Embarking on any strategic journey is an enormously complex challenge, with many factors and dependencies to consider. Not least the digital disruption so evident in many sectors.
There are five domains of corporate strategy that the digital world is changing, each of which you must understand, embrace and show leadership in:
Domain - Customers
In traditional thinking customers are to be marketed to and persuaded to buy. Mass markets utilised efficiencies of scale from mass production (one product for all) and broadcast communication (a consistent message and medium) to drive sales based on manipulations such as price, features, service & quality.
In the digital age, we are in a world better described as multiple networks of customers who are dynamically connected and interacting in ways that alter their relationships to businesses and each other, and are often wary of the manipulations used.
Theme - Harness customer networks
The use of digital consumer technology has changed how people discover, evaluate, purchase and use products, and how they share their experiences and connect with brands.
This forces a rethink of the traditional marketing funnel and a customer’s path to purchase, which may skip from using social networks to online marketplaces and search engines, from a laptop at home or work to a mobile device when outside, through to customer service via online chat or by walking into a store.
Firms used to be the key influencers, now its customers are.
Domain - Competition
Traditionally businesses competed with rival companies that looked very much like themselves, and they cooperated with their supply chain partners.
Today we are in a world of asymmetric competition, where companies from outside our industry, who look nothing like us, offer competing value to our customers.
This digital disintermediation is putting stress on our partners and supply chains, the more so if they begin to serve our customers directly.
Theme - Build platforms, not just products
A platform is a form of business which creates value by facilitating direct interactions between two or more distinct types of participants - for example, users, content publishers and advertisers.
Each has a different role and gives or receives a different type of value. A platform participant must be free to set its own terms of engagement, and all interaction must take place through the platform and be facilitated by it.
A platform not only allows its creator to generate its own specific value, but it creates an eco-system in which all parties benefit. Rather than a zero-sum game, competition is now about influence and the ability to serve.
Domain - Data
Traditionally data was produced within a business, and mainly used for forecasting and decision making.
Today data is generated in unprecedented quantities from every conversation, interaction and process, inside and outside of the business.
It data no longer structured. The challenge is understanding what it all means.
Theme - Turn Data into Assets
Data is available from new sources, can be applied to new problems and is a key driver of innovation.
There are new analytic tools which allow us to uncover unexpected patterns in activity and unlock new sources of value. Understanding this ”big data” is a vital part of how every business operates, differentiates itself in the market and generates new value.
Once you start to treat data as an asset, you need an organisational data strategy. You must gather diverse data types (business process, product and/or service, customer etc); you must then use it to make predictive decisions; you must apply it to product innovation; you must identify what people do, rather than what they say they will do; you must combine data across silos.
The entire nature of available data and how it is applied by a business has changed significantly.
Domain - Innovation
Traditionally innovation was managed with a singular focus on the finished product. Because market testing was difficult and costly, most decisions were based on the intuition of time-served managers, or a detailed analysis of the market and a hunch on the next direction it would move.
The cost of failure was high. Today we identify candidates for what needs improving (price, features, service or quality) and then iterate through multiple possible solutions – at every stage validating the market response.
Today’s digital technologies allow us to take a very different approach to innovation, one where rapid iteration and continuous learning makes it quick to gain market feedback and act on it.
If an approach does not work, then we quickly move on, at minimal cost. We learn to change aspect of a product or service so that we know if it works or not.
Domain - Value
Traditionally a firm’s value proposition was seen as fairly constant. A product may be updated, operations improved, marketing campaigns refreshed, but the value offered to its customers was one defined by the industry it was in.
A successful company had a clear value proposition, found a point of market differentiation (price, features, service or quality) and focused on execution year on year.
Today, if we rely on an unchanging value proposition we invite challenge and disruption by new competition.
Adapt your Value Proposition
The only sure response to the inevitable challenge to your industry is to take the path of constant evolution.
Three routes out of a shrinking market include new customers who get the same value, new value to existing customers and new value to new customers.
Don’t wait until you have to adapt to a situation though, aim to innovate to stay relevant
Constantly evolving businesses spot opportunities, focus on their customers and adapt to market change. A customer-centric business moves with its market, continually refreshing products and proposition, reaching new sets of customers and growing the value of existing ones.
Next: Who are your Customers?
Now that we’ve seen how to set strategic direction, we should clarify who our Customers are. To be a truly customer-centric business then you need to know Who are your Customers?