Technology Blogs by SAP
Learn how to extend and personalize SAP applications. Follow the SAP technology blog for insights into SAP BTP, ABAP, SAP Analytics Cloud, SAP HANA, and more.
cancel
Showing results for 
Search instead for 
Did you mean: 
RobertT
Product and Topic Expert
Product and Topic Expert
0 Kudos

Photo by Compare Fibre on Unsplash


Centers of Excellence (CoEs) concepts are a popular organizational structure for companies seeking to enhance their performance and competitiveness. While organizations may call them by different names, at its basic level, a CoE is a dedicated team or department within an organization that is responsible for developing and promoting best practices in a particular area. They can also generally be classified into four different types: centralized, federated, democratized, and hybrid. In this blog, we'll explore the differences, benefits, and shortcomings of each type of CoE.

Centralized CoE:


A centralized CoE is a traditional model where a central team is responsible for developing and implementing best practices across the organization. The central team is responsible for decision-making and enforcing standards. This model is suitable for organizations with a clear hierarchy and centralized decision-making processes.

Benefits:

  • Consistency: Centralized CoE ensures that all business units follow the same standards and best practices. This ensures consistency and reduces the risk of errors or inefficiencies.

  • Control: Centralized CoE provides control over the process of developing and implementing best practices. This ensures that the practices align with the organization's goals and objectives.

  • Efficiency: Centralized CoE can promote efficiency as resources and expertise are centralized. This can lead to cost savings and improved performance.


Shortcomings:

  • Lack of Flexibility: Centralized CoE can be inflexible as decisions are made by a central team, and there is little input from other business units. This can lead to a lack of innovation and slow decision-making.

  • Limited Perspective: Centralized CoE may have a limited perspective as they only focus on a specific area of the business. This can lead to a narrow view of the organization's goals and objectives.


Federated CoE:


A federated CoE, also known as a decentralized model, allows for multiple teams to be responsible for developing and implementing best practices in different areas of the organization. Each team is responsible for making decisions and enforcing standards within their area of expertise. This model is suitable for organizations with multiple business units or geographically dispersed teams.

Benefits:

  • Local Expertise: Federated CoE allows for local teams to develop and implement best practices that are tailored to their specific business unit or geographic location. This can lead to improved performance and greater buy-in from local teams.

  • Flexibility: Federated CoE allows for flexibility as local teams have autonomy in decision-making. This can lead to greater innovation and faster decision-making.

  • Improved Communication: Federated CoE promotes communication between different business units or teams. This can lead to improved collaboration and sharing of best practices.


Shortcomings:

  • Inconsistent Standards: Federated CoE can lead to inconsistent standards as each team is responsible for developing and implementing best practices. This can lead to confusion and inefficiencies.

  • Duplication of Efforts: Federated CoE can lead to duplication of efforts as each team develops and implements their own best practices. This can lead to wasted resources and inefficiencies.


Democratized CoE:


A democratized CoE is a model where all employees are responsible for developing and promoting best practices. This model is suitable for organizations that promote a culture of innovation and collaboration.

Benefits:

  • Innovation: Democratized CoE promotes innovation as all employees are encouraged to develop and promote best practices. This can lead to new ideas and improved performance.

  • Collaboration: Democratized CoE promotes collaboration as all employees are responsible for developing and promoting best practices. This can lead to improved communication and greater buy-in from employees.

  • Employee Engagement: Democratized CoE can lead to increased employee engagement as all employees are encouraged to participate in the development and promotion of best practices.


Shortcomings:

  • Lack of Control: Democratized CoE can lead to a lack of control over the process of developing and promoting best practices. This can lead to inconsistency and inefficiencies.

  • Limited Expertise: Democratized CoE may result in limited expertise, as not all employees may have the necessary skills or knowledge to develop and promote best practices.


Hybrid CoE:


A hybrid CoE is a combination of centralized, federated, and democratized models. This model is suitable for organizations that require a balance between control and flexibility.

Benefits:

  • Customizable: Hybrid CoE can be customized to meet the specific needs of the organization. This can lead to improved performance and greater buy-in from employees.

  • Flexibility: Hybrid CoE allows for flexibility as different models can be used for different areas of the business. This can lead to greater innovation and faster decision-making.

  • Control: Hybrid CoE provides control over the process of developing and promoting best practices. This ensures that the practices align with the organization's goals and objectives.


Shortcomings:

  • Complex: Hybrid CoE can be complex to implement and manage as it involves multiple models. This can lead to confusion and inefficiencies.

  • Costly: Hybrid CoE can be costly to implement and manage as it involves multiple models. This can lead to higher expenses and reduced cost savings.


Summary


As we can see, the type of CoE that an organization chooses to implement depends on its specific needs and goals. Each model has its own benefits and shortcomings, and organizations should carefully consider which model is most suitable for their business. A centralized model may be appropriate for organizations that require consistency and control, while a democratized model may be appropriate for organizations that value innovation and collaboration. A federated model may be appropriate for organizations with multiple business units or geographically dispersed teams, while a hybrid model may be appropriate for organizations that require a balance between control and flexibility.

If you found this article helpful, be sure to click like. And course follow me for more on the topics of BPM, Process Mining, Customer Experience, Digital Transformation, and Automation.

Until next time - Keep Transforming 💡