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Why the Corporate Strategy Team Should Lead Digitization Efforts

Digitization is one of the most important forces for firms to harness in the next decade; it requires a team that can shape a centralized response to such a nascent subject, and then coordinate its implementation

All companies, regardless of size, industry, region, or business model, need a digital strategy. Every aspect of business and commerce now has a digital component, and the importance of inventing and creating products, raising capital, running companies, and serving customers via digital methods is only going to increase.

Corporate strategists expect the effects of all this digitization to be felt most keenly in the next two to four years, according to CEB data. But, despite all this activity and excitement, even the definition of “digitization” lacks consensus across most big companies, let alone ideas on how to make the most of it.

This leaves strategists in an important position. Given a large part of their job is to help operationally-focused execs make decisions on more nebulous issues, they should be in the vanguard of their firm’s digital charge.

Digitization is Important but Poorly Managed

Most management teams have already put digitization at the core of their high-level thinking – 90% of firms connect digital strategy with their overall strategy, according to MIT Sloan Management Review – but 70% of digital initiatives are still predicted to fail by 2018, according to an IDC study, because of insufficient ownership or collaboration.

Digital efforts should be central to strategy, and they should require central leadership. In many firms, the best choice to manage these efforts is often the head of strategy.

Strategy executives acknowledge this need to lead, too. In a recent CEB forum on digitization in New York, 90% of polled respondents said that Strategy should either have primary or shared ownership of digital initiatives – yet only about a quarter said that was the reality at their organization.

Strategy’s Digital Challenge

Six trends are reshaping the business landscape:

  1. A deeper reliance on data: Information is king. But as companies rely on data more and more for decision making, they also face a data glut that creates more noise and complicates choices.

  2. The transformation of products into information-rich services: Consumers now prefer ongoing experiences and subscriptions over stand-alone products and one-time purchases.

  3. Greater demand for personalization: Customers increasingly expect products tailored to their lives and personality and expect less effort in interactions with providers.

  4. Machines have an increasingly large role in work: Automation isn’t new, but it’s moving into more complex activities that require machines to learn and adapt.

  5. Formerly clear lines between functions and roles are blurring: The problems businesses face in a digitized environment require greater flexibility, collaboration, and interaction on multiple fronts.

  6. Change is accelerating: As demand shifts and digital disruptors are able to quickly scale their business model, existing firms will increasingly face pressure to keep pace. However, the difficulty to make swift shifts will magnify this pressure.

These digital trends create three broad challenges for strategy teams:

  • Aligning the company around these digital shifts.
  • Adapting how they evaluate strategic initiatives to a more uncertain and “noisier” environment.
  • Helping executives overcome the complacency they have with current business models.

Overcoming these challenges is critical. Companies that fail to digitize will face a huge competitive disadvantage. This holds true not just in the obvious examples of efficiency losses and missed opportunities.

Employees that don’t have the chance to develop their skills in a digital environment are at least five times more likely to leave their company in the next year as their counterparts at digitally maturing organizations — and this even applies to staff at the senior level.

Strategists Should Take a Bird’s Eye View

To avoid falling behind, Strategy should broaden the way it thinks about digitization. It’s more than just one initiative, and it requires something more cohesive than a piecemeal approach. When taxi ride-hailing app Hailo attempted to launch in New York to compete with Uber and Lyft, it met with failure. Cab companies attempting to digitize through just an app found their approach mismatched against the technological inertia of their business model.

For cases in point, see chart 1. It shows how digitization is changing the way information is exchanged, decisions are made, and almost all aspects of work. Each box shows how a company has used advances in computing power and connectivity to transform the business model – products/services, sales channels, and operations.

Strategists should ask themselves where their current digital initiatives fall in the matrix and which areas present vulnerabilities, opportunities, and challenges.  They can also try filling out a blank version of this matrix with their company’s current initiatives, vulnerabilities, and future opportunities.

Filling out your own matrix can help overcome the temptation to keep initiatives segregated by function, or to pigeon-hole “digital” as something individual business units are best placed to handle. Filling it out will help strategists understand the reach of digitization across their company, along with what they should do to lead these efforts.


Digital innovations across the business model

Chart 1: Digital innovations across the business model  Source: CEB analysis


 

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