How to create a successful business strategy for the digital world.
Every business today needs a digital strategy. Products and services need to be digitally connected and integrated including cloud, big data and data analytics, the internet of things, mobile apps, etc. To connect customers with information, data and things is of vital importance thus the digital strategy needs to facilitate this integration and allow customers to interact with the organisation’s products and services.
Businesses need to create revenue from digital technology and thus need a strategy that creates a digital edge, which combines digital information and physical things in new ways to create value and revenue opportunities. In order for organisations to achieve this digital edge they need to transform processes, business models, internal behaviour and the customer experience by exploiting the ever-growing digital connections between systems, people, places and things.
Defining digital strategy
Digital strategy is still a relatively new concept with the scope ranging from incorporating email, websites and social networks into marketing and communications activities to going mobile
Depending on the sector and business, the perception and role of digital changes dramatically. For some companies, e.g. a catalogue mail order business, it’s disruptive in the worst possible way. For digital–first companies, it is at the core of the business strategy.For many businesses however, it offers new opportunities of trying new ways of reaching out to customers and winning business but equally there are many organisations who see digital as a threat to business, jobs and changing customer expectations.
Mapped against what digital strategy means is the evolution of digital strategy. Initially digital strategy was concerned with cost savings and efficiency improvements, then about online business generation and now it’s about business improvement as a whole. Thus a sensible definition of what digital strategy is today could be articulated as follows:
Digital strategy is the process of identifying, creating and executing digital opportunities that will increase the competitive advantage of the business.
How do different businesses approach digital strategy?
Research suggest that more than 50% of business executives say they have a digital strategy. However the term digital is used in three different ways and in reference to three timelines:
- First, there are the companies that look at e-commerce through the lens of the late 90s and whose digital strategy is borne out of fear of failure to adapt to the digital era.
- Secondly the word digital is used to describe current technology trends such as social media, mobile applications or cloud computing.
- The third use of the term digital is in reference to the future, in which products and services themselves become digital.
What a business means when it states it has devised and embraced a digital strategy fundamentally depends on which of the three camps it belongs to. Is it a back runner of the race, committed to the present or looking to the future? Whichever camp the business is in right now, one thing is certain: all businesses have to tackle the future digital strategy much more comprehensively that they had to for two decades as otherwise they may not be a business worth fighting for.
How to create a successful business strategy for the digital world
Every technology – including everything digital – that has the potential to transform starts in an isolated environment or silo and comes with its own individual strategy before it becomes part of the bigger business strategy. Digital strategy needs to be at the heart of business strategy.
Thus the review and renewal of a digitally underpinned business strategy comes down to a single premise, i.e. using information and technology to improve (human) performance and ultimately generate business growth.
The second phase of digital strategy
The first question is what elements of the digital strategy should be different as repeating the previous strategy is by no means the route to success. At the macro level there are two options:
- Extending the reach and scope of everything digital, which is similar to the way IT ap-proaches the automation and integration of various business applications, such as payroll, HR, CRM, ERP, etc.
- Digital transformation, which takes the initial digital strategy into consideration but queries its validity and positions variations of this strategy to accommodate changing business and client expectations.
Digitisation demands both changes in leadership and business strategy. Businesses have been using technology for many years, but things are fundamentally different to even a decade ago. Customer buying behaviour and expectations have changed in that most major purchases are researched online before a purchase is made and even the purchase itself is increasingly made online.
Another key change is the cost of delivering IT services and solutions is continuously reducing thus offering more and more ways to apply technology / digital, such as the Internet of Things (IoT), that looks to draw value from information gathered from sensors deployed everywhere in our everyday life.
In the past it would have been a lengthy and costly process to deliver a high-end IT solutions but digital is fundamentally shifting the competitive landscape in many industries and allows new market entrants to gain market share quickly and cost effectively.
Digital success stories are based on two things:
- Collaboration, often with businesses that in the past would have been regarded as competi-tors, or –initially- with businesses that your organisation can share data and information with.
- Flexible IT infrastructure that can scale in an agile fashion both up and down to meet chang-ing business demands, create quick proofs of concept, respond to market changes or chang-ing customer behaviour without creating significant financial outlays and risks.
Making the right decisions
Businesses need to think carefully about the right balance of attack and defence when it comes to their digital strategy. Monopolies generating high margins might think it suicidal to create low-cost and innovative alternatives as it would inevitably cut short terms profitability. Equally businesses who are constantly on the defence from new and attractive market entrants with more appealing propositions and lower cost bases may need to reconsider their strategy.
Thus it’s crucial to set out early indicators as to the value a business wants to derive from its digital strategy. In many sector there are opportunities that come from new channels to market or a low-cost entry into new markets. But there are also threats that come from improved price transparency that can lead to squeezed margins. Understanding the balance of those opportunities and threats is a good way of understanding the type and size of investment that digital should receive and the timeline according to which action is needed.
Experienced long-term market players have strengths that they can utilize to thwart off new digital market entrants, such an existing customer base, brand, know-how and importantly data. The importance however is to ensure that all of those assets are leveraged as part of the digital strategy, e.g. ensuring that the data they do have is used in an effective way for insight and for the business proposition in the digital world.
This blog was written by Stefan Haase, Associate at Whitecap Consulting.