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March 13, 2014
Five questions every digital strategy should answer
By: Mark McDonald

Digital technology not only disrupts business it also enables new business models. Incorporating mobile computing, analytics, big data, cloud and sensors to become a digital business raises questions across the organization. Responding to these questions is the goal of a digital strategy.

Digital touches everything from redefining industry and market structures to creating new customer experiences and capabilities. Generating questions is not an issue with digital. Digital changes business basics. This means that finding the right questions requires starting with those basics but with a digital twist.

  • Who wants to be your customer?

  • Why will digital outperform the current business model?

  • Where will value be demanded and delivered?

  • When will digital transformation happen?

  • How will you win?

On the surface these questions seem similar to the past. But look again and you can see how digital changes business. Let’s take each question in turn. Later blog posts will feature each question in detail.

Who wants to be your customer?

Customers sit at the center of strategy. Traditionally companies defined who their customers were based in terms of customer and market segmentation decisions. Customers choose you in the digital world. This inverts the answer to this question and the approach to finding that answer. Understanding the customer and how you see them in the business can result in setting a different strategy for digital.

Why will digital outperform the current business model?

Creating customer value that translates into company revenue was the basis for answering the why question. Exploring revenue and cost value trees provided a structured way to define new value propositions and strategies. Those techniques apply in digital strategy, but will often result in creating the same old answers based on new technology. This form of digital substitution does not constitute a digital business strategy so much as repaving business processes with digital technology. Avoiding the digital substitution trap requires answering the question “why will digital outperform the current business model?”, otherwise.

Where will value be demanded and delivered?

Strategy defined an organization’s position in a value chain and position influenced expected margins, proximity to the customer and marketing plans. Digital disintegrates value chains in favor of networks, or ecosystems, built around sets of customer needs. This raises a fundamental question of where the organization plays in the future as an infrastructure player or as a solution provider that goes over-the-top of the infrastructure. In the digital world it’s less about where you play and more about whom you play with that determines the location of value creation and delivery.

When will digital transformation happen?

In some ways this is the question in digital strategy as markets transform from an analog-internet basis to a digital-information model. Each industry or new digitally contested market will change at its own pace. Scheduling market transformation is a futile attempt. But it is possible to sense when things are changing by looking at the forces that shape the market, including customer direction, channel technology, capacity and age, product information intensity, product selection and pricing, and opportunities to blend products and services into new value propositions. The trick in digital strategy is to recognize the signals that put these forces into play as time, innovation, demographics and sentiment change.

How will you win?

This is the ultimate question in any strategy requiring an organization to choose their path to success. The problem is that digital changes fast-rendering prescriptive or presumptive paths less relevant. Responding to this question requires setting an overall direction for the digital business strategy. Organizations can participate in the digital economy by applying new technology to current products, processes and business practices. Earning a digital premium represents the alternative as leaders use new technology to bring new value propositions and operations to market. Both are viable ways to win depending on how you define the digital game you are playing.

Finding new answers to new questions

Digital technology creates opportunities and challenges for every organization. Facing these opportunities and challenges requires making choices and setting new directions – that is the purpose of a new digital business strategy. Given the diversity of options it becomes imperative that digital business strategies start with a solid foundation. That foundation comes from the responses to these five questions in every digital strategy.

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