It’s no longer a question of whether or not you need a digital strategy. Digitized industry leaders “are twice as likely as traditional incumbents to” experience organic revenue growth of 25% or higher. Just look at HBO Max—the streaming platform that will likely change moviegoing as we know it.
The movie industry took a big hit in 2020 because of the word pandemic, revenue dropped by 18% compared to 2019. But while most production companies decided to put their projects on hold, WarnerMedia, HBO Max’s parent company, changed their digital strategy. They made their new releases available on their streaming application and in theaters that agree to host them. The digitization of their movies produced quick buy-in from their regular customers and even got them a couple of new ones.
A digital strategy is imperative, so your business can remain relevant in a world that’s already transformed by technologies of all kinds — artificial intelligence, automation, the Internet of Things, and more.
What is a Digital Strategy?
A digital strategy is a business plan that outlines how a business can use digital technologies to improve the customer experience, reduce operational costs, or capture a greater market share.
A lot of businesses struggle to define what is digital strategy. Is it developing digital customer engagement channels, creating new sales channels, deploying digital tools internally, or developing digital products? The answer is a digital strategy can mean one or all of the activities listed above, depending on what your business needs to survive and thrive.
George Westerman, a scientist at the MIT Initiative, explains that a digital strategy is nothing more than a business strategy that’s guided and supported by digital channels.
So, one business’s digital strategy might be offering the latest online payment options, while another’s digital strategy might be to adopt digital tools to streamline operations and cut costs.
Just as business strategies are not one-size-fits-all, digital strategies cannot be either. A digital strategy that works for a newspaper, says The New York Times, may not be the same as one that works well for an auto manufacturer like Buick.
When Should You Implement a Digital Strategy?
The best time to implement a digital strategy is anytime you see two forces acting at the same time:
- Force #1: Changes in technologies and tools — This could refer to vast improvements in existing technology (speed of the internet, mapping technology, improvements in AI) or the launch of new technologies and tools (Internet of Things, electric cars, robotics).
- Force #2: Consumer adoption of technology — This refers to a state where new technologies are both cost-effective and easy for consumers to use. Here, technological adoption refers to both consumer tech (social media, mobile phones) and business-focused tech (sales tools, customer relationship management tools, human resources management software).
Rapid improvements in technology and simultaneous consumer adoption of that technology usually cause a digital disruption of existing business models and give rise to new business possibilities.
For digital disruption to occur, both forces must act at the same time — that is, new technology needs to be available and subsequently adopted by consumers. For instance, digital sales tools like live chat and video conferencing have improved considerably in the past few years (technological change), but digital selling only took off when Covid-19 forced B2B sales teams and end customers to adopt virtual selling tools in droves (consumer adoption). Both these forces acting together meant that more businesses needed a digital selling strategy to thrive.
Once the signs of digital disruption are evident, businesses must move quickly, or they risk being outsmarted by competitors.
Take the Netflix vs. Blockbuster saga, for example. Blockbuster should have implemented a digital strategy as soon as they saw the improvements in internet speeds (technological change) and the widespread consumer adoption of the internet. Both these trends gave rise to a new business possibility: online movie streaming. Despite evidence of digital disruption, Blockbuster management refused to abandon the DVD business and adopt a digital strategy.
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How to Build and Execute a Digital Strategy
Building a digital strategy is similar to creating a traditional business strategy. It’s just that the strategy is executed via digital channels: find out what customers want, find the best way to supply it, execute quickly, and keep iterating as new waves of digital disruption hit your business.
Let’s look at the process of creating a digital strategy in detail.
1. Determine customer demand
Customer needs and wants should be the starting point of your digital strategy. If not, you risk making digital moves that may not improve the customer experience and sales, or worse, may drive customers away. A car rental company could launch an app to make bookings, for example, but if customers still have to make cumbersome calls to extend bookings, change locations, or upgrade, it could make their experience worse.
The best way to gauge what your customers want is to create a customer journey map. Customer journey maps, both current-state and future-state, help you identify and anticipate customer needs to guide your digital strategy.
A current-state customer journey map allows you to visualize how customers experience your product in its current state and where there’s scope for improvement. It reveals if customers want:
- a different version of your product
- a better delivery channel (apps, websites, connected experiences)
- lower prices
- better customer service options
A future-state journey map helps you anticipate needs customers may not be able to express or be aware of. Future-state journey mapping involves visualizing the ideal journey of a customer with your product and uncovering new ways of improving customer experiences.
2. Determine your digital approach to meet customer demand
Once you know what customers want (aka what they demand), it’s time to think about how you will meet their demand (aka what you’ll supply) using digital channels, tools, or platforms.
Depending on what your customers want, a few different digital approaches can help you meet customer demands. Here are some options:
- Set up digital partnerships (digital ecosystems) to provide additional functionalities to customers. For example, Buick provides virtual assistance in cars in partnership with Amazon’s Alexa.
- Offer digital subscriptions to unbundle products for customers. For example, The New York Times has different apps for Cooking and Crosswords.
- Set up digital marketplaces to connect any types of customers in your industry. For example, career consultants like Superpath also include an online job board to connect job seekers and job posters.
- Build customer-facing apps or websites to streamline customer interactions. For example, Cardinal Health built a website to provide more self-help options for its users.
- Consider mergers and acquisitions to help customers buy your product easily across digital platforms. For example, Amazon acquired Goodreads to allow readers to directly purchase books from the social networking site.
This is by no means an exhaustive list of digital approaches you can use to meet customer demand. As technology evolves and customer demands change, there will be better and more innovative ways for businesses to meet customer demands using digital tools.
The key is to choose the digital approach that best meets your customers’ demands and helps your business grow.
3. Assess and Revamp Internal Business Processes with Digital Technologies
Once you determine your customer-facing digital strategy, turn your attention to your internal digital strategy.
Look for redundancies in business processes that hamper employee productivity, increase costs for your business, or prevent your business from offering the best possible customer experience. For instance, your marketing and sales processes may be siloed, or outdated IT systems may be a barrier for your tech team.
Once you identify redundancies, pick the right digital tools, approaches, and platforms that help you eliminate those redundancies. For instance:
- Customer relationship management tools help you organize and better use customer data.
- People management software helps you better manage employees.
- Changing your technology architecture helps you overcome barriers from legacy systems.
- Switching to the cloud helps you eliminate fixed costs, such as physical servers and data centers.
In many cases, the best digital strategy for a business is not to build a new digital product or digitize supply channels but to digitize internal processes and lower costs, boost revenue, or gain powerful customer insights.
4. Be Agile in Your Digital Approach
Klaus Schwab, chairman of the World Economic Forum, famously said, “In the new world, it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish.” If you want
your digital strategy to succeed, be agile in creating, implementing, and iterating digital strategies.
An agile digital approach involves researching customer needs and new technologies more often, executing digital moves faster, making improvements quickly, and regularly reallocating funds from underperforming to high-performing digital activities.
Here’s how to brainstorm and choose the right digital approaches at a faster clip:
- On a weekly basis, analyze customer data to identify unmet demand, learn about new technologies, and share findings from tests and learnings with your org.
- On a monthly basis, assess your business model for digital opportunities, evaluate your portfolio to look for opportunities to add or divest businesses, and reallocate digital talent among business units.
- On a quarterly basis, reallocate capital expenditure and defund underperforming initiatives.
The frantic pace of technological innovation and faster consumer adoption of digital tools makes agility even more important in implementing a digital strategy.
Adding digital elements to the fringes of your business doesn’t work because customer-facing technology needs internal digital business processes to support it. Similarly, world-class tech on the inside isn’t enough to improve customer experiences on the outside.
If you launch a cutting-edge website for customers, invest in data and analytics to provide the right insights for sales and marketing to guide users, use artificial intelligence to provide better recommendations to customers and automate billing processes for smoother transactions.
If you want your digital strategy to succeed, use technology to transform your business inside out. Here’s a guide to digital transformation to get you started.