How to Build the Best Digital Strategy and Gain a Competitive Edge
Take your strategy formulation process to the next level using a proven framework.
Digital investments have increased over the years and more so recently due to the pandemic. Total spend on digital transformation is expected to reach $6.8 trillion between 2020 and 2023 according to IDC.
99% of businesses have invested to some extent in digital transformation. However, less than 50% of companies have a clearly defined digital strategy, according to the EY-Parthenon Digital Investment Index report.
Companies need a thorough digital strategy to better compete and reach their full potential. It is more critical than ever, especially in the midst of multiple on-going crises.
Most digitally mature companies are overdue for a major and urgent refresh. Their main challenges are to better face the new environment and account for the latest technological developments.
1. Why Now?
Crises bring volatility, new unknowns, and changes to clients’ behaviors. The current situation has led to seismic and unfathomable changes.
The Direct-to-Consumer (DTC) model has flourished, with repercussions for all businesses. Consumers are now shopping online more aggressively than ever, compacting 10 years of expected growth into a few months. McKinsey & Co refers to this acceleration in adoption as the “Quickening”.
Many other changes, from working from home most of the time to avoiding gatherings and travel, have forced businesses to re-invent themselves, re-plan their strategic initiatives, and rethink their digital capabilities.
2. A Challenging Playing Field
Businesses are not benefiting equally from the changing environment:
- The retail, live entertainment, and travel industries are facing bankruptcies, difficult decisions, and saw sales temporarily drop to record lows.
- Online businesses and supermarkets are facing the opposite issue and are dealing with sharp growing pains, from retaining talent to maintaining an extended supply chain.
Financial analysts are facing uncertain projections, complicating the financial planning cycle: is the bump in sales there to stay, or is it a blip in the forecast before revenues go back to normal?
As companies face this new unchartered territory, what is the best process to formulate a solid digital strategy? How can companies seize opportunities without taking on new unsustainable risks?
How can they best fight a more efficient and sophisticated competition? What works best in a faster-paced market where online shops and new sellers can pop up overnight?
3. The Digital Strategy Matrix
One way to cover and logically organize all strategic initiatives is to follow a step-by-step approach across 4 categories. The goal is to prioritize delivery by their business impact, starting with:
- Projects improving revenues and profits
- Internal processes supporting sales
- After-sale services supporting customers
- Streamlined internal functions increasing employee productivity
It can be helpful to visualize these four categories as a matrix:
4. The Discovery Process
The best way to kick off this journey is to analyze the key areas of the business, as part of a discovery process. It can be complemented with interviews, reviewing materials documenting processes, assessing the technology stack, and understanding its architecture.
Any additional insights which can support and inform the strategy are valuable, as long as they help improving decisions. Speaking to customers or mystery shopping, for example, could help bring new information to light on the overall Customer Experience (CX).
One of the keys to selecting the right initiatives and priorities is to thoroughly assess the current digital state. That is often referred to as the level of digital maturity and it determines the readiness of an organization for its next chapter. It has nothing to do with the size or success of the business.
5. Communicating the Strategy
Digital Strategy is about communicating clear steps to achieve greater Digital Agility. It is also about obtaining buy-in from leadership, by explaining succinctly how results will be achieved.
High-level digital initiatives should be summarized and prioritized in a conducive way. They can then be socialized and refined with the relevant teams:
This framework works across industries. It can be useful to kick start strategy planning sessions where initiatives will be broken down, assigned to owners, planned, and matched to available resources.
In parallel, it makes sense to start drafting targets, KPIs (Key Performance Indicators), and OKRs (Objectives & Key Results) to drive delivery and results.
Calculating the return on digital investments has become more prevalent over the years as a KPI. It is often abbreviated as RODI or Digital ROI.
6. Focusing on the Right Outcomes
Legacy businesses
The outcomes will be different for each company. If a company or industry is not considered digitally savvy, the focus will be on nailing down the basics, for example:
- Several of the largest retailers in North America do not have a transactional website to this day. They have a message on their front page mentioning that many of their stores are closed for now and to just wait to visit them again.
- Since it is not possible to order anything remotely, they would be at the early stage of their digital maturity in this area and the priority could be to define, design, and build an e-commerce solution to make up quickly for the loss of revenues.
- At that stage, there would be no need to invest yet in social media nor online ads because there is not a value chain built to convert visitors into online customers. It would come later in the roadmap, as digital capabilities improve.
Digital savvy businesses
Other companies are further ahead in their journey and have already automated most of their functions. Their efforts will concentrate on taking the current setup to the next levels:
- Technology startups often have ads covering all channels, are retargeting customers, use SEO (Search Engine Optimization) by managing long lists of curated keywords to rank well in all search engines, and push out product updates with minimal effort.
- Although the level of digital maturity is much higher, there is always room for growth. Maybe a key area to look into is how remote workers are doing if it came up as an area of concern or uncertainty. A typical employee survey, asking if employees have the tools they need, can be helpful.
- Using a company-wide survey and asking more open questions will allow collecting insights about key technology challenges. It can be very helpful to unearth opportunities to improve the digital set up, especially if there was a recent switch to remote work.
7. Adding layers to maximize and accelerate the impact
As the strategy takes shape, it can be beneficial to explore additional dimensions, for example, potential partnerships and acquisitions to achieve the stated goals.
It might also make sense to re-assess the current technology in light of the new initiatives. As the company grows and new products become available, it is often productive to review the functionalities and costs to confirm that the solutions in place are still good fits. It is a good time to update the roadmaps, go back to the market, and launch vendor selections if needed.
Most companies pursue automation and streamlined workflows to reach operational excellence. That requires products to work well together at the portfolio level or to establish a strong data broker in the middle, such as a data warehouse.
Operational costs, budgets, and investments are always a point of contention, especially when the numbers keep growing and business is impacted by economic or sanitary crises. As part of strategic planning, there are always opportunities to optimize and balance buy vs rent vs build decisions at the onset.
Lastly, the most important layer is talent. There is a shortage of qualified digital talent on the market and it has impacted digital transformation efforts.
As part of their digital strategy, companies have to lay out a plan to acquire, retain, and develop high performing digital talent. It includes executives, general managers, project managers, content creators, and technology experts.
Companies also need to maintain a support network of key suppliers, contractors, advisors, and business partners who will be able to contribute to accelerating successful programs and will help with completing high priority initiatives.
How is your Digital Strategy working for you? Do you follow a similar process or do you have one of your own?
In my next post, How to Best Convey Your Digital Strategy by Using 4 Key Categories, I am drilling down into those four categories and providing several examples to illustrate how systematic and smart execution can deliver the best results.
Max Dufour is a Partner at Harmeda. He leads strategic engagements for Financial Services, Technology, and Strategy Consulting clients. Connect at mdufour@harmeda.com, on LinkedIn, or visit Harmeda. Any links to external sites can be affiliate links and therefore generate compensation as part of the Amazon Associates Program and other similar programs.
