This blog postulates and discusses the ‘internet business model’ and its mechanization, made up in part of business rules (internet business rules), part culture, part economic system, part techniques. They are not differentiated much here because the model is still evolving.
Thursday, 11 January 2018
How do I create a digital strategy?
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
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
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.
business models, rules, methods & tools of digitisation 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
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
culture isabout 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.
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
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
“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
’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
The business models, rules and methods of digital
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
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
aconsumer owns.The marketplace model of Alibaba is also
based on the p2p model, used earlier by eBay.
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.
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
1991 First website; begins the democratisation of information & seeding media industry disruption
of the internet
1994 First blog; accelerated the democratisation
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 onlyconsume, 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
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
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.
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 modelengages
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
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
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.
externalisationold 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