The Essence of Business Strategy: Digital Strategy

"Necessity is the mother of invention."

The above statement aptly describes the changes brought in by the pandemic in the last two years. The COVID-19 crisis brought about a change in the way businesses operates and accelerated the digital transformation for businesses by years. With everything being digitized, from client interaction and supply chain management to internal operations, organizations that were quick to embrace technology have benefited greatly. Necessary changes that organizations made at the onset of the pandemic and departments that were bootstrapped to support the fragile framework of the remote working environment were made permanent as organizations realized that the future of business would be driven by technology. During the crisis, more advanced technologies have inadvertently filled the technology talent gap, with legacy systems being replaced by more agile solutions that input much larger data volumes and offer valuable insights.

With increased dependence on technology for most business functions, digital transformation, which has been a key trend over the last few years, has accelerated. However, with the growing adaptation of technology, competition in the new economic environment has also influenced strategies & business practices.

Enterprises adopt new strategies and practices in order to stay competitive in the new economic environment. However, as enterprises continue to embrace new tools and solutions to support operational changes, it is harder to differentiate between business strategy & digital strategy.

The Evolution of Business Strategy

Since the dawn of the digitization trend, the norm of using technology to improve business performance by creating new products or redesigning existing processes has been adopted by organizations across industries. With the need to remove the blurred lines between a digital strategy & a business strategy coupled with technology-fueled industry standardization, having a comprehensive strategy is imperative. The ideal Digital-Business Strategy outlines an organization's direction to gain new competitive advantages through technology. Technology has become more than just software or hardware; as new technology allows innovative companies to offer services that were not possible before; this leads to changes in business models.

Digital strategy and business strategy will become one as digital technology advances, and companies progress on the digital transformation journey. However, It is helpful to still use the term "digital strategy" for focusing the efforts behind digital initiatives.

There should be a clear understanding of what Digital means to your company & never lose focus, there can be tactical changes in strategies, but the end goal should be constant.

Let's say that your digital strategy is to monetize the productivity software your company has developed internally. You create a plan to package the software as a mobile application and sell it to individuals. You later realized that the product has more excellent value if it is sold to businesses to integrate into their mobile apps. Your ultimate goal didn't change, but your strategy (plan) did. Changes to your digital strategy guiding principle should result in a significant shift or reorientation of your company. However, it is best to have concrete steps that are flexible enough for you to pivot as necessary.

Roadblocks

What stands between your vision of merging your digital strategy & business strategy? While companies realize that they need to go beyond just building a synergy between their digital & business strategy to keep themselves competitive and growing, there are still many roadblocks that get in the way of achieving what they'd like.

1. Incomprehensive Digital Strategy & Vision

Companies that begin the process with research and start acquiring digital technologies, to begin with, are likely to fail. To start with an in-depth analysis of your current business problems might also seem the next logical step. BUT, considering the future impact of digital technologies on your industry in the next five to ten years should be where you start brainstorming. Do not use the current state of technology to gain short-term advantages. Instead, you can reverse-engineer your future by considering the impact on your people, processes, and technology. This will allow you to identify the most feasible steps and prioritize them today.

2. The problem with "Tunnel Vision"

Your team is likely to be focused on the lowest-hanging fruits. This could include customer-facing web properties, digital applications, the "customer experience", and other marketing concerns. These items can have a significant impact on core business processes and operations. Unfortunately, most groups will only make the front end more enjoyable for clients and do little to improve the back end.

3. The Compliance Problem

Business and operational leaders often claim that the people in Compliance or Legal prevent them from achieving their goals. They say they would be a top-in-class digital organization if not for their compliance department.

Firms trying to adopt content modularization in their form design process can face difficulties from more conservative compliance and legal departments. For example, if you are a national property or casualty insurance, there may be state-by-state variations in the disclosures required for a particular form. Modularizing your content allows you to create unique forms for each state while keeping only a few templates. However, compliance will often want to see each state's final output. Worst-case scenario, 50 forms will be created and maintained, each with minor regulatory differences. Even if you adopt the modular approach, your team will still need to keep track of approvals for 50 forms. While this is not as difficult as maintaining each template separately, it is still tedious.

4. Talent Gap

The talent gap is real. A shortage of qualified, skilled talent is one of the biggest roadblocks to the successful intertwining of business & digital strategy.

5. Legacy Systems

Technological systems are the first to be updated whenever paradigm shifts in an organization's business strategy. However, there are scenarios when this is not possible. For instance, Mainframe systems - a technology, i.e. more than 50 years old, is still used by 96 of the world's 100 biggest banks & 9 out of the world's ten largest insurance companies. Changes must be brought about at the foundational level to integrate digital in their business strategies truly. Even when fresh off, the assembly mainframes are considered a legacy system, not because of the hardware but because they are used to run legacy applications & programs written in obsolete programming languages. To migrate everything from scratch with over 50 years of data is a major obstacle for organizations.

Leading with Digital: How to Develop a Competitive Business Strategy in 2022

It takes more than just knowing the right technology to create a digital strategy that works.

A digital-led strategy focuses on integrating digital technology to transform the way a business operates, how it reaches customers, how its products and services are taken to market, how internal teams coordinate and beyond.

Digital-driven strategies are developed and implemented by organizations that embrace digital technology to transform their entire business. It is less about the technology itself and more about improving efficiency through various tools.

Organizations that may be less open to digital change might use specific channels and technologies to achieve their objectives.

It is important to consider the digital-led strategy from the beginning and not just integrate it into the overall strategy. It doesn't add to existing strategies or translate from traditional strategies - it is the strategy.

A digital-led strategy driven by data can be adapted to maximize ROI and allow investments and efforts to change. Also, it is worth considering the crucial role that digital-native businesses play in setting customer experience benchmarks. The tech giants like Amazon, Netflix, and Apple have had it better during the pandemic than their competitors. They have increased revenue and even taken market share away from less-digitally savvy competitors.

Digital-only banks in banking have experienced relatively less disruption than traditional banks. This is because their customers are satisfied with the lack of in-person communication options. This model was virtually immune to pandemics.

These organizations didn't need to change their business model. They were already digital-first and had agility and speed as their core values. While 'going digital" was crucial for survival in the short term, it seems that there is little incentive to go back to business strategies as they were before the pandemic.

The Role of CIO in 2022 & beyond

Even the most established industries have come to appreciate technology as an enabler of business. Many companies were able to adapt to new business models and new working methods even during difficult times to maintain their client base and ensure their survival.

Many organizations have seen a significant increase in the power and influence of CIOs. This was due to the need for new ways of working during the pandemic. Innovative technologies created by these individuals have made it possible for employees to work remotely, attend meetings from home, and collaborate from anywhere in the country or the world.

It's encouraging to see CIOs leading this shift in strategic digital transformation, but we cannot allow things to go back. We are moving towards greater certainty in the future. The last year and a half have shown us something: anticipate the worst and prepare for the unexpected. Business leaders and CIOs need to continue to work together to successfully define the objectives to ensure that business growth is achieved.

CIOs now have an unprecedented opportunity to place digital transformation at the center of their company's decision-making processes. This is more than just putting data at the center of everything and establishing the infrastructure. They have the opportunity to use their influence to drive behavioral change in the company and highlight the need for converged business and digital strategies.

A Forbes Insights survey found that 84% of CIOs believe their roles have become more important over the past five years. They also consider their most valuable skill to be contributing to corporate strategy. This trend is only going to get more.

CONCLUSION

The future is uncertain. Businesses should use the next few months to consolidate the resilience built during the pandemic and continue modernization efforts. This will enable businesses to merge digital and business strategies, reaping the benefits of a blended approach. Today's businesses are keen to create and deliver seamless digital experiences that offer a frictionless experience and delight their end-users. Consumers are not willing to accept anything less. Businesses can quickly be left behind in such a competitive environment if they fail to comply.

Technology is the foundation of these experiences. However, companies must have a clear strategy and vision to adapt to changing market conditions and customer needs. It is essential to have a solid approach that uses the most recent technologies and provides enhanced customer value. It is crucial to select the right technologies and partners to drive the proper accountability and results for the entire business.