Thursday, 11 January 2018
It is a high level plan to set the direction and scope of an organisation over the long term to operate in the digital space. It is really about carrying out business over the internet. It is part of a corporate overall strategy.
Look at digital as another channel alongside other channels - newsprint for newspapers, stores for retailers, tv for video. And while digital today is perceived by many to be about social media marketing (industry immaturity), social media is but only one avenue of digitisation. Another misconception is a focus on IT, probably because the first adopters are tech startups. If you think digitisation is about tech, your plans will be flawed. Take a holistic view if you want to execute a digital strategy effectively. [Digital strategy is itself part of the overall corporate strategy.]
Most websites today is v1.0, designed with principles from the pre-dot.com crash days (2000) and is mostly read-only. Website 2.0 today should be engagement based, in a digital era, to converse with customers and would-be customers ie. from passive to active. They should also be UX designed, not graphics designed to appeal to internal management. And managed under business development, not IT.
A digital strategy is about digitisation and digitisation is the application of a digital strategy, crafting a plan, based on a corporate objective, around the appropriate internet business model, taking into consideration specific rules and executing it using the right digital techniques and tools. Since digitisation is about engaging the outside - customers, would-be customers, partners, would-be partners, external experts, public – outreach is integral to the plan. The organisation can use either private (eg. email, blog) or public channels to do this. Social media is in this context a public channel and IT, an enabler.
The framework provides a guide to create a digital strategy.
of internet business models, rules, methods & tools of digitisatoin
In summary, a digital strategy is needed when an organisation wants to use the internet for business, alongside existing means. The digital strategy considers internet business models, new rules of doing business, methods and tools to execute the plans in the digital space, alongside conventional means.
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To apply digitisation, externalisation is something managers need to know of. Digitisation is about engaging the outside (customers, would-be customers, consumers, partners) to meet a business objective.
What is necessary in order to execute an effective digital strategy? This post provides pointers. It also explains digitisation.
Do not be stymied by the term ‘digital strategy’. It is like any other strategy an organisation may undertake - a high level plan to set the direction and scope of an organisation over the long term to meet a specific objective or goal. The specific objective is the ‘digital economy’, so it is a high level plan to set the direction and scope of an organisation over the long term to operate in the digital space. What you need then is to understand digitisation and what it entails.
Second, this should be carried out by the business units and not, a common misconception, left to the IT division. If it is a major strategic initiative, say, realigning the organisation to include a digital footprint, the board must be involved, perhaps leading it.
Third, you want to create a digital strategy because you intend to use the internet for business or for your business operations.
Fourth, by definition, you want to reach your audience - customers, consumers, partners, etc - to engage with them digitally. A digital strategy is about externalisation. So an internal operation like finance will see little benefit from digitisation (use IT instead). Don’t confuse digitisation and IT. It is also more than marketing and sales, another common misconception.
Fifth, think of it as another channel to carry out your business, alongside conventional means. And preferably, all these channels are integrated, like the idea of online-offline strategy for retailers. To do that, figure out this digital channel, its capability.
Devising tv ads requires that you understand the medium - tv. The same applies to digital – the internet or rather the internet economy. It is however more complex, something I refer to as a set of business models, business rules, techniques and tools.
Six, go beyond buzzwords that instil a false sense of confidence. Depth is necessary. Resist the urge to act on impulse on incomplete information.
So how do you create a digital strategy?
Figure out what strategic planning entail? And what it means by ‘digital’ ie. digitisation? Meld them into a strategy. The former is something you have carried out. I’ll touch on the latter.
By digital, it means digitisation
Digitisation is simply how business is carried out over the internet. In planning, it is to apply principles of the digital economy (term interchangeable with internet economy) to a business. A better way to put this is to be familiar with digital, how it works, its machinery and then to apply the relevant aspects to the strategic plan.
Fig. 1 Internet business models, rules, methods & tools of digitisation
The digital space means operating within the machinery of the internet economy.
The digital space means operating within the machinery of the internet economy.
As with anything to do with organisations, it starts with culture.
Digital culture, really we should be referring to internet culture, is unlike what we are used to. Its understanding is necessary when executing digital strategies.
Culture is the collective behaviour of an organization
Culture shapes behaviour, it determines how the team will function. The challenge here is acceptance since operating in the digital space requires adjustment.
"Digital culture is about cooperation, partnerships. Existing culture is about internalisation (tasks mostly done in-house) while new culture adds a huge dose of externalisation (tasks carried out through what is collectively termed community; partners, would-be partners, customers, would-be customers, consumers, fans of brands, the public)."
Culture affects decisions. If the person in charge is steeped in the old ways, he would likely reject ideas he is not comfortable with, whatever. The irony is that while many of us knows the impact of digital disruptions, and by definition disruptions is only possible when new business methods are used against the conventional, we reject them when it affects us. Herein is the challenge of digitisation.
This is not the place to dwell on this topic but it has to be addressed. Conflicted decision making results in sub-par execution. Now, if it is not strategic but a one-off initiative, culture is obviously less significant.
To create an effective digital strategy, one needs to understand how this machinery works.
Data-thinking, customer-centricity & externalisation
Think in terms of data when deriving the digital strategy, always – collecting it (even when it is not obvious), strategic use and more. Have a data plan. This thinking should be in the dna of the team.
Similarly digital culture puts the customer in the centre. We have been annoyed at the need to repeat entries when form filling. Executives, traditionally, tend to put the organisation first ie. make it easier and more efficient for staff. The repeat entries allow the form to be sent to various departments without having to replicate the data. This is a big no-no with digitisation that minimises customer friction. The aim, always, is to reduce customer effort.
The thought that comes to mind when a manager is tasked is to identify executives in the organisation best suited to handle it. Our natural tendency is to keep things within the organisation. This is internalisation. New culture embraces the outside. It engages the community to be a part of the process to achieve a corporate goal. This is externalisation (more here). It reduces costs but mostly it is to improve effectiveness, for goals which are suited. It taps into customer needs better than conventional surveys. Nothing beats it at monitoring trends. It has been used for product design.
“No matter who you are, most of the smartest people work for someone else’
- Bill Joy, co-founder of Sun Microsystems
“Threadless, an online merchant sells T-shirts but it does not have its own designers. Instead it runs design competitions online. Members submit their ideas and then voted on the one they liked best. Hundreds of thousands of people use the site blogging and chatting about designs and socialising with their fellow enthusiasts. They also buy a lot of shirts.”
’What has provided a lifeline to Alibaba is the user-generated rating systems for the thousands of online small merchants that Alibaba would otherwise have no way to police.’….this also saves Alibaba a ton of money from a bigger internal audit group by treating the community as part of the team.
In a digital strategy, the firm has to balance internalisation and externalisation, depending on the tasks at hand. But always, put the customer first and think of data as a valuable resource and unlike money, once lost cannot be regained.
The business models, rules and methods of digital
Organisations today operate on principles derived from companies formed from the beginning of the industrial revolution. So it will be the same in the information age – from internet startups and the internet’s formative environment.
As internet startups transform the industry, their business approaches are starting to be adopted by the wider industry. Think agile. Think blockchain. They themselves were influenced by developments of the early internet.
“You can’t really understand what is going on now unless you understand what came before”
– Steve Jobs
The forebear of WhatsApp is IRC (internet relay chat), first used in 1988. Today called IM (internet messaging), free text messaging and calls are transforming the old telco model. Note that ‘free’ is in fig. 1. The sharing economy model that Uber is based on, in fact has its roots in Napster, the p2p (peer-to-peer model) music file-sharing firm founded in 1999 that created ‘commercial’ value for the PC a consumer owns. The marketplace model of Alibaba is also based on the p2p model, used earlier by eBay.
The modern management terms you are beginning to be familiar with – lean management, agile, pivot, MVP (minimum viable product) were derived even earlier, from the open source process that itself was influenced by the operating environment and governance during the formative period of the internet. The principles of open source, free is one, is against conventional wisdom (so was Uber’s model when it was first introduced) and yet is the lynchpin of the new generation of businesses like Facebook and WeChat and lately even adopted by conventional firms like the Guardian newspaper (UK) and Goldman Sachs.
Crowdsourcing is now used to raise funds (crowdfunding), create virtual resources (Uber), supplement customer service (Amazon), assist sales (customer reviews = word-of-mouth). Crowdsourcing at this scale is a model that cannot work in the industrial era, pre-internet. The internet’s cheap connectivity brings crowds globally together.
1969 Internet created; RFC3, a governance document, ‘encourage others, anyone, to chime in’ including those not involved in the specific project. It catalysed openness and set the stage for today’s culture of crowdsourcing.
1985 First domain name registered
1988 IRC invented; IM (WhatsApp) today is replacing SMS & phone calls, transforming telcos
1990 Web invented; made the internet useable by ordinary folks
1991 First website; begins the democratisation of information & seeding media industry disruption
1992 Commercialisation of the internet
1994 First blog; accelerated the democratisation of information
1994 Yahoo, Netscape founded; free now has value
1994 Amazon founded; Amazon used the new ‘rules’ of business brilliantly to change retail
1998 Google founded; pagelink, their breakthrough technology, is based on the peer-to-peer (p2p) model
1995 eBay; brought to fore the marketplace model for retail, a p2p model
1997 Six Degrees created the first social media site (Facebook is the 4th), a modern factory
1999 Napster, eBay, Alibaba; Napster turned a consumer resource, their PC, into a business resource, creating value for the owner. This changed the definition of a consumer forever - ‘Once consumers only consume, now they also produce. It launched the sharing economy. Computation of global productivity must reflect this.
2000 Dot.com crash; the run-up to the crash heralded experimentation of early digital business models. The 2nd dot.com phase (now) is producing viable digital business models & business ‘rules’.
2006 Buzzfeed founded and invented native advertising. Also, readers decide on the news that go to the front page, not editors, upending centuries of the print media model.
2007 AirBnB founded; relies on a consumer resource - their homes - in the business model just like Napster’s that used consumer PCs.
2008 Bitcoin; blockchain is the real deal. Blockchain is technology to create trust. Its variant will become the foundation of (digital) transactions.
* If you studied the business models of the early internet firms, you’ll notice that they used the free model in one form or another, taking ‘free’ from the fringe of business to mainstream.
Fig. 1 captures some of the business models, rules and methods of digital and is obviously too onerous to cover in this post. I’ll touch on a few here.
Methods and tools to execute digital strategies
You are familiar with some – SEO (search engine optimisation), social media, blockchain.
You may be familiar with the platform model, though I prefer to use the term open platform because there is the closed platform. Facebook is an example of the latter since its data is not available to the public. An open platform allows anyone access to its data, for example a municipal OpenData initiative that makes its data available to the public.
I will touch on two more, one a tool and the other a digitisation method you may not be familiar with. Each is topics on its own so I’ll just introduce them here and reference them for further reading.
If you are wondering how you can execute crowdsourcing projects, the community model is one mechanism. Community refers to customers, partners, the public or a combination, over a subject of common interest. It can come from those working in a specific industry, the like-minded or fans of retail brands.
The community model engages a specific community to directly or indirectly contribute towards a goal….to help with sales (AirBnB), provide better customer service, design a better product, spot a trend...and is achieved over a few months to the long term. It is a deliberate use of a community for business.
Most of us have in fact come across the community model. Before making a booking at AirBnB, we look at the reviews. Reviewing is a consumer activity. What is written in aggregate can make or break a buying decision. AirBnB unlike traditional hotels, use the community model deliberately to enhance their business, providing important information consumers want. In fact, most internet startups use it in one form or another.
The simple model is both a method and a strategy to implement digitisation. It is also relevant to execute business plans. Traditionally when we plan a project, we tend to cover as many angles as possible for fear of failure. That’s at least 80% of eventualities (80/20 rule). The simple model flips it to 20%, as a start. Semblance of lean management? Yes and what is called mvp (minimum viable product) and then pivot to another plan. It is adding agility to the overall strategy. The whole point of the simple model is not to be overly complex.
“As an execution strategy, the simple model simply suggests that the first version of a digital initiative be designed simply.”
‘Lean’ is a management guide, the simple model is more. As a method, it can be used to design a website or a product.
Observe the site design of AirBnB and Google’s search page. They are simple, designed to-the-point so that customers find what they are looking for as quickly as possible.
Such a look is intentioned so a user goes in, execute and get out quickly. No distractions. Bland quickens. Clicks are minimised. Obviously it’s different for media sites but new-gen news sites such as qz.com do have a streamlined look. Quite a contrast from the tiring first generation sites that makes you click through as many pages as possible to increase hit rates and expose us to more opportunities for ads. The simple model has also shaped recent startups. Browse Indeed.com, Trulia, Flipboard. It has entered the realm of business.
Finally blockchain, surely one of the most important creation of the era. It is trust tech, a digital tool that creates trust for digital transaction. Based on the p2p model, blockchain will be used for many digital transactions.
To successfully craft a digital strategy, one must understand the mechanics – culture, business models, business rules, management principles, techniques, tools – of digitisation. You then consider these as input in the normal strategy development exercise.
externalisation old culture is about internalisation (tasks mostly done in-house) while new culture adds externalisation (tasks carried out through external resources; partners, would-be partners, customers, would-be customers, consumers) to reduce costs but mostly to improve effectiveness
the.simple model a method and a strategy to implement digitisation
open source model lean management, agile, mvp, pivot…source of modern mgt. principles
free now has value free as a business tool has moved from the periphery to mainstream
the community model a digital engagement method (clients, consumers, partners)
the peer-to-peer business model Uber, AirBnB, Napster (started the sharing economy), Alibaba