In this interview a digital strategy professional who has over 15 years experience and completed 40+ digital and corporate strategies for large companies, in many different industries, provides all their knowledge on the subject of ‘digital strategy’.
What is a digital strategy?
A digital strategy is a very loaded term these days. It mostly depends whether you think about digital as a way of improving your existing business, or a major trend entirely disrupting your business (in a negative or a positive way!). I break digital strategy into three rough types:
- Digital channels: Focuses on how you use digital channels (web, social, ecommerce) to reach new customers with your products (to lower customer acquisition costs and increase sales), or how you reach your existing customer base more cost-effectively (to improve customer experience and reduce the cost to serve).
- Digital business models: Focuses on how you start a new line of business that is based on a digital product (e.g. streaming services), or take an existing business and make large parts of the value proposition digital rather than physical (e.g. providing tutoring online).
- Digital transformation: Focuses on how you use digital technologies to improve the performance of a business, from the inside. Think: making processes more efficient with better systems that leverage technology or deliberately capturing and using data to give you better business insights.
That’s it really, pretty straightforward when you take the time to write it down.
When do you need a digital strategy?
Any time from 2012, the point at which smartphones became largely ubiquitous, was the time that all businesses definitely needed to be thinking about their digital strategy. You need to meet your customers and employees (and all other stakeholders) where they are, and how most of us interact, buy and discover is now inherently digital.
The real question is what kind of digital strategy do you need? Here are some questions that might help you identify what kind of digital strategy you need:
You need to consider digital channels if you are experiencing these key questions, challenges and issues:
- How can I start to sell my products and services online?
- How can I drive more online sales?
- How can I help more customers to discover my products?
- How can I increase my conversion rate?
- Can I find and convert customers more cost effectively by using different digital channels?
Digital business models:
You need to consider digital business models if you are experiencing these key questions, challenges and issues:
- Is there a way I can deliver an existing or new product in a digital way that improves the economics of the business?
- Are there parts of my customer experience that customers would prefer to be done digitally?
- Are there parts of my employee experience that customers would prefer to be done digitally?
You need to consider digital transformation if you are experiencing these key questions, challenges and issues:
- Are there systems, processes or data flows that are done manually?
- Could the systems, processes or data flows be improved with digital technology?
- Do your manual systems or processes take a long time or produce more errors than you would like?
- Do you find that you don’t capture or aren’t able to efficiently use data that you collect throughout your business (e.g. customer service data, sales data, etc.)?
That should give you a rough guide as to when to consider kicking off a digital strategy exercise and help decide which type of digital strategy you should be looking into.
How long should it take to complete a digital strategy?
It depends what you choose to take on, how quickly you can weigh up options, and then how fast you can make decisions. To give you a rough idea of ranges:
- Digital channel strategy could take 2-6 weeks, provided that you have the data to hand regarding what digital channels you use today and how effective they are.
- Digital business models take longer to develop. They can take anywhere from 6 weeks (to develop the bare bones, often called a Minimum Viable Product) to 12 weeks if you want to be able to answer more questions about your target markets and how you will reach them.
- Digital transformation takes longer again, largely because you need to assess your current systems and processes before you can work out where you will benefit most from digital transformation. A small business could do this in 6-8 weeks, but a large corporate will spend 4-6 months developing a strategy for digital transformation (and much, much longer actually implementing it).
As usual, projects often take twice as long and need double the budget. So make sure you have contingencies in place to plan for it taking longer and costing more.
How should you structure a digital strategy?
Firstly, digital strategy is another type of ‘strategy’, so start with the big picture. First you need to be clear about what you want to achieve (clear aspiration), where you want to play (which products, markets and customers you are targeting) and how you believe you will win (what is your unique value proposition).
After that, you can really start to think about how digital plays a role in how you configure your business to enable you to deliver your value proposition (what unique capabilities you will need) and what management systems you will need (what data, systems, processes will help you work out when things are working and when they are not).
Now that you know what the business or organization wants to achieve overall, you can map where digital fits into all of this. Depending on what type of digital strategy you need, you’ll structure your work differently.
How to structure a digital channel strategy
- Target customer: articulation of your target customer segments and their characteristics
- Current state: analysis of how you currently acquire/convert your customers, how effective it is and how much it costs
- Goal setting: articulation of what you want to improve (i.e. lead generation, email sign ups, acquisition, conversion from free to paid, etc.)
- Options assessment: comparison of all channels (digital and non-digital) that you could use to reach customers, including benefits and costs. You might like to model out how investing more in certain channels might impact your metrics based on assumptions about how effective those channels might be
- Plan: set out which channels you will invest in, for which products, to target which customers, when.
How to structure a digital business model strategy
Note: a lot of this will be started in your overall strategy.
- Product/market fit: what is the problem you are trying to solve, for who? How does your product idea solve that problem for the customer in a unique way? (remember: you don’t have to come up with a product that doesn’t exist, it might be cheaper, faster, easier to use, more suitable for younger or older generations… there are lots of ways)
- Value proposition: who is your target customer(s)? What value does your product deliver to that customer (based on what matters to them)? Which problems does it help them solve? Are you selling a single product/service or a bundle?
- Business model: how will you deliver the product/services to your customers? How will you make money (what are your costs, what are your revenue streams - there might be multiple)? How are you embracing digital to make your business model more profitable?
- Capabilities: what do you need to make this work? (think: partners, resources, suppliers, knowledge). Sometimes I like to use the very simple Business Model Canvas to spark some ideas.
- Go-to-market (distribution, pricing and marketing): Where will you distribute your product (will you have an Ecommerce shopfront, sell through a third party, download directly from your website)? How will you attract an audience or customers (which digital channels will you use to market)?
How to structure a digital transformation strategy
- Objectives (laid out in your big picture Strategy described above): what are you trying to achieve? How is that measured (e.g. cost, productivity or time it takes to complete a certain process)?
- Current state assessment: what is the problem? What are the pain points you experience with certain systems or processes now? How long do certain processes take today? How much do certain systems cost to run?
- Target future state: what do you want your transformation to achieve? What do you want the future process to like? What is most important to address vs. less important to address? (because often you can’t do everything!)
- Assess technology options: what are the products, systems or process improvements that could help you achieve your target future state? What are the costs (think: one-off cost, recurring cost, cost of the time it will take to implement)? What are the benefits (think: time saved, improved business results, improved productivity, improved experience)? Which one should you choose?
- Implementation roadmap: what should you do first, second, third, etc? Which changes need to be done before other changes (also called dependencies)? How long will each take and what are the key steps and milestones? What resource and budget do you need to put towards each and when?
Who do you need to engage when completing a digital strategy?
If you are working on digital channel strategy, you need to work really closely with your colleagues in Marketing as well as anyone else who manages your digital presence (website, social channels, online customer support). This ensures that whatever plans you have for digital channels also work with any offline marketing plans (e.g. you might want to run online and offline campaigns at separate times so you can really see what is working) and that you are ready for increases in online demand as you invest in digital marketing (e.g. your website won’t crash from extra visitors, your online customer support won’t be backlogged).
Then you should engage with Sales, Product and Engineering teams to make sure everything is integrated into their plans, systems and processes, and they all know what they need to do to make the digital channel strategy a success.
With a digital business model, often you will want to start with a small group of people open to big, new ideas. This helps you flesh out the idea without it being shot down before you have a chance to test it. Ideally, though, you involve people who can help you think about all the different angles: Marketing (customer needs, cost of acquisition), Finance (cost of acquisition), Operations and Engineering (how you will deliver the product) and Product (value proposition, product design).
A digital transformation strategy needs to involve many people from different areas of the business because the changes you end up making can be very pervasive. They will have impacts across the entire organization. As a principle, you want to involve someone from each part of the business that your digital transformation will impact. Doing this early helps them understand the ‘why’ behind big changes to come, which means they are more likely to support the process than to get in the way. A good way to determine this list of people is to examine the process or system you are thinking of changing and identify all the functions and people that interact with that process or system. This activity will pay off in spades.
What are common mistakes to avoid when completing a digital strategy?
Assuming ‘digital’ will fix everything. Your analysis of what the problem is, what needs to change and the outcome you are shooting for is just as important as how digital will help you solve it. For example, just adding digital marketing channels if your product isn’t right for your target customer or those channels is not going to yield results. Think about ‘digital’ as an enabler of your overall strategy.
Taking on too much at once. You might be tempted to take on many changes once you see how much opportunity there is to improve! Just be wary of how much change any business can take on at once. You are better off starting with the top priority projects at the start of your roadmap, notch up some wins and then take on the rest!
What are your top tips for completing a digital strategy?
Start with a clear view of the questions you want to answer (also called your “scope”) and your structure. It can be really easy to go off-track after you start developing your strategy, so your questions and structure that you set out at the start will ensure that you don’t miss anything. In my experience, you should spend at least 10% of your time and effort getting your questions and structure right up front, and only then go and do your research and analysis.
Think about ‘digital’ as a means to an end. “Doing something digital” should never be the objective, it is just a tool or channel or way of getting things done that might be better than how you do it today. Focus on the business objective that you are trying to achieve, or the problem you are trying to solve for a customer.
For example, selling accounting software online is not purely about having a flashy website, it’s about guiding small businesses through a complicated process with confidence and ease. You might decide that having a neat, modern website is crucial to build trust with your customers, but it's not just for the sake of having a flashy website. Keeping this in mind should help to keep you on the right track.
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