CoE: What is a center of excellence?

As organizations strive to stay competitive and meet evolving customer expectations, they increasingly turn to internal centers of excellence (CoE) for support and innovation.

A CoE is a strategic approach you can apply to any department, helping to drive innovation, enhance customer experiences, and foster growth. When leveraged effectively, centers of excellence empower organizations to unify their approach and ultimately gain a competitive advantage.

What is a center of excellence?

A CoE refers to a team or department that builds up specialized expertise in a particular area and then shares that knowledge across the organization. Organizations can promote consistency, efficiency, and excellence across all areas by centralizing skills, best practices, and thoughtful leadership into a CoE.

The primary purpose of a CoE is to optimize essential processes. It then takes those processes and puts them into standardized systems. It serves as a collaborative hub overseeing best practices, benchmarking performance, tackling problems, and fostering a culture of continuous improvement. 

The team within a CoE generally includes professionals with deep expertise in their domain. And rather than being siloed, the CoE extends its knowledge across the organization. The CoE model enables organizations to break down internal barriers between departments, unifying disparate efforts into a consistent, organization-wide approach. These CoEs act as the go-to authorities for their specialization, which the rest of the organization can access and learn from.

Types of centers of excellence

CoEs can take many forms based on an organization's needs and structure.

Some common types of CoEs include:

• Enterprise CoE: An enterprise CoE focuses on optimizing processes, governance, and strategic alignment across the organization. It acts as a unifying force and oversees the establishment and integration of other CoEs within the organization.
• CoE for organization processes: An organization process CoE streamlines and improves critical workflows and operations. It analyzes end-to-end processes, bolsters efficiency through automation, ensures consistency in execution, and implements continuous process improvement frameworks like Lean Six Sigma.
• Data CoE: A data CoE enables an organization to leverage data analytics and insights fully. It institutes frameworks for collecting quality data, builds analytics tools and infrastructure, performs sophisticated analysis, and develops actionable insights. The Data CoE also helps democratize data access and educate staff on becoming data-driven.
• Design CoE: A design CoE is a repository for design assets and best practices. It allows for a uniform visual identity across the organization while giving other teams insight into creative processes and user interfaces. Organizations with a robust DesignOps system will almost always include a design CoE.
• Technology CoE: A technology CoE drives innovation and excellence in engineering, IT systems, and technical infrastructure. It sets technology standards and strategies, oversees solution implementation, optimizes architectures, and incubates new technologies like AI and automation. The CoE also facilitates knowledge sharing between technical and non-technical staff.
• Research CoE: A research CoE serves as an organization's center for research and development. It sets research strategies and agendas, oversees projects, programs, and collaboration between research teams, and aligns research efforts with the organization's goals.
• Security CoE: A security CoE oversees and enforces information and cybersecurity policies, procedures, and technologies. It performs risk assessments, puts preventative controls in place, monitors for threats, and responds to incidents. The CoE also regularly trains employees on security best practices.
• Innovation CoE: An innovation CoE spearheads creative thinking and transformation across the organization. It provides frameworks for ideation, runs pilots of new concepts, and scales viable innovations. This type of CoE is a common component of a robust ResearchOps system.

Objectives for establishing CoEs

Organizations typically establish a center of excellence to achieve one or more of these key objectives:

• Running the organization: Many CoEs optimize day-to-day operations and improve current processes. They're focused on running the existing organization as effectively as possible.
• Growing the organization: Some CoEs look outward to identify new market opportunities, revenue streams, partnerships, and acquisition targets. They help the organization expand strategically.
• Transforming the organization: Forward-looking CoEs adapt the organization to industry disruptions, next-gen technologies, and evolving customer needs.

The most successful CoEs balance running, growing, and transforming the organization. They make incremental improvements in existing processes while also imagining entirely new possibilities.

Benefits of CoEs

CoE brings several advantages to organizations that drive growth and innovation.

• Improved decision-making: CoEs infuse data-driven insights and expertise into decision-making. Their guidance helps leadership confidently formulate forward-thinking strategies.
• Standardized processes: By designing and governing workflows organization-wide, CoEs create consistency and efficiency across organization units, roles, and locations.
• Enhanced innovation and adaptability: CoEs systematically generate breakthrough ideas and equip the organization with the tools to pivot in response to market changes.
• Bolstered customer experience: Customer-focused CoEs allow the organization to deliver seamless, personalized experiences that deepen loyalty.
• Increased agility and decreased costs: By centralizing expertise, CoEs let organizations improve capabilities quickly without significant investments. Their standards and shared services maximize value.
• Unified vision and purpose: With their cross-functional authority, CoEs align all employees around common objectives and strategies for achieving excellence.
• Embedded knowledge: CoEs ingrain specialized expertise into systems and processes, preserving knowledge when individual team members transition out. This institutionalization ensures continuity and minimizes the risk of disruption from personnel changes.

What elements should a CoE include?

While each CoE focuses on its specific mission, it generally has some standard components that enable it to drive excellence.

Strategy alignment

A CoE must tightly align its goals and activities with its broader strategy. CoE leadership should work closely with executives to make it possible to translate high-level objectives into concrete initiatives.

Organization process management

A key focus for CoEs is optimizing the organization's processes relevant to their departments and teams. They institute well-defined methodologies for improving workflows. At the same time, they document processes to standardize procedures and ensure consistency. Over time, this helps eliminate inefficiencies, bottlenecks, and inconsistencies across the organization.

Performance management

CoEs implement performance management frameworks to gain data-driven insights into their developed processes. They establish metrics and KPIs, then meticulously track them.

By continuously monitoring and sharing findings with stakeholders, the CoE enables evidence-based decision-making and provides visibility into everyday performance.

Innovation and ideation

Cultivating innovation is a key focus area for CoEs. They establish structured frameworks that enable creativity, experimentation, and calculated risk-taking. The CoE provides tools and environments for generating promising new ideas. They incentivize innovation across the organization, not just within the CoE.

Customer experience research

Optimizing service delivery and satisfaction is essential for CoEs focusing on customer-facing functions. With rigorous quality control processes and customer satisfaction tracking mechanisms, these CoEs can provide data-driven insights into customer retention and possible unfulfilled needs. The CoE can take everything it learns and refine operations to optimize customer experience.

Knowledge management

CoEs actively curate knowledge bases and transfer expertise organization-wide to elevate capabilities. They diligently document best practices and create training programs to foster a culture of continuous learning. 

CoE subject matter experts share their know-how through training and other methods. This enables the entire organization to leverage the CoE's specialized skills.

Research and benchmarking

Leading CoEs keep up with industry advancements and emerging technologies. The CoE helps the organization stay ahead of the curve by translating external insights into improvements.

Best practices for effective CoEs

CoE best practices are crucial for maximizing the benefits and long-term sustainability of the center of excellence. The most successful CoEs tend to use a few common strategies.

• Develop a clear vision and strategy for your CoE: Aligning its goals with the broader organizational objectives will ensure coherence and drive the right initiatives.
• Assemble a cross-functional team with diverse expertise: Use a holistic approach to problem-solving and foster collaboration.
• Establish a clear roadmap and milestone plan: Regularly track progress and make necessary adjustments. 
• Prioritize knowledge management: Systems designed for collecting and sharing organizational knowledge allow teams to learn from past mistakes and continuously refine their approaches.
• Foster a culture of continuous learning and improvement: Encourage experimentation, continuous discovery, risk-taking, and sharing ideas across the organization.

Common pitfalls for CoEs

While centers of excellence offer tremendous potential, they aren't without challenges, which can hinder their effectiveness and success. 

• Lack of clear strategy and alignment with the broader organizational vision: Without a clear understanding of the organization's goals and objectives, the CoE may struggle to deliver value and drive innovation.
• Failure to establish a clear leadership structure: When there is unclear or conflicting leadership between the CoE and other elements of the organization, teams will struggle to succeed. It also means that organization leaders might not actively utilize the CoE's insights.
• Siloed knowledge: If the CoE becomes too insular, sharing its knowledge and expertise across the organization becomes impossible.
• Missing performance evaluation: Establish a framework for regularly evaluating the CoE's performance to ensure it's making valuable changes.
• Limited scope. If the focus remains solely on incremental improvements rather than transformation, a CoE won't be able to make changes that keep the organization competitive.

Avoiding these missteps requires careful planning and consistently measuring outcomes against targeted benchmarks.

Frequently asked questions

How do you choose which CoE model is right for your organization? 

The optimal CoE model depends on your strategic objectives, existing strengths, industry landscape, and organization size. Take a holistic view of these factors to determine where consolidating capabilities will generate the most value.

How many CoEs should an organization have? 

There is no ideal number of CoEs. However, be wary of creating too many CoEs, which can lead to redundancy and inefficient overlap. Start small and grow as the need arises.

How can you foster engagement with a CoE across the organization? 

Some organizations promote knowledge of CoE insights through presentations and workshops. Nurture relationships by embedding CoE members across the organization. Incentivize usage by connecting CoE KPIs to individual and team evaluations.

What's the difference between a center of excellence and a competency center? 

Although people sometimes interchange these terms, a competency center focuses on developing expertise in a specific capability or function. A center of excellence takes on a broader, more strategic role in driving excellence across departments.

How can you demonstrate the value and ROI of a CoE? 

Tracking key metrics, such as productivity enhancements, cost reductions, accelerated innovation, higher customer experience metrics, UX goals, and increased revenue, can help quantify a CoE's tangible impact.

How do you decide when it's time to disband a CoE?

Signs may include a need for continued benefits, high costs, and overlapping responsibilities with other CoEs.