Avoid the spray-and-pray approach to launch digital initiatives, it won't work.
“When a strategy succeeds, it seems a little like magic, unknowable and unexplainable in advance but obvious in retrospect. It isn’t. Really, strategy is about making specific choices to win in the marketplace.”― A.G. Lafley, Playing to win: How strategy really works
If you are embarking on becoming a digital business, using a spray-and-pray approach to launch digital initiatives will be frustrating and wasteful. There is a better way, and it is about systematically exploring your options and making choices to win at digital. It would help if you had a digital strategy.
If a digital strategy transforms your non-digital business into a digital business, let’s understand what makes a digital business.
A digital business is one where the business strategy is driven by digital. By digital, we mean the capabilities of using ubiquitous data, unlimited connectivity and massive computing power to run the business.
Consider a typical order-to-delivery process. The process takes an order from a customer and delivers the purchased goods to the customer.
Let’s consider how a non-digital operator would do this job.
Now, let’s question this setup:
So, when we hear that Amazon is now offering two-hour delivery, we can now understand the amount of work they have put into making all the parts of the value chain work in concert.
Now, let’s question this setup:
Amazon is a digital business because it has deliberately designed its organisation—people, processes and technology—to be integrated and driven by digital. Digital is at its core, as mentioned in its mission statement:
“Our mission is to continually raise the bar of the customer experience by using the internet and technology to help consumers find, discover and buy anything, and empower businesses and content creators to maximise their success. We aim to be Earth’s most customer-centric company.”
The key lesson: If you are an existing business with a low digital footprint, you need to start becoming a digital business. You don’t need to be 100% digital, but you need to be on the journey. Having a digital strategy can help you in this journey.
Before we jump into digital strategy, let’s first define business strategy.
Business strategy is an organisation’s unique way of sustainable value creation. Anchored by a compelling vision, it describes where the company will play and how it intends to win.
Consider IKEA’s compelling vision:
“To create a better everyday life for the many people.” This vision goes beyond home furnishing. We want to have a positive impact on the world—from the communities where we source our raw materials to the way our products help our customers live a more sustainable life at home.
As you can see, strategy is about making tough choices. And it is not a one-time, set-it-and-forget-it activity. No, you have to monitor, evaluate and experiment with it continuously. As a leader, your job is not to “create” strategy but to live with strategy—to be a “strategist”.
When a significant change in the environment such as “digital” comes along, you have two options:
If you choose option 1, you are just optimising your value creation. If you were a caterpillar before, digital makes you a faster caterpillar.
If you choose option 2, you are looking at new ways to create value. If you were a caterpillar before, now you are a butterfly!
Consider two companies in the taxi business:
You know where this is going. Both companies had the same options available to them, but Company A decided to use it to supplement their strategy, while Company B decided to make it their business strategy.
A digital strategy, therefore, is your business strategy driven by digital. When a large percentage of your strategy is driven by digital, you are a digital business, and then your digital strategy is your business strategy. Google does not have a digital strategy now, do they? They are a born-digital business and thus have a business strategy.
Therefore, a digital strategy helps transform your non-digital business into a digital business.
The key lesson: Treat your digital strategy as your business strategy in the making.
For a born-digital business, the digital vision is the business vision. Consider Google again. They don’t have a digital vision; they have a business vision. For companies on the journey of becoming a digital business, a digital vision helps direct the energy.
Consider DBS Bank. The Singapore-headquartered bank has won many awards for being the “best digital bank in the world”. These days, it wins awards for being the “best bank in the world.”
In 2010, DBS’s vision was to be the “Asian bank of choice.” But note how this started to change when they embraced digital transformation. In 2014, their vision changed to “make banking invisible”. In 2018, the vision changed again to “make banking joyful”. In her book, “Designed for Digital”, MIT’s Jeanne Ross explains this phenomenon as the result of a company making bold bets, running experiments and transforming after the learnings: “Digital visions direct experiments. In turn, experiments invariably shape a vision.”
Therefore, a digital vision is a statement that describes the value that the company intends to achieve with digital.
Consider Burberry. When it was transforming (mostly digital), Angela Ahrendts, who was leading the change, declared:
“[Our] vision was to be the first company to be fully digital end-to-end. The [resulting] experience would be that a customer will have access to Burberry across all devices, anywhere in the world.”—Angela Ahrendts
Burberry’s subsequent initiatives all lined up with the stated digital vision and resulted in one of the more profitable years for the company.
So, how can we craft a digital vision?
First, you need insight. You need to know the challenges, obstacles and problems that your customers face and the value your company can offer—you need to reimagine your company’s place in the world.
You can start by questioning your current performance or looking at what your competitors are doing or at the emerging trends that offer significant value creation opportunities. This exercise will take some time, so be patient.
After you’ve gathered the data and analysed it, you need to start exploring your options by asking deep questions such as:
Once you have wrestled with these questions, you can put your insights down in the form of a statement.
Recollect that a digital vision statement is a call to action to take bold steps and conduct experiments to learn and build capabilities along a chosen path.
After crafting your digital vision, you now need to hunt for vision-aligning, value-creating opportunities to win with digital.
It would be best to explore where-to-play (WTP) and how-to-win (HTW) choices to find these opportunities.
The WTP/HTP idea comes from Roger Martin and AG Lafley’s brilliant book on strategy: Playing to Win: How strategy really works.
WTP is the playing field for the company (or department or team). Some of the WTP choices include:
HTW is the value-creation capacity. There are two choices:
As an example, consider the same order-to-delivery process we covered earlier.
In Singapore, Amazon targeted a specific glass of goods such as groceries and household items (stuff that customers would want urgently) and chose to differentiate itself from its competitors by delivering the goods in under two hours.
So, how does one come up with the WTP/HTW choices?
Here’s a process you can use:
The resulting list is your portfolio of digital opportunities.
Capabilities are the activities that an organisation does to create value, and it is a combination of processes, tools, skills and behaviours, and systems that delivers a specified outcome.
Your organisation may have hundreds of capabilities (reach customers, buy goods, pay suppliers, create products, etc.). But your organisation has some key or differentiating capabilities that are better than the competition, and these form the basis of your competitive advantage.
To pursue digital opportunities, your company needs digital capabilities, and to win at digital, your company will need differentiating digital capabilities.
Some baseline digital capabilities include:
If you are an existing business, you must look at your digital vision and opportunities portfolio and identify the key capabilities your need to realise them.
Identifying the key digital capabilities is only the start. You have to systematically develop these capabilities in your organisation. A common misconception is that capability building is an HR responsibility.
Consider the capability to gather and analyse data to make decisions. To become world-class in this capability, you need knowledge and skills but also the processes, platforms and governance that will help it become consistent and scalable across the value chain. Achieving such a wide-ranging change requires cross-functional collaboration between the business units, HR, digital and IT teams.
Consider two digital systems: Human Resource Management (HRM) and Customer Experience (CX). You use an HRM system to make employee payments, and you use a CX system to create and run e-commerce stores.
Both the HRM and CX are digital systems. Still, they have different roles: the former is about keeping the core internal processes stable and robust while the latter is about continuously tweaking digital offerings to customers.
Like the HRM system, many other operating systems form a company’s operational backbone. These include finance systems, sales systems, intellectual property systems, etc.
On the other hand, systems that allow rapid tweaking and experimenting are a new breed called “digital platforms”.
“A digital platform is a repository of business, data, and infrastructure components used to rapidly configure digital offerings.”—Designed for Digital, Jeanne Ross et al.
If you want to launch a campaign for your e-commerce store, for example, you don’t need another system. You can use the campaign building blocks offered in the same CX system to design and launch the campaign.
The Lego-like composability of the digital platforms offers the ability to whip up new offerings quickly and become essential when you are thinking of scaling your digital services. For example, you could address many opportunities in your portfolio with a handful of digital platforms, thereby giving you the leverage to execute a wide range of digital projects quickly.
What are your choices in selecting digital systems?
Now that you have crafted your digital strategy, it is time to implement it. Here are the steps you can take:
If you’ve made it this far, congratulations! You can appreciate the time and effort required to create a good, solid digital strategy that can transform you into a digital business. Now, go and create your digital strategy. If you need a little help from us, just get in touch at firstname.lastname@example.org. Good luck!
Introductory guide to help you design and build modern business processes.