Digital Transformation: Strategy Compass (concept note)
Strategy: Defining a set of activities that allow a company to position and deliver a unique set of products or services to the market lies at the core of any strategy definition process. Digital Strategy is a subset of the overall strategy.
Digital technologies continuously change the way we live and work at a speed that poses a challenges for a good part of the population but also drives change in customer needs and expectations. Many companies, see the adaptation to this evolving customer needs as an existential treat and, under the label digital transformation, appoint a chief digital officer.
The Chief Digital Officer: in focussing on evolving customer needs, one of the main roles should be:
- to improve existing activities by enhancing them with digital technologies (operational effectiveness)
- defining and enabling new activities that are digitally enabled, but more importantly are aligned with the company strategy. These new activities should be consistent or even be re-enforcing for the cluster of existing activities that are at the core of the company strategy
Once the strategy is clear and communicated in all corners of the organisation, digital transformation becomes a change management programme which is a challenge, but nothing new.
Operational Effectiveness Trap: all this might seem like common sense, but for many organisations, operational effectiveness has been the only element of their strategy leading to commoditisation and margin erosion. Operational effectiveness as a stand-alone element and not related to a positioning strategy does not deliver sustainable advantage in the market. Many Japanese companies, as much as they were known for their operational effectiveness, have also gained fame for not having a differentiating strategy which in the long run has led to margin erosion as competition always catches up with operational effectiveness.
Without sitting down and defining a sustainable strategy, digital transformation in this environment will eventually lead to more commoditisation and more margin erosion.
Strategy Compass for Digital Transformation: always start with a strategy exercise focussed on understanding the cluster of activities that in the market the company operates in, delivers (even limited) competitive advantage. It is these set of activities that deliver a compass for any next step.
Without the compass, Digital Transformation efforts often and typically lead to the development of an app, a digital island in the organisation that, as a product, is easy to copy externally and which delivers very few value for the rest of organisation.
Peter Van Overmeir - info@themobileproject.net - www.themobileproject.net
The Mobile Project designs and implements digital transformation projects, ideally but unfortunaltely not always starting with settting up a Strategy Compass.
