless uncertainty and disruption operational resilience and organizational agility are key components of a future proof operating model of the organization of tomorrow. Deloitte research on the Exponential Enterprise has found that organisations’ Ability to Win – their traditional strategic positioning – can be boosted by 4x with investments in their Capacity for Change – their strategic activation.

We consider the COO role as one of the most critical to organizations, given the COO’s position as the owner of the key levers of change: people, processes, data and technology.
 

Our COO Survey: expanding the COO agenda driven by regulation, tech and customer expectations

To understand how the COOs of FS firms are responding to the changing business environment, we surveyed a group top tier banks and insurance companies across Europe around three main dimensions: (i) external forces impacting the COOs, (ii) key trends reshaping their strategic agendas and (iii) the maturity of their transformation journey towards what we call the Next-Gen COO.

Based on the survey results and our discussions with the COOs, it is clear that their focus is today much broader than merely the traditional back-office operations. The vast majority of COOs oversee at least four distinct organizational capabilities, including inter alia technology, data & analytics and operations. Any one of these can be regarded as strategically important to a modern FS firm, not to mention many or all of them. This speaks to the potential of the COO function in shaping the overall strategic agenda of their organization, especially when, more often than not, the FS firms COOs sit on top of more than one of these capabilities.

Which functions are within your remit as COO?

Interestingly, risk management is not typically under the remit of the COOs, except in the Nordics. This might give the Nordic COOs an advantage, given how much regulation impacts the whole industry. This was noted by one of the COOs we interviewed who was focused on his firm’s wealth management business:

“FiDA (EU’s Financial Data Access Regulation) and RIS (EU’s Retail Investment Strategy), that’s it. Those will set the agenda for our business in the coming years.”

The COO agenda is shaped by various external forces, with three main pressures emerging within financial services in Europe, that is, tech disruption, increased regulatory pressure and growing customer expectations.

Which external forces do you consider most critical?

There is nothing new in tech disruption and regulation in the FS industry, but what is interesting to observe, is the impact of customer expectations directly on the COOs’ daily agenda. One can of course make the claim that everything an organization does should always be done with the end customer in mind. While we agree, we do recognize the daily realities of the back-office operator, who might find it difficult to keep the end customer in mind at all times.

Thus, we find the COOs’ increasing involvement in their organizations’ end-to-end customer journey development an interesting, and welcome, development pointing to a recognition of their strategic significance within their firms.

Four focus areas: operational resilience, intelligent operations, end-to-end digital reconfiguration, sustainable operating models

Our survey results, enriched by our conversations with the COOs, surface four main strategic focus areas for the COOs to help them elevate their firms’ operations to the next level: operational resilience, intelligent operations, end
to end digital reconfiguration and sustainable operating models.

Almost all COOs we surveyed are pursuing the use of emerging technologies (such as GenAI) and insight-driven operating models (increasingly, built on better use of GenAI) to modernize their ways of working and make them more resilient in case of disruptions. Additionally, dynamic talent allocation, leaning on worker skills rather than organizational hierarchy for task distribution, is becoming the norm in today’s operations. However, some COOs reported organizational barriers in their quest to modernize their respective functions:

“There is no way we can move to a more flexible, less hierarchical org set-up within our firm. That is simply not in our culture.”
 

Which key initiatives are you pursuing to enhance your firm’s operational resilience?

With intelligent operations we refer to broad-based, industrialized use of data in decision-making, rather than isolated within individual functions or businesses, even if highly sophisticated. While FS firms are exploring e.g. use of GenAI in customer service and fraud prevention, less than half of the COOs we surveyed are confident in their ability to adopt new technologies successfully. When touching upon one firm’s cloud transformation, the COO noted a significant change in their mindset as a result of their learnings over the past years:

“I think it’s fair to say that we didn’t quite understand why we started this journey in the beginning. But we have learned a lot and now look at this as a long-term evolution instead of a one-off exercise.”

Given that sustainability is a core part of virtually all FS firms we surveyed, it is no surprise that it is also one of the key focus areas of the COOs. However, the COOs struggle with availability of data which has made it difficult to quantify the impact of their actions and to track progress. As one of the COO area experts told us:

“We have tried to pursue implementation of eco-friendly technologies across our firm but there is no reliable data we can use to prove to our leadership that this makes sense.”

Early stages in transformation: mostly fixing inefficiencies or driving narrow change
 

Most of the COOs we surveyed consider the current maturity of their transformation as fire-fighting or narrow change targeted at one single initiative. There are a few organizations, though, that have passed this hurdle and are operating a much more pervasive change agenda taking a holistic view on the needs of their firms.

What is the scope of transformation you are pursuing as COO?

Our study confirms the potential of the COOs to take a bigger role in their organizations as instigators of change expanding their view to end-to-end customer operations, instead of being bogged down to running back-office operations.

Conclusion

Our study sheds light on state of the COO domain within the European financial services industry. The COOs are evolving to much more than mere back-office operators and increasingly taking responsibility of their firms’ end-to-end digital customer journey development.

Their agendas are driven by external pressures, and they are assuming responsibility for a vast array of core organizational capabilities, including many that are of major strategic importance to their firms.

Most of them are in the early stages of maturity in their transformation journey but there are those who have reached the ultimate stage we call The Next-Gen COO.

If you’d be interested in hearing more, feel free to contact us.

Mikko Leinonen: Mikko Leinonen | Deloitte Finland | Financial services | Partner | Financial services

Per Fust: Per Fust | Partner | Financial Services | Deloitte Sweden

About the study

Our study is based on a survey of 15 leading banks and insurance companies across Europe. These firms are domiciled in 9 different countries and represent more than EUR 10 tr in total assets. To understand their views in more detail we conducted several interviews with the firms’ COOs and leaders and experts within their COO functions. Finally, we synthesized our survey results and interview findings and highlighting the most significant insights to the COOs.

The Exponential Enterprise | Deloitte