Modeling Costs to Optimize Value with a Digital Twin

The Hackett Group Managing Director of Europe David Ketchin talked with Associate Principal Tom Kellaway about how companies can determine the optimal cost for business services by using a “digital twin” approach, which can be used to model changes to business complexity, functional demand, and service delivery model. Using this approach, companies can more gain insight into the value of various strategies for business services improvement, including staff reductions, process improvement, and automation.

Show Notes

Tune in to this episode of the Business Excelleration Podcast—hosted by The Hackett Group, a global leader in defining and enabling world-class performance. Hearing from the top experts on how to avoid obstacles, manage detours, and celebrate milestones, this episode focuses on the functional digital twin model and how it can be used to learn about your organization’s costs.

David Ketchin guides today’s conversation with Tom Kellaway is a leading expert in benchmarking and functional delivery model improvement. Tom is a key architect of the digital twin concept. A digital twin is the generation or collection of digital data to represent a digital object. The aim of a functional digital twin is to show the “should cost” and a “could cost” of a function. The data captured is similar to other assessments, but the difference is in how it is used. Taking multiple variables a digital twin will generate a single outcome or value. You’ll need a big data set to make this work, Tom explains.

Straight away with this model, you can see if there’s fat or inefficiency in the system, or if you’re working the organization too hard to be sustainable. Additionally, they’re able to calculate the “could cost” of an organization. This can help identify areas of improvement, such as automation, performance levels, shared services, etc. that still reflect your company’s uniqueness. Having this “could cost” model gives companies insight into how to best invest in their service delivery system. You can also flex the other values, David explains, altering the revenue or business complexity to understand the impact on the model. This can be particularly useful for growing organizations.

David says the reception has been overwhelmingly positive from organizations looking to model their business this way and using more science in their decision making. Moving forward David hopes to weave the digital twin concept into all of his projects. Providing the extra capability to supplement the traditional benchmarks.

Timestamps:

• :57 – David Ketchin introduces today’s topic and guest.
• 1:24 – What is a functional digital twin?
• 3:36 – Data points captured for a digital twin.
• 5:40 – What makes a functional digital twin different from other assessments?
• 11:20 – How is the “could cost” modeled.
• 13:07 – Personal benchmarks.
• 14:48 – What is the reception for organizations modeling their business this way?
• 18:19 – Weaving the digital twin into more projects.