What The Heck Does Digital Strategy Actually Mean?

If you’ve been in business any length of time, you’ll have come across the concept of “digital strategy,” sometimes called “digital innovation” or “digital transformation.” But unless you’re technically-minded, you don’t usually know what it means. And that can make getting your head around it all the more challenging. 

You should note that digital strategy isn’t just one thing. Furthermore, it comes in varying levels of sophistication. Some companies operate very basic digital strategies, while others take them much more seriously. 

A digital strategy is necessarily a nebulous term that incorporates a vast number of activities. But if you were to distill it into a single sentence, it would be this: figuring out how to use new technologies so that your company wins. 

At a high level, it sounds deceptively simple. Still, it is unbelievably complicated when you come to thrash it out. For some companies, digital transformation means moving to paperless reporting or creating a dashboard from which employees can access all customer information. For others, it means rebuilding the business from the ground up using new technological capabilities. 

Many companies also now see technology as a way to “lock-in” their market advantage. Airbnb managed it with holiday rentals. Amazon did it with e-commerce. And now many other firms are wondering whether they can do something similar in their fields. The ultimate strategy, therefore, is proactive, not reactive. It’s a significant difference. 

What Elements Go Into An Effective Digital Strategy?

Definitions of digital strategy transformation are notoriously amorphous. If you do a quick Google search of the term, it’ll spit back articles discussing big data and analytics, technical consulting, updating websites, and data center virtualization. 

None of these, however, really captures what we mean when we talk about digital strategy transformation. And that’s fundamentally the root of the problem. A lot of people in the business world don’t have a good idea of what it is. It’s not just random jargon. It means something and has a practical impact on business. 

Let’s break down the terms “digital,” “strategy,” and “transformation” individually and then create a definition of digital strategy transformation that brings them all together. 

Digital refers to communication between devices using binary. Today, though, it has become a byword for anything that contains a microprocessor or indirectly uses one. 

Strategy in business is the art of winning. It’s the ability to take a particular stance on a market issue, create objectives related to it, and then execute. It’s different from trial and error because it is a purposeful effort to outfox your competitors. 

Finally, transformation is the idea that businesses can change in fundamental ways. Before digital technology came along, people used to talk about how companies could transform their cultures or pricing plans. Usually, it involved something critical and fundamental. 

Therefore, digital strategy transformation is the idea of using technology in a fundamental way that allows you to win. You’re not just doing basic things, like automating your social media posts using an app. Instead, you’re looking at the technological landscape and building your business around it. In other words, you’re taking an entirely different approach. 

What Types Of Digital Transformation Are There? 

There are multiple different types of digital transformations that you can undertake. And how you perceive them depends on your position in your enterprise. 

Business Model Digital Transformation

This type of transformation is usually the one that the CEO leader takes. They want to know how new technology will change the underlying way they do business and how they might have to change their operations. Usually, it involves wholesale shifts in the company’s processes, policies, people, technology, and culture. 

The good news is that many companies have done this in the past, and are currently in the act of doing so in the present. Perhaps the best examples come from retail. For instance, clothes store ZARA saw the writing on the wall a long time ago - e-commerce was the future. Therefore, the firm immediately set about creating a compelling website and a second channel for customers to buy products. Interestingly, the brand very much sees itself as an online offering, similar to ASOS, instead of a traditional brick-and-mortar retailer. For ZARA, physical premises were just a means to an end. 

Business model digital transformations are perhaps the most fundamental of all of the other types - which we discuss below. They involve the further-reaching changes and often require you to bring in entirely new teams. 

Operational Digital Transformations

Operational digital transformation is all about making day-to-day activities of the business more efficient. Note here that we’re not talking about changing the business model in some fundamental way. This notion is more akin to the fourth industrial revolution. Companies aren’t changing how they take payment or the type of business they run. Instead, they’re doing what firms have always done - use technology to lower their costs. 

5G is the most recent catalyst for this kind of digital transformation. As cloud infrastructure brand Oracle points out, the new communication standard is a game-changer. It offers a level of flexibility and reliability unavailable via current 4G technology. 

The Oracle 5G Service Communication Proxy - a service that helps make 5G more functional - is already impacting the enterprise level. Companies are using it to create secure, cloud-native environments. And that’s driving 5G adoption. 

In this case, digital transformation involves using 5G in novel ways. For instance, it’s not easy to monitor equipment across multiple sites and feel that to a central cloud network in real-time. But with 5G, the actual communication element becomes relatively simple. A central control program could use AI to parse incoming information and then send out optimal instructions via the cloud without any human involvement. 

Cost-Cutting Transformations

Digital technology can cut costs dramatically, and many companies are taking advantage of it, under the moniker of digital strategy transformation. When going through these kinds of changes, firms will often talk about using the “hybrid cloud” or “virtualizing data centers.” They also suddenly become enamored with software-as-a-service options.

Note here that, again, the primary driver is operational. You’re taking an existing business model and sprinkling it with shiny new technology that offers lower costs. You’re making significant changes, but you’re not shifting the focus of the company fundamentally. 

Some examples of this in action might help. During the current coronavirus crisis, many companies have stopped using offices and moved their operations to the cloud. Workers now tap away on their laptops in their homes instead of traveling to some central office space. 

When you think about this in more depth, you soon see that it is a species of organizational transformation. The old model was to use a physical building to bring workers together to work on projects. The new idea is to scrap that entirely and rely on cloud apps. 

Another cost-cutting transformation is reducing headcount. Currently, a lot of organizations have large in-house IT teams that look after the running of their networks. But these are mostly obsolete except for the most technical of enterprises. With managed IT, most companies can eliminate these vast costs and rearrange their entire network and app stack. Plus, third-party providers usually do a much better job of keeping everything running and secure. They monitor your network in real-time. 

Customer-Led Transformations

Companies like Apple and Salesforce taught the business community that nothing is more important than serving your customers' needs. If they aren’t happy, your bottom line soon suffers. 

Customer-led transformations are all about improving the customer experience. The concept is far wider-ranging than you might imagine at first. 

In retail, for instance, this transformation usually involves moving the business online. Or, at the very least, connecting e-commerce and in-store experiences in practical ways. 

In other companies, like estate agents, it means improving customer relationship management. Sometimes, this means adding CRM solutions that allow one agent to pick up where another left off. The most impressive solutions are omnichannel, meaning that they collate customer data across communication methods. 

Some companies have a culture problem and need to change that instead. Pushy sales tactics, for instance, might be putting off customers. Or systemic abuse could be leading to high turnover and lost revenue. 

Some companies need to overhaul their online user experience. Many firms operate outdated websites and have never sought help from experienced web designers. 

Conclusion

Digital strategy transformation is a complicated topic. So if you haven’t understood every word in this article, then it’s no reflection on you. It’s just a tricky subject. 

Whenever you see the word “strategy,” think “winning.” When you couch it in these terms, it is much easier to see what people mean when they add other words, like digital and transformation. 

Transformations usually involve multiple features of your business. It’s not about tacking something digital onto existing processes. It’s about doing something differently, owing primarily to the capabilities of the underlying tech. At root, you're looking to solve problems that previously seemed intractable. Or you are enhancing your abilities to provide an edge over your competitors.