The digital era has had an unprecedented impact on the way businesses operate – be they large multi-nationals or local small and medium-sized enterprises (SMEs). Markets shift, competitors rise and fall, insurgents appear and consumer demands transform at an alarming pace. Meanwhile, the challenges and opportunities businesses face are more complex than ever before. Now the rapidity and complexity of decision processing must be reflected in decision making, and this has meant that strategy and tactics have become increasingly intertwined.
This rapidity is recognised, for example, by several of the leading consumer goods companies. Anna Manz, Diageo’s head of strategy says, ‘Straightforward analysis will not give you the answers as to how consumer journeys will change and what our responses could be.’
However, some traditional aspects of business strategy are as important now as they have ever been;
- Being bold and visionary
- Focussing on customer differentiation and competitive advantage
- Striving for high relative market shares
- Translating this into profit to be invested back into the business
1: Start with a vision, and a bold one at that
Having an ambitious vision around which the organisation can galvanise is a vital ingredient in a world that is evolving quickly and unpredictably. This vision should be a statement of intent that will inspire people and get them excited about being part of the journey. As Marjorie Scardino, former CEO of Pearson and current Non Executive Director at Twitter, says: ‘The digital era calls for bigger, more visionary perspectives about what consumers expect and demand.’
Amazon and Google have bold visions. Amazon’s ‘earth’s most customer-centric business’ and Google’s ‘organise the world’s information’ achieve the delicate balance of being ambitious, motivational and uplifting while also communicating durability and attainability.
Remember: If you are changing your vision regularly, it is probably not a good vision or indeed a vision at all.
2: Establish 90-day strategic goals
Define 90 day priorities for everyone in your organisation. Everything now moves so fast that 90 days is probably the right point at which to assess whether the strategic objectives and goals are appropriate and achievable.
In setting these 90 day objectives, companies need to make sure that all functions in the business are aligned which means that consistent objectives are key. This is best done by getting all the right people in a room and debating these objectives and whether they need to be adjusted to reflect organisational stress.
This approach reflects the fact that operating in a digital world requires a far greater degree of cross-functional working than in a traditional enterprise: all teams need to be pulling in the same direction.
3: Refresh and recalibrate your financial plans annually
All digital businesses need a three year financial plan to reassure banks and investors that there is a profitable future, and that their money is being put to good use. However, three year plans in the fast-paced digital business landscape are at best only a broad indication of what might be financially possible – and, as a result, companies have to be brutally honest about what they plan to deliver together with the financial and operational consequences. After the first year, this honesty must continue – how have things worked out? What has not worked? How should the company’s strategy change to reflect the things we’ve learnt? And how will this affect our financial performance and financial needs? These questions are imperative to effectively planning the future with greater insight and understanding.
4: Install new measures of success
The data rich nature of digital business has created myriad ways to measure and monitor success – a key component of any goal-orientated organisation. For example, the ‘customer journey’, monitored correctly, gives businesses unique insight about customer behaviour. This, in turn, presents opportunities to redesign and optimise the customer experience based on its findings…and to measure it accordingly e.g. on-time deliveries.
In addition, these metrics need to be sophisticated enough to recognise that experimentation is part and parcel of the digital world, and a degree of failure of such experiments is also a way of life. Only by trying different approaches, evaluating them rapidly and regrouping around the experiments which appear to be working and abandoning those which are not, can you refine and develop strategy in the New World.
As a backcloth to these important “Watch-outs”, business leaders, no matter the size of their organisation, need to worry about growth and market share rather than short term profitability and cash generation. The investor market understands the importance of being a market leader and that leadership positions give more opportunities for monetisation than “Me Too” positions. CEOs and business leaders therefore need to focus on measures that allow them to understand whether their companies are outgrowing the market and taking share from competitors in both the online and offline spaces. If you are a fast moving, fast growing online-only business and your more conventional offline competitor is at a loss to understand what is happening, this then becomes a winner-takes-all situation.
So, what does this mean?
Strategy in the digital age has become an increasingly interactive process. The fluidity of digital business models impact upon the rapidity in which decisions are made and processed. If you have an offline business and are very quick to adopt and roll out the appropriate digital models to complement, protect and grow this business then you are probably in the best of all worlds. Move slowly and you will probably lose out to more nimble digital competitors.
In the longer term the offline and online will converge in many businesses and “digital” as a word will cease to be a useful way of describing the old or the new world. The companies who win will be those which are able to integrate conventional Old World thinking with New World thinking to create sustainable competitive advantage and the value that goes with it.
By Chris Outram, founder of OC&C Strategy Consultants, author of ‘Digital Stractics: How Strategy Met Tactics and Killed the Strategic Plan’