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Digital Strategy is a form of strategic management and a business answer or response to a digital question, often best addressed as part of an overall business strategy. A digital strategy is often characterized by the application of new technologies to existing business activity and/or a focus on the enablement of new digital capabilities to their business (such as those created by the Information Age and often as a result of advancements in digital technologies such as computers, data, telecommunications, Internet, etc.). As is the case with its business strategy parent, a digital strategy can be formulated and implemented through a variety of different approaches. Formulation often includes the process of specifying an organization's vision, goals, opportunities and related activities in order to maximize the business benefits of digital initiatives to an organization. These can range from an enterprise focus, which considers the broader opportunities and risks digital can create and often includes customer intelligence, collaboration, new product/market exploration, sales and service optimization, enterprise technology architectures and processes, innovation and governance; to more marketing and customer-focused efforts such as web sites, mobile, eCommerce, social, site and search engine optimization, and advertising.
The digital strategy is part of the business strategy and experts maintain that it cannot be effective or successful if built independently. It is argued that it represents how the business strategy is influenced by leveraging digital resources to create differential value. In the process, it reshapes traditional organizational strategies into modular, distributed, cross-functional, and global business processes.
There, are numerous approaches to conducting digital strategy, but at their core, all go through four steps:
- identifying the opportunities and/or challenges in a business where online assets can provide a solution;
- identifying the unmet needs and goals of the external stakeholders that most closely align with those key business opportunities and/or challenges;
- developing a vision around how the online assets will fulfill those business and external stakeholder needs, goals, opportunities and challenges, and
- prioritizing a set of online initiatives which can deliver on this vision.
Within each of those stages, a number of techniques and analyses may be employed.
Identifying the key opportunities and/or challenges in a business
- Stakeholder interviews
Includes one-on-one interviews, group interviews and workshops with a company's senior management, marketing and sales, operations and service stakeholders with a goal of understanding the business strategy, challenges and opportunities, products, organization, processes, supply chain and vendors, distributors, customers, and competitive landscape, as well as the potential role of their online assets.
Includes evaluations of a company's main competitors and potential substitutes with the goal of understanding a company's strengths and weaknesses relative to their competitors and potential substitutes. While this often includes steps found in traditional marketing competitor analysis, such as products, prices, etc. Competitor analysis includes two unique items:
- Heuristic evaluation: An evaluation by an expert of the usability and user experience of a company's online assets compared and contrasted to those of its competitors and potential substitutes.
- Features/functionality analysis: An evaluation of the features and functionality provided by a company's online assets, compared and contrasted to those of its competitors and potential substitutes.
An analysis of a company's financial data (which may include everything from public financial statements to private ERP data) with the goal of understanding the financial impact (positive and negative) that certain changes would have on a company.
- Bridge between business challenges and digital roadmap
ASSIMPLER Blueprinting - The Business Blueprinting of the organization is designed based on the ASSIMPLER framework. ASSIMPLER stands for Availability, Scalability, Security, Interoperability, Maintainability, Performance, Low cost of ownership, Extendability and Reliability - applied to business services and processes. The framework helps model the business expectations and challenges to be addressed through the Digital Strategy.
- Digital positioning
The digital positioning model stands as one of the first visual frameworks for assessing an organization's digital positioning strengths, weaknesses, and capabilities. The model focused on four key positions: Customer Experience, Operational Excellence, Industry Transformation, and Market Transformation.
Identifying the unmet needs and goals of external stakeholders (consumers of online assets)
- External stakeholder interviews
Includes one-on-one interviews and focus groups with a company's external stakeholders, with a goal of understanding external stakeholders behaviours, needs, goals and perceptions of the company and their industry both in the broadest business context as well as specifically online. In addition to standard marketing strategy methodologies and questions (quantitative and qualitative), external stakeholder interviews for Digital Strategy may include usability testing, an analysis of how effectively external stakeholders can use the online assets developed by a company for their intended purposes. In digital strategy this is used to uncover usability barriers that may prevent the online vision being achieved.
An analysis of external stakeholder behaviors in their environment, for example: field observations of shoppers in a store. In addition to standard ethnographic research, digital strategy research may include video recording of an external stakeholder using their computers or specific computer applications or web sites.
An analysis of the usage patterns of a company's online assets with the goal of better understanding external stakeholder behavior as well as identifying strengths and weakness of the company's current online offerings. This may include understanding how many people are visiting a web site, what are the most popular pages, what are the most popular paths, where are people coming from, where do they drop off, how long do they stay, etc.
- Performance assessment: Review of effectiveness of current digital technologies.
- Funnel analysis
A specific methodology for web analytics where the company's online assets are modeled as a sales funnel, with a visit or impression representing a new lead, a certain page or action in the web site considered a conversion (such as a user hitting the purchase confirmation page) and specific pages in the web site representing specific stages of the sales funnel. The goal of the analysis is to provide insight into the overall conversion rate as well as the key weak points of the funnel (the stages in which the largest percentages of users drop out of the funnel). This may also involve analysis of a company's search engine optimization situation and changes in online traffic pathways.
- Analytical CRM
An analysis of a company's customer databases and information repositories with the goal of segmenting customers into homogeneous groups across one or more dimensions of behavior, demographics, value, product or marketing message affinity, etc. In digital strategy this often includes the online customer registration database which companies use to provide access to their customer specific, protected areas.
- Multichannel analysis
An analysis of a customer's behavior (such as their purchase or service behavior) that looks across all of the different channels, in which customers interact with a company's products or information. There are lots of different ways to do this; a representative example would be, a company focuses on the customer purchase process (how a customer becomes aware of a product, how a customer develops the intent to purchase a product, and how a customer actually purchases the product). The analysis would look at which channels (for example: phone, catalog, retail store, web site, 3rd party search engine, etc.) a customer uses at which stage of the purchase process, attempting to understand why each channel is used, each channel's relative attribution and evaluating the company's strengths or weaknesses in that particular channel for the particular stage of the process.
An approach to the collection of external stakeholder feedback in a quantitative manner from a large population. In digital strategy, surveys may be used to validate or invalidate key questions raised in more qualitative exercises such as external stakeholder interviews and focus groups. Depending on the breadth of the survey population and the degree of variation within the population, survey results may be segmented to form homogeneous groups across one or more dimensions of behavior, demographics, value, product or marketing message affinity, etc. Surveys are often conducted online using web surveys, e-mail lists, or 3rd party panels, although phone surveys or other offline methods may sometimes be used when there are questions as to the online savviness of a particular target population.
Developing a vision and prioritizing a set of online initiatives
A spreadsheet with supporting documentation that quantifies the investments and returns over time, resulting from the execution of the online strategy. The Business plan also defines the Key Performance Indicators (KPIs) that will be used to measure and evaluate the success of the online strategy.
- Technical assessment
A design of a technical architecture which will meet the needs of the business vision and conform to the business plan and roadmap. This is often done as a gap analysis where the current technical architecture is assessed. A future technical architecture, which meets the needs of the online vision, is designed. The gaps between the current state and future state are identified, and a series of initiatives or projects to fill those gaps are developed and sequenced.
- Organizational and process assessment
Similar to a technical assessment, organizational and process assessments look at the changes that need to be made to an organization and its processes in order to achieve the online vision. They may involve a series of business process reengineering projects focused on the areas of an organization most affected by the online initiatives.
A way of prioritizing various initiatives by comparing their cost of implementation with their expected business benefits. This is often done by creating a two by two matrix where cost of implementation runs along the x-axis (from high cost to low cost) and expected business benefit runs along the y-axis, from low benefit to high benefit. Individual initiatives or projects are then plotted on the matrix in terms of their calculated costs and benefits. Priorities are then determined according to which projects will provide the greatest benefit for the lowest cost.
- Online media plan
A plan detailing the allocation of media spending across online media (such as search engine marketing, banner advertising, and affiliate marketing) usually as part of the customer acquisition or retention elements of the digital strategy. Since the late 2000s, social media has become increasingly important in engaging with customers both for marketing and customer support purposes, especially benefiting smaller businesses.
- Proof of concept
Graphical representations or an outline of key ideas or processes of the digital strategy. These are often created in order to better communicate a key concept or to build excitement among stakeholders when building consensus or socializing a digital strategy.
A high-level project plan which details the durations and dependencies of all the initiatives in the digital strategy. The roadmap will often include checkpoints to assess the progress and success of the digital strategy, over time.
- Measurement plan
A description of the key performance indicators used to measure the effectiveness of the digital strategy as well as the process for collecting and sharing this information. The measurement plan usually covers the financial, operational, and e-business metrics and their relationships.
- Governance model
The organizational structure, roles, and process description of the operational entity that will manage the initiatives in a digital strategy. The governance model describes who is responsible for what, how decisions are made, how issues are escalated, and how information on the performance of the projects is communicated within the organization.
As of 2007, a trend in digital strategy is the use of personas as a framework for using customer information to prioritize online initiatives. Personas are character sketches which represent a typical member of one customer segment and highlights their needs, goals and behaviors. Because it is representative of a customer segment, it allows decision makers to prioritize various features based on the needs of the segment. Because it is a character sketch, it is sometimes easier for decision makers to internalize the key needs of the segment than it would be by reading large quantities of information. A typical approach is to create the segment based on customer analysis such as customer interviews, ethnographic research, and statistical surveys. Then assemble key decision makers or stakeholders, present the findings of the personas, and use them to kick start a brainstorming session around different online initiatives which can meet the personas needs and goals.
Historically, execution of a business or digital strategy is done as a big bang, with large initiatives such as site redesigns and transactional systems taking 6–12 months to develop and often an additional 6–12 months before they deliver any results. As of 2007, a trend has emerged where companies adopt a more iterative approach to rolling out their strategies, one which leverages a series of smaller tests, which are carefully measured and analyzed and used to modify or optimize the digital strategy. An example of this test-measure-optimize-scale approach is that a company might take some key pages on their site and test a number of versions of those pages with different marketing messages, design approaches, user experience optimizations, navigation optimizations, and even new features and functions using a multivariate or A/B test. The company would then identify the page which had the best combination of changes in terms of some key business metric (such as conversion), analyzing the results to understand which changes were most instrumental in affecting the high conversion rate, and applying those learnings to future pages and future tests (conversion optimization).
The advantage of this approach is that in the long run, it tends to be more successful in delivering business results, because each step is measured and adjusted for. In addition, it tends to favor smaller (less risky, less expensive) steps rather than larger (more risky, more expensive) initiatives before getting the payback. The disadvantage is that over time this approach tends to converge on a solution (local optimum), not necessarily the best solution (global optimum) that might have been reached if a company starts from scratch instead of building each step on the previous one. Another disadvantage is that although this solution tends to favor smaller, more incremental changes, there is often a larger up front cost to setting up all the measurement systems and staffing a company with the right analysts and change processes to react to these tests in a timely and effective manner. As a result, companies often adopt a mix of big bang efforts augmented by some smaller, more iterative efforts as part of their overall strategy. A person who is primarily focused on digital strategy may be referred to as a digital architect or digital strategist and a person who executes a digital strategy may be referred to as a digital marketing engineer.
There are also several challenges when developing and implementing a digital strategy. This include human factors, particularly knowledge, skills, and attitudes, which impede full engagement.
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