“Digital transformation.” “Digital strategy.” “Think digitally.” What do they really mean? What do they really imply for you and for your organization? Do you know why you are doing these things and what your organization intends to accomplish? Does your organization need both a digital strategy and a business strategy? Are they different? They shouldn’t be, for if properly conceived, they are one in the same.
Technology has been a driver of business transformation for as long as business has been a concept. Innovative companies have always embraced new technologies and reinvented themselves. Those that didn’t, eventually faded away or disappeared completely. Technology has enabled entirely new business models and companies to transform what value they create and how they create it. For every company that succeeds, others spend millions of dollars and do not get the results they anticipated.
Today, CEO’s face yet another wave of technology-driven transformation at an ever-increasing pace. They are challenged to create “digital strategies” and to “digitally” transform their business models. They are under pressure to be digital leaders and to be able to articulate to stakeholders how their companies will become “digital”, what that means, and how it will lead to new sources of revenue, growth, and advantages.
To succeed, instead of starting with “digital”, a better place to start is with a renewed and deep focus on the customer and their industry value chain in developing your company’s overall strategy. A good strategy will first articulate:
- What industry or customer problems will be solved, and needs met
- What outcomes will we help customers achieve in their business?
- What will we make easier for our customers to accomplish?
- What value is going to be created and why will anyone pay?
- How will we engage customers differently or in entirely new ways that give us a sustainable competitive advantage?
- What capabilities will we need to deliver the value?
Answers to these seemingly straight forward questions can be surprisingly elusive. However, they should be the foundation of building a good strategy. This should not be digital first; rather meeting customer needs first. While any good business strategy includes “digital,” technology-first thinking can lead to a hammer in search of nail. When overdone, everything starts to look like a nail. Data analytics may seem like part of a good digital strategy, but is it clear what customer problem is going to be solved and why anyone would be willing to pay? Companies have poured millions of dollars into digital strategies and solutions that solve the wrong customer problem. While one company works out a digital strategy and solution to make certain work activities easier, another company with deeper knowledge of the customer’s process, value chain, and desired outcomes figures out a way to eliminate the need for those activities all together. Both have digital strategies, but the latter will win virtually all the time.
“Needs endure; solutions are transient.” Technologies become outdated. Meeting customer needs and creating value never do.
The overused and by now clichéd example of Kodak’s reliance on celluloid film is telling. Since they thought they were in the film business, they focused on how to beat rival Fuji. However, they failed to realize that they weren’t in the celluloid film business at all; they were in the memory business. How long have humans had the need to save memories? Forever. In the cave days, hieroglyphics saved memories on cave walls. This continued to the written word, sketches and paintings, film, digital, etc. The need remained the same (saving memory) for as long as humans have existed; the solutions evolved. Needs endure, solutions are transient. Companies today need a digital strategy no more than Kodak needed a celluloid film strategy. Both are/were misguided. Both are too narrow and short sighted. What all firms need is a business strategy for doing a sustainably better job of meeting customer needs than the competition. Full stop. Today, “digital” is certainly part of that, but by no means a standalone concept. It leads to the now clichéd “Kodak myopia” that have accelerated the downfall of far too many companies.
To be fair, some organizations approach developing a digital strategy with a focus on the customer journey and ways to improve or transform it. This is usually done in the context of the customer’s experience when acquiring and using a company’s product or service. While this is valuable, also consider the reverse perspective. Start with the customers business processes. Develop deep insights into where there is potential to create more value, new ways to solve problems and drive outcomes, even in areas your company may not address today. Take this further and widen the lens beyond the customer’s business process and into their value chain, and even ecosystem.
While digital technologies can make it easier and transformative for customers to do business with you, a more complete strategy will articulate how your organization will make it easier and transformative for your customers to conduct their own business and create value for their own customers.
Instead of only looking at the customer journey through your company’s processes, look at your journey through theirs, and innovate where and how you are going to create value.
Actions to Take
CEO’s that want their organization to develop digital strategies should lead people to develop good business strategies. They should work towards developing a unified vision that articulates what value they are going to create for customers, why they know customers would be willing to pay, and how they intend to deliver that value. The following are three actions that leaders can take to drive better results from their “digital strategy” and transformation efforts:
- Make a focus on the customer a priority, an obsession. Make developing deep and continuous insights and knowledge of customers and industry value chains part of the DNA of your organization, not just a one-time research project to front-end a digital strategy initiative. Demand a relentless focus on the customer and the industry value chain. Take the time to understand the customer perspective, what they are trying to get accomplished, and why. Develop it to become a core capability of your organization. This will give your organization an advantage in identifying new opportunities to create value before your competitors do. It will give you edge in rethinking how value can be created in ways that could give you a unique competitive advantage. Bring your customers into the discussion. Go beyond customer interviews and focus groups, which are outdated and especially limiting for B2B organizations. Learn how to have deep, quality conversations with customers. Work with them to co-create and reimagine new ways of addressing their business challenges and achieving outcomes.
- Think differently, not just digitally. Challenge the organization that doing things differently is just as important as doing things digitally. Spending millions on digital strategies and technologies that do nothing but enable outdated work activities, processes, value propositions, and businesses models isn’t going to drive long-term business success. Note that it’s not enough to think about how to deliver a value proposition differently. Maybe the value proposition needs to be different! Thinking digitally without thinking differently keeps companies anchored in what they have always done and why they have always done it. Kodak is an example of not thinking differently about the business they were in and the value proposition they offered. Make thinking differently the priority.
- Aspire to create good business strategies, where digital is ubiquitous. Artificial silos between business and technology can result in separate strategies evolving. This is counterproductive. Digital strategies can emerge that are disconnected from the business and from customers. Business strategies can emerge that do not have enough innovative thinking nor leverage how technology can open-up entirely new ways of working, creating value, and even driving new business models. By focusing the organization on developing a single cohesive strategy that is centered around creating customer value, it will help set the tone and expectation that digital needs to be embedded.
Digital is powerful and essential means to an end. The end is a business vision and strategy that is grounded in creating superior customer value and differentiating from your competition in ways that give your organization an advantage that leads to growth.
Written by Dr. William Putsis and Philip J. Burns.
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