Author of the “Digital Era”
Founder and CEO of Fintech Solutions LLC
In the well-known film “The Fifth Element” by Luc Besson, it was only possible to save the earth from the flaming orb of absolute evil by possessing all five elements. A successful and viable business is also not possible without a combination of the required elements. Nowadays, a well-formed digital strategy is a must. Let’s see what is included in this concept and why it is needed.
Not so long ago, I completed the development of a digital strategy concept for one ambitious large bank in the Azerbaijani market. In the course of the work, I faced the fact that the very concept of digital strategy, even among specialists and market players, is very vague and unequivocal.
I am sure that when faced with the preparation of a digital strategy, each company has at least two questions: do you need such a strategy at all and, most importantly, how should it look and what should it include.
Let me please start with the “Why?”: now, digital strategy = business strategy. In other words, if you agree that without a strategy, the company’s development path is going nowhere, then you can safely substitute the Digital into your company’s development strategy. Because without a digital transformation there is no future for the business.
The presence of your products and services in the client’s mobile phone is not a luxury, but the usual norm of today. And the Internet of things has a severe impact on the situation – now our life and habits have changed dramatically. For example, a coffee machine with Internet access via Bluetooth in our office can make my favorite drink.
A digital strategy will help you use technology to improve your business performance. And the use of technology can help in the process of creating new products, and in a complete rethinking of all business processes.
It is a digital strategy that will help the company to differentiate itself on the market. The strategy, of course, must also include tactical steps that allow you to understand exactly how the transformation will take place.
There are cases when the implementation of digital transformation can open the way to change the business model of the company and to find new opportunities in the creation of technological services. In essence, the strategy itself is the definition of a path. In the end, to take this journey you will need a specific plan and a roadmap. In addition, at the strategy stage, all divisions of the company will receive a unified vision of the digital future, which will help to make more informed decisions today.
It should be noted that the formation of a digital strategy is a very difficult task due to the fact that everything around us is constantly changing. Therefore, in order for the strategy to be feasible it is important to do the “homework”:
- Determine the business objectives of the company. The strategy should help in achieving them. In principle, if there are no goals, then you do not need a strategy yet.
- Identify target audiences to be in the focus of the right technology.
- Audit the current state of the business to understand what you are working with now and where there are unresolved problems. It is critical to understand which platforms and systems the company uses, and which difficulties arise.
- Describe how, through strategic steps, you will achieve your business goals.
- Make a plan for investing in technology in support of the digital strategy.
In addition, digital strategy, as a rule, affects client experience, company processes, and business models. At the same time, the digital transformation of a company is a deeper concept that generally defines the culture within the company as a whole. Also, do not confuse digital strategy with IT strategy. The first one will help to improve customer services and increase sales efficiency. The second focuses on which technologies exactly you decide to invest your time and money.
I am sure that the right questions always help to make the right decisions. If you are at the beginning of your digital journey and doubt which technologies are most relevant for you, ask yourself:
- How will this technology affect your business or how will it change it?
- Will this technology help create additional value for your customers?
- Will you have new customers or even new target audiences?
- How will technology change your value proposition for customers?
- Will this technology contribute to your differentiation against competitors?
Some useful ideas on the way to implementing your digital strategy:
- Determine who will be the Digital Leader in the company. Most often this is the role of a CEO. The logic is simple – the leader of this level will be able to achieve the involvement of the entire team of directors. Many companies designate dedicated Chief Digital Officers for this role. It is also a good option – it is important that this person has enough authority to influence the changes and fight the natural resistance. But the confrontation will be very serious – no one likes changes, and moreover, people tend to see the new approaches as a threat, both to their positions and to the business of their units as a whole.
- Decide whether your strategy will be aggressive or defensive-passive. Both roles are good and they depend on your goals.
- Look into the future. Yes, we are not Nostradamuses, but in every sphere and in all segments of the business one can see obvious, gaining momentum. And the strategy should be taken for the long term, to allow you to understand that you can navigate your business ship through the raging ocean of digital changes.
- Suppose you have a problem in order to assess what specific advantages the process of forming a digital strategy brings to you. Here are some of them:
- More leads and higher sales. Up to new audiences with whom you have not previously worked. New opportunities for digital marketing will help to answer the following questions very precisely: who is your client, what does he want and what problems does he have.
- Greater customer experience and customer engagement.
- Improving company efficiency.
- Thoughtful and informed decision making on business development.
- Determination of the new direction of the company, which will help to adapt to the ever-changing market.
- Victory over competitors – the right strategy will help you get past the market leaders. And this is not an exaggeration. Otherwise, how would new players in the market drive out leaders and powerful brands? Digital approach to evaluating competitors will show you the strengths and weaknesses of other companies in your market, and help build a strategy for conquest.
- Return on investment.
- An interesting and important point – it would be ideal to attract customers to the development of a digital strategy, because all the market power is now with them. There are interesting cases when companies arranged client forums for sharing brainstorming on digital strategies. You can also see new opportunities in partnership and collaboration – in some cases, even your competitors can become your partners. A huge number of such partnerships are now observed in airlines, in the insurance and financial sectors.
A few words about the planning horizon. Let’s be honest with ourselves – with the current rate of change, it makes no sense to plan for a period of more than 5 years. Optimally 2-3 years in the horizon with an annual review.
It is also interesting to see which technologies are the companies queuing for – or in other words, where the most investment into digital goes to. Here are the top 3 according to IDG Digital Business Survey:
- Artificial Intelligence (AI) is the undisputed leader.
- Machine learning (Machine learning).
- Internet of things (IoT).
And finally, for gaining more inspiration, I offer several figures from multiple pieces of research and real-life cases in support of the need for a digital strategy:
- Let’s first have a look from the SME’s perspective. Studies have shown that the use of digital technology in business allows SME’s to earn 22% more than in the old-fashioned companies. The growth in the productivity of the tech business is estimated at 10%, while sales are growing by almost 40%. Despite these impressive figures, every third SME still has no online presence.
- 55% of startups have a digital transformation strategy. Among corporations, this figure is 38%. At the same time, the digitalization is in full swing – 89% of companies are already implementing or in the process of developing a digital-first strategy. Among them, the leaders are the services sector (95% of companies in various stages of creating digital strategies), financial services (93%), and healthcare (92%).
- Only 15% of company employees in the early stages of digitalization state the presence of a clear and understandable digital transformation strategy. At the same time, for those companies that obviously chose Digital as their number one priority – more than 80% of employees confirm the digital strategy in place. Moreover, the digital leadership of a company can be a key factor in choosing this company as an employer.
- Within the last 10 years, Amazon has gone from a regular bookstore to a market value of $355 billion (December 2016). At the same time, the accumulated market cap of all the largest US retail chains as of the same date amounts to $297.8 billion.
- In 2016, JP Morgan Chase invested $10 billion in digital solutions and upgrading its systems and platforms. Over the past three years since this investment, the bank’s market capitalization has grown from $240 billion to $380 billion.
- According to McKinsey, digitalization will bring banks 10% more revenue from each digital product and a 20% reduction in costs.
Required postscript. Everybody knows the sad story of how Kodak company refused to introduce a digital camera, because it saw in it a threat to its business. And where is Kodak now? Apparently, somewhere near Nokia. In short, be like Amazon and don’t be like Kodak.
In other words, go digital or go home.
Anastasiya Shevchenko is also a Partner of the international marketplace for Startups and Corporations collaboration called Let’sPartner. Click here to find out more about the project.