One of the most common buzzwords in today’s business parlance following the advent of the 4th Industrial Revolution and, more recently, the Covid-19 pandemic is “digital transformation”. The impact of the Coronavirus pandemic meant economic activities were shut down globally, and social distancing became the norm forcing digital transformation upon people and businesses. On the back of this, companies were compelled to re-think their modalities for doing business in accordance with the safety guidelines and procedures that governments and health regulators had laid out. This translated to having meetings virtually, working from home, and resolving business problems remotely.
For instance, Companies like Zoom, which was digital-first, became household names as videoconferencing gained traction. By the second quarter of 2020, Zoom had about 300 million app installs and saw its revenue grow to $663.5 million in the same period. While companies like Zoom thrived on the growing need for digital connections, many other companies realised they were ill-prepared for remote work and saw the need for agility and skill to embrace the changing business landscape while delivering on evolving customer expectations. This contributed greatly to the quick adoption of digital technologies by many firms. Research by Forrester estimates that before 2020, only about 15% of companies were ‘digital-savvy’, but the “new normal” forced industries to take on digital transformation rapidly.
As more companies see the need for adopting technology and utilising digital tools in their business processes, some have had to learn on the go, trying different systems to see which would work and adopting various successful and less successful digital strategies. Therefore, this article’s essence is to help companies understand what a digital strategy is, how it aids digital transformation, how to plan your digital strategy, and how it connects to the overarching corporate strategy.
The Digital Economy Continues to Evolve
To keep track of all the “digital” terms used interchangeably and sometimes incorrectly in the business world, it is imperative to review what the various terms mean and how they apply to specific situations. It is important to note that while some of these terms only recently became buzzwords in the business community, they have been around for some time.
- Digitisation refers to creating a digital representation of physical objects or attributes. This process involves converting physical items or information into digital documents, such as scanning a hard copy into a soft copy. Digitisation was one of the major themes of the 3rd industrial revolution in the 1960s as industrial processes were automated, electronic equipment was manufactured in their droves, and the internet was invented. Digitisation creates data and serves as a foundation on which digitalisation can occur.
- Digitalisation is a step higher than digitisation as it utilises the digitised data to improve business processes. Here, we begin to leverage the outcome of digitisation to increase efficiency, gain actionable insights, and create new business models.
- Digital strategies focus on using technology to improve business performance, whether that means creating new products or reimagining current processes. Digital strategy is largely specific to a particular process, product, or activity. It refers to the nitty-gritty of how an organisation should utilise digital technology to create new products or processes that gives it a competitive edge and introduces changes to its business model to account for future technologies. Different departments in a company can have varying digital strategies to aid in the delivery of their business processes. When put together, the sum of a company’s digital strategies is the digital transformation experienced.
A good example of a successful digital strategy is Adobe. In 2013, the company transitioned from physical software to the completely online Creative Cloud. At that time, the management of Adobe felt that its business model was not sustainable and needed a change. They decided against raising prices yearly and took their business to the cloud. It was considered a significant risk at that time, but the digital transformation experienced by the business has led to increased customer and employee satisfaction.
- Digital transformation refers to transforming a company’s traditional business model, processes, and products into digital ones. It is an intensive process that effectively builds an entirely new organisation. While all brands require digital strategies to remain competitive in the digital age, not all brands will need to transform digitally as some are digital-first businesses while others, like Netflix, have already transformed digitally.
In the case of Netflix, their entire business model was built around mailing hard copy DVDs directly to customers. Customers had to request movies in advance and wait for them to arrive at their doorsteps. As its subscriber base grew, Netflix incorporated a digital strategy into its physical business model. In 2007, they began offering customers a streaming subscription in addition to the traditional DVD rental service, allowing customers to choose which model they wanted. This new model saw exponential growth in the number of subscribers and consequent growth in revenue.
Planning Your Digital Strategy
Despite the overwhelming importance of transforming businesses digitally and having a digital strategy, research by a global advisory firm shows that 70% of companies that initiate digital transformation didn’t achieve their stated objectives. In another study, only 16% of companies believed that their transformation efforts improved performance and put their company on the road to long-term change. The question then becomes, what are the other 84% of businesses lacking?
Digital transformation of a business requires proper planning, extreme care from management, buy-in from all relevant stakeholders, including employees, and an understanding of the digital tools available. When planning your digital strategy, it is important to consider the digital technology your business currently uses and other better options, the digital capacity of your business and areas of weakness and opportunities, and the latest technological advancements that can help your business.
Before developing a digital strategy, you should think about the following questions
- How will digitalisation influence our existing business model and positioning within our industry’s value chain?
- How can we recognise and join market areas within and outside our industry where value is being created?
- What areas of our business model are vulnerable to disruption from new competitors, and how can we better handle them?
- What skills do we need to build to be a leader in the sector?
Too often, brands mistakenly assume a digital strategy is only about digital channels and technology, and they don’t take the time to align it to the broader business capabilities.
This is where working with an experienced partner like pcl. can help. At pcl., we position our clients’ businesses for growth and increase their competitive edge by adopting the latest technologies to create workable digital strategies that help transform their business. We create digital experiences that improve employee engagement, client satisfaction, product development, and business performance.
The post Building a Robust Digital Strategy for Business Growth appeared in the Phillips Consulting on July 26, 2022.