Digital strategy is hard to get right — yet critical to success.
Everyday we conduct more business and pleasure using digital means. We’re all being more digital. This is increasing the pressure on businesses and organisations to respond – to do more and offer more with digital. To be more digital. Unfortunately, the more we do with digital, the more complex digital projects become, and the research shows that the majority of organisations fail in their attempts to make the most of digital opportunities.
Recent research from Boston Consulting Group found 70% of organisations report that their digital transformations did not deliver the benefits they expected.
There are many reasons why we struggle, such as constantly changing technologies and evolving customer expectations; and there is no doubt that delivering complex digital projects can be incredibly challenging, but why do we fail at such an alarming rate? And if we are failing so regularly, why do we continue to approach projects the same way, and make the same mistakes?
In the same research from Boston Consulting Group, they identified six keys to success when they looked at the companies that succeeded with their digital transformations. The first key was “having an integrated strategy and clear goals” for the transformation.
This need for good strategy is supported by two further pieces of research from McKinsey & Company. In the first, over 1200 companies were asked about their digital transformations and well over half reported that their transformations had stalled. A lack of a clarity on the strategy and/or a poor digital strategy was cited as the primary reason for failure in 21% of cases.
In the results from a 2017 survey of over 2000 companies, McKinsey & Company found 48% of respondents stated that the return on investment from their digital initiatives was less than the cost of capital. This suggests that about half the time these digital projects did not deliver any significant or tangible benefits. Conversely, the same research team found that companies that closely aligned their digital strategy with their corporate strategy were more than twice as likely to generate significant returns on their digital investments.
The research might be a few years old, but it’s compelling: a clear digital strategy tied to the purpose of your organisation is a key determinant of success when it comes to delivering complex digital projects.
Why are we getting our digital strategies wrong?
Firstly, the brutal truth is that developing good strategy is harder than most people realise: and good or bad strategy is normally only ever evident in hindsight.
Secondly, and although this is improving, a common reason why many organisations fail to develop effective digital strategy seems to be a lack of digital ‘fluency’ at the right level. Sometimes the people responsible for developing digital strategy lack sufficient knowledge about what’s possible and what a digital strategy looks like, and sometimes it’s the opposite: the people responsible lack sufficient experience or knowledge of the business.
Naturally, if you can’t speak the language or identify the need for a translator, there’s bound to be confusion. This leads to four common and problematic scenarios:
a) Not knowing the value of a digital strategy or where it fits within your organisation, therefore not investing the necessary time to develop one
b) Simply choosing the wrong digital strategy (often copied from another organisation)
c) Relying on external technology companies to develop your strategy
d) Incorrectly assuming that a digital strategy already exists.
What is a digital strategy?
Although the phrase ‘digital strategy’ is frequently used by all manner of organisations; a digital strategy for your business is not just a plan for your website or your content, nor the replacement of a business platform or digitising workflows, nor the creation of an app, neither is it the execution of an advertising campaign or the use of social media. These activities require strategic thinking and may be required to bring a digital strategy to life, but they are not the strategy.
A strategy is a coordinated set of activities designed to move an organisation from one place to better one. A digital strategy outlines how an organisation can get better business outcomes by using and aligning all of its digital technologies to meaningfully change the behaviour of its customers, stakeholders and staff. A digital strategy could present new opportunities and different ways of doing business by examining the business model and defining ‘value’ in new ways.
A digital strategy sits above and guides all the technologies and related processes within an organisation. Like teamwork, a large part of the power of strategy lies in the coordination of activities. Developing a collection of disparate individual strategies is not strategy. A digital strategy should sit in the space between the strategy of the business and the technologies it uses.
If the overarching digital strategy layer is absent, if you can’t see how your technologies are coordinated in such a way as to enable your organisation to do better business, you might be missing a digital strategy.
What type of digital strategy do you need?
Every organisation has a fundamental strategic position that outlines where it fits in a market, and how it creates and delivers value. Put simply: the position outlines how an organisation makes money, who its customers are, and who it competes with. Knowing the position answers the question: what business are you in? This may sound overly commercial, but even a government department has customers, and must deliver value whilst competing for resources, information and attention.
Understanding the fundamental strategic position of your organisation will help you decide upon, and set goals for, the type of digital strategy you need; which in turn outlines what you will or won’t do with your technologies.
At the most basic level there are three fundamentally different types of digital strategy:
a) Streamline (most digital transformations are based around using technology to enable an organisation to do the same thing more efficiently)
b) Amplify (use technology to focus on and amplify the activities in your organisation that drive the most value for your business and customers)
c) Disrupt (seek to create new experiences of value that consequentially take value away from competition; you can think quite broadly about what constitutes competition for your organisation).
Any of these strategic approaches can be combined with choices relating to whether you focus on internal or external audiences, how you scale, your business model, as well as your network and platform choices (which outline how and who you collaborate with).
Naturally, it’s hard to find the time and money to adopt more than one of these strategies at a time. For example, if you are streamlining your technology for efficiency gain, it’s hard to simultaneously be investing in creating new and disruptive experiences. However, it’s not impossible. You could compartmentalise your digital activities and adopt fundamentally different approaches for each, so long they’re coordinated in such a way as to support your organisation’s fundamental strategic position. So what does that mean in plain English?
What could a zoo do?
Let’s say you run a zoo. Your fundamental strategic position demands that you use resources as efficiently as possible so that you can look after a wide variety of appropriate animals. You create a strategy with the goal of increasing the number of animals in care whilst lowering the cost of entry so more people can see the new animals.
You decide to undertake a digital transformation to improve and streamline the organisation’s overall efficiency, with a particular focus on optimising the ratio between animal popularity and cost of maintenance (which includes enclosure development and maintenance, food, water, keepers’ wages etc). There are certain animals that the public loves to see, which drives visits and revenue, and certain animals that are critical to foster for conservation purposes. Ideally, popular animals are also critical animals.
Alongside the transformation, your digital strategy outlines why and how you could develop a ‘keeper app’ that children and schools download and use to look after their favourite animal. The app is demanding — as are the animals. The virtual animal requires regular feeding and cleaning etc. The application is designed to create educational and commercial opportunities, as well as driving more real world visits to the zoo. Perhaps features or animals can only be unlocked at the zoo? The fundamental approach for the keeper app is to disrupt. The experiences created by the app are new for the zoo and compete with all the other apps on the child’s device, as well as competing with all the other ways that the child is learning.
The digital transformation is focussed on using technology to be more efficient, whereas the keeper app creates an engaging experience that increases visits to the zoo whilst simultaneously gathering data on which animals are most popular and why.
The two projects could be compartmentalised (the visitor experience team could lead one, while corporate services leads the other) but are complementary as the keeper app provides useful insight for the transformation team about which animals are most popular. This insight into visitor behaviour can then be translated into increased efficiency.
If time and resources allowed, you could complicate things even further by simultaneously looking at the zoo’s online store and adopting an amplify approach: increase the range of popular animal products, increase digital advertising, optimise your pricing, partner network and supply chain to increase profit etc.
The overall digital strategy should outline, coordinate and guide the purpose of the transformation, keeper app and online store projects. The guiding purpose naturally flows into subsequent choices regarding processes, people, data and technology. However, the digital strategy does not dictate, for example, how the keeper app should be designed or built — that is determined during execution.
But — and this is a big but — the entire digital strategy is flawed if the key diagnosis or hypothesis at its heart is wrong: do you really want to optimise animal care based on popularity? This could lead to the zoo being overrun by cute fluffy bunny rabbits. And possibly some tigers.
Good strategy takes time
To create a digital strategy that can achieve significant shifts in behaviour or business results is hard, and takes time. It requires a deep understanding of an organisation, its purpose and its customers, as well as the ability to think creatively while coordinating expertise and input from many different internal and external stakeholders. As such, it can’t easily be outsourced or done in a single workshop or sprint. But as the research shows, taking the time to get your strategy right pays off.
Albert Einstein is famously quoted as saying, “If I had an hour to solve a problem, I’d spend 55 minutes thinking about the problem and five minutes thinking about solutions.”
The point being that in 2021, we don’t lack for technology solutions and choices, instead, we lack for the time needed to properly define the problem so we can make better decisions. We need better strategy.
Start off on the right foot
If you’re serious about doing better with digital, you need a champion in your organisation with the time and licence to do the work required to create a coherent digital strategy. This could be you.
If you don’t have the strategic capability in-house, engage an independent strategist to help you with the necessary thinking and creativity. Your strategy partner should be well versed in alignment building workshops and come with a box of tools such as insight research, analysis, journey-mapping, service design etc. They will help you take your organisation on the journey.