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What Is A Center Of Excellence (COE) And Why Should Organizations Set It Up?

What Is A Center Of Excellence (COE) And Why Should Organizations Set It Up?

19 Feb, 2024

On August 2, 1939, Albert Einstein warned President Franklin D. Roosevelt about the potential German development of an atomic bomb. This urgent caution led to the initiation of the Manhattan Project, a massive, secret mission that united global experts and culminated in the Hiroshima atomic bombing on August 6, 1945, marking a catastrophic end to World War II and reshaping global power dynamics. The project showcased unprecedented collaboration and technological superiority, setting a benchmark for excellence. It underscores the importance of expertise and collaboration, lessons that modern companies apply by setting up Centers of Excellence (COEs), Global Capability Centers (GCCs), or Captive Centers to innovate, compete, and excel in their industries, maintaining a race for superiority reminiscent of the past.

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What is a Center of Excellence (COE)?

A Center of Excellence (COE) is a body in an organization that works across business units (BUs) or product lines within a BU and has a leading-edge knowledge and competency in that area. It is comprised of highly-skilled individuals and experts, who disseminate knowledge in an organization and share best practices. The literal meaning of a Center of Excellence is – ‘A place where the highest standards are maintained.’ The Software Engineering Institute of the Carnegie Mellon University defines a COE as “A premier organization providing an exceptional product or service in an assigned sphere of expertise and within a specific field of technology, business, or government, consistent with the unique requirements and capabilities of the COE organization.”

How to set up a Captive Center or a Global Capability Center (GCC)?

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However, COEs mean different things to different organizations per their business needs. For instance, an R&D organization would define the term COE as a dedicated team within the organization that operates with the mandate and accountability to define and implement the vision for a “specific focus” – the focus, of course, is aligned to the strategic vision of the organization.

Now the question arises as to how to know if an organization needs a COE.

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When should you think about the Center of Excellence (COE) setup process?

Similar to the Manhattan Project, which united numerous talented individuals to pioneer groundbreaking innovations, establishing a Center of Excellence (COE) requires a clear purpose and strategic roadmap. COEs are typically founded under one of two scenarios:

When is COE a good idea?
  • When there is a need to develop expertise and standards in an area/component used by multiple products and solutions in the organization. The COE, in this case, owns this competency. It defines the roadmap, standards, and the architecture for that module. Teams across the organization use the module/component in their products or solutions.
  • When there is a need for a new skill in the organization that must be developed organically through an incubation COE. This COE is then responsible to develop this competency through hiring, trainings, and partnerships that can be leveraged across the organization.

Why set up a Center of Excellence (COE)?

In today’s rapidly evolving world, the pace of technological advancement is relentless, compelling companies to continuously innovate to meet changing customer expectations and maintain a competitive edge. Setting up a Center of Excellence (COE) becomes crucial for companies aiming to differentiate themselves by offering solutions that reflect a deep understanding of their domain and technology. COEs serve as incubators of innovation, enabling organizations to foster the development of new skills, drive innovation, and adopt a fail-fast approach to quickly adapt to market changes.

By focusing on specialized areas of expertise, COEs help organizations harness and disseminate knowledge, ensuring they remain at the forefront of their industries. This strategic approach to innovation and skill development is vital for companies seeking to establish themselves as leaders in their fields, capable of delivering cutting-edge solutions to their customers.

What are the organizational benefits of setting up a COE?

  • Establish visibility and focus: 

    Having a dedicated team means that employees and the world are aware of the focus. COEs also demonstrate that an organization is committed to excellence.

  • Eliminate Risks:

     COEs are not impacted by the day to day business of an organization. They do not have to deal with immediate revenue pressures and are free to channel their expertise and focus on a single business activity, process, or capability.

  • Flexibility:

     COEs are not limited by all the process overheads that typical product teams may have to deal with. They have the flexibility to innovate fast and fail fast.

Benefits of Establishing a COE

Relevant Center of Excellence (COE) Case Studies

There are several interesting instances from the industry where COEs have taken the spotlight and made a significant difference in an organization’s strategic goals:

  • Target set up a COE in Bangalore that focuses on Business Intelligence and Analytics, which directly contributes to enhancing the operational and sales efficiency across the organization. It helps in driving customer engagement and higher sales for the entire organization.
  • Bosch’s analytics COE works on predictive modeling, analytical solution design, development and architecture, data visualization for global businesses across various domains. It created a new analytical model for the automotive vertical and has developed a deep expertise in cyber-physical systems.
  • ThyssenKrupp set up a competency center in Budapest that focuses on software development activities for electro-mechanical steering systems and develops new software functions for improved and safe driving experience.

Companies are striving to win this tussle for excellence, and are leveraging COEs as tools to stay ahead. As the saying goes, ‘Well begun is half done,’ setting up a COE will indeed mark the beginning of an organization’s journey to excellence. However, it is only a task half done. To stand out, organizations must make sure that they have the right ingredients to establish an effective and successful center of excellence.

Decades ago, Charles Darwin had rightly pointed out, “It is not the strongest or the most intelligent who will survive, but those who can best manage change.” Thus, change and challenges are inevitable and ready or not, expertise is the key to the future.

Making a business case for a CoE or outlining its blueprint, Zinnov can help your organization every step of the way to set up a CoE. Get in touch with us at

Other helpful resources:

  • Benefits of CoE
  • CoE
  • Setting up a CoE
  • What is Center of Excellence
  • What is CoE
  • Why set up a CoE
Sukanya Roy, Associate Director, Zinnov
Richa Kejriwal, Marketing, Zinnov
Frequently Asked Questions

A Center of Excellence (CoE) is a centralized team of experts that gathers knowledge, develops best practices, and provides support and guidance in a specific area of expertise. They serve as a hub of expertise for the entire organization and help to ensure that best practices are adopted and implemented consistently across all departments. COEs can be established in a variety of areas, such as technology, customer service, sales, marketing, and operations.

An organization should establish a Center of Excellence (CoE) to consolidate expertise, promote best practices, and foster innovation, which can lead to competitive advantages, cost efficiency, and a commitment to excellence in a specific domain. CoEs also offer flexibility for experimentation and risk mitigation while facilitating cross-functional collaboration and providing a structured framework for measuring success.

A CoE is a good idea when an organization has a need for: 1.Consistent and standardized practices across the organization 2.A centralized source of expertise and knowledge, support and training for employees 3.Improved performance, reduced costs, increased innovation, and improved risk management

Establishing a Center of Excellence (CoE) offers several advantages, including: 1.Enhanced Performance and Reduced Costs: A CoE promotes best practices, streamlines processes, and fosters innovation, leading to improved performance and reduced operational costs. 2.Centralized Expertise and Improved Decision-Making: A CoE serves as a hub of knowledge and expertise, providing valuable insights and support to decision-making across the organization.

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