Eleven reasons why every business needs a digital strategy
In this digital era, every firm, irrespective of its size, business domain or geography needs to adopt the digital chord. As a professor in BITS Pilani’s Work Integrated Learning Programs Division — which also offer MBA in Digital Business – here is an elaboration of the need to have a digital strategy.
To begin with, we must define what a digital strategy is. It can be considered an amalgamation of platform strategy, cloud strategy, automation strategy, and data strategy. Platform strategy helps companies to allow their platform participants to benefit from the presence of other participants on the platform. Cloud strategy outlines the role of the cloud in the organization. Automation strategy helps you automate processes for more availability, reliability, productivity, performance, and lower cost. Data strategy is essential to help businesses make informed decisions on the basis of data, and to keep that data compliant and secure.
However, pressing priorities can be quite different for different firms, depending on the stage of their lifecycle. While legacy companies need to have a digital strategy in order to survive, grow and provide more value to their customers, the intent of the digital natives is to differentiate themselves from the other players, and to help them be more nimble. Therefore, the strategy for enabling digital transformation is different for different companies, and there is no fixed solution that works for each company.
The fundamental objective of a digital strategy is to create value for the customer. This can be in the form of convenience or ease of use, the amount of functionality delivered, better customer engagement, higher speed of service, more agility, and so on. For instance, firms today have created an API (as an interface between the UI and backend) that provides a headless experience to customers so that they need not change the UI every now and then. This is contrary to first mover e-commerce players (the Amazons and Flipkarts of the World) who had the luxury of creating their platforms over a long period of time.
The second important objective of digital strategy is to ensure data security and cyber security. This is crucial in the contemporary context, when the data becomes a competitive advantage for any organisation, and there are higher chances of ethical violations related to pilferage of customer data.
Third, a sound digital strategy also enables organisations to have infrastructure stability and systems reliability. Today’s business continuity plans are primarily enabled by digital tools. For example, if one component of a system stops working, the second one must immediately take over by the use of digital interventions, unlike the mechanical or electrical interventions that were predominant a few decades ago. Additionally, digital interventions are also used to predict whether equipment is about to fail, and take corrective action immediately.
Fourth:an important objective of digital strategy, which was reinforced during the pandemic,is to better support collaborative working across departments and organisations that work remotely with geographic and time differences. This has also led many businesses to obtain cost savings from the reduction of land resources.
Fifth, many organisations also need a digital strategy to harness the power of existing data. Think of the retailers today who are using recommendation systems to recommend products to consumers, or using advanced demand forecasting models to become more efficient in their demand and supply planning. Digital strategy has played a significant role in enabling this.
Sixth, digital transformation engagements also enable organisations to decrease time to market, manage supply chain disruptions better, or respond with more agility to dynamic customer requirements. It was evident during the pandemic that the firms with the first-mover advantage in digital interventions were able to mitigate the adverse business effects of the pandemic significantly. For example, some insurance players that had digitised their insurance purchase processes were able to leverage consumers’ greater lean toward life risk cover and witnessed a sharp growth in business, while conventional insurance players that were still relying on paperwork for documentation, suffered.
Seven, digital strategy enables value creation in an extended ecosystem of participants. For example, we often see cases where different platform participants derive gains from each other’s participation. In today’s context, it is important that value creation is not limited to within the organisation but also happens between the customer and vendor, or between customers, or vendors.
Eight, having a digital strategy helps firms in increasing their competitive differentiation, and enhances their ability to innovate. It is an important blue ocean strategy when the other players in the industry are trying to fight among themselves using conventional strategies. Digital interventions can also help in increasing the overall market size, benefitting the entire industry.
Ninth, a digital business strategy can create new services or value streams, capture more business, accelerate growth, enable upselling, retain the market, and transform it.
Tenth, a digital strategy can enable organisations to achieve cost-effectiveness and efficiency in their business processes through better management of resources, and also enable compliance.
Last but not the least, digital strategy ensures the availability of technical expertise in the workforce through training programs. Sometimes, digital strategies are also used for employee empowerment, which makes the employees happier and more productive.
Having a digital strategy is critical today, and has enabled businesses to improve their market position, promote innovation, become more agile and responsive and stay relevant. It is digital strategy that enabled Uber to change the traditional way of working in the transport industry. It has eliminated the inconveniences of booking a car, the procedure of filing a complaint, the cancellation of bookings, paying the driver without change, and so forth. It has also established accountability with drivers and improved customer experience through technology. It has solved the problems of both- drivers and customers, by connecting them in one app.
Similarly, Netflix was just one more company competing in the DVD market in the late 1990s. It then eliminated physical stores by making all films available online. Watching a movie became easy for a viewer from the comfort of their home, and the payment process was also made simple. It offered a wide choice to consumers and personal, subscription-based accounts that customers could manage themselves. All Netflix needed to do next was manage licensing and scale the technology, eliminating the costly element of inventory entirely.