4 Steps to a Digitization Strategy: How-To for Top-Managers

February 05, 2020

How to integrate your digital strategy into your corporate strategy

Disruptive technologies such as artificial intelligence, blockchain, and augmented reality have had a drastic impact on business models that worked well in the past. A company’s long-term success increasingly depends on its ability to adapt to this changing environment and become fit for a digital future. This requires a suitable digitization strategy. Astrid Kleinhanns-Rollé, Managing Director of the WU Executive Academy, explains how companies can best integrate digital policies into existing business strategies, breaking the process down into four steps.

Lightbulb-hologram as symbol for an idea about digitization
Which 4 steps are necessary to integrate the digital strategy into the business strategy?

Stand-alone “digital affairs” departments handling stand-alone digital projects are a thing of the past. Digitization has long become an integral part of every company’s corporate strategy; it is considered part of any organization’s DNA. But how do you sustainably implement a digital strategy across all business segments? “Maybe not surprisingly, developing a successful digital strategy is not rocket science. What it takes is a focus on the relevant core areas of your business and analyzing them by asking the right questions,” Astrid Kleinhanns-Rollé, Managing Director of the WU Executive Academy says. “Four fields are particularly important because they have the greatest impact on transformation processes: the (future) market, the value chain, customer relationships, and the organization’s new orientation.” If companies complete these four steps, they can successfully integrate their digital strategy in all business segments and become fit for the digital age:

Step 1: Define the Market for Your Future Business

“In today’s uncertain and fast-paced VUCADD* world, companies have no choice but to critically reflect on their business models. Digital businesses have already caused major disruptions in whole industries,” says Astrid Kleinhanns-Rollé. Airbnb has become the largest tourism platform without owning a single hotel. Uber is the champion among taxi companies without calling a single taxi its own. Streaming services such as Netflix or Spotify have revolutionized the TV and music market. But it is not only digital products that keep transforming the economy. The Japanese electronics giant Sony has recently ventured outside its own field of business and presented its first electric car, which is equipped with its own software, is based on Sony sensors and electronics, and is operated via an electronics platform. Against this background, companies must consolidate their business fast, innovate their business models radically, and re-define their whole ecosystems including stakeholders and innovative partners such as startups. And all this without diluting what their brand is about. “Not an easy task,” Astrid Kleinhanns-Rollé admits.

* VUCADD = Volatility, Uncertainty, Complexity, Ambiguity, Dynamics & Diversity

Pic of a tablet for streaming in the age of digitization
Entire industries have already been disrupted by digital companies. For example the TV and music market by streaming providers.

Key Questions to Consider:

  1. Market environment: Who has disrupted my industry most profoundly? Can I myself cause a disruption to the current business model by means of digitization before somebody else does? How can my company utilize digitalized products and services to stay competitive? And how can I protect the brand essence despite all changes to ensure existing customers are not scared off?

  2. Business model: Which methods and approaches can I use to generate value and innovate business models, and where should I learn from the best?

  3. Platform: Which innovative partners do I need in my ecosystem? How can I manage and effectively use this ecosystem – for instance via a digital platform?

Step 2: Increase Your Value Chain’s Efficiency and Effectiveness

“Use digital technologies to make processes of the value chain more effective and innovative,” says Astrid Kleinhanns-Rollé. Through extensive data collection and evaluation, information on inefficiencies and downtimes in production can be determined and it can be revealed where improvements can be realized. The raw digital data created this way, so-called smart data, can sometimes even be sold. In the Industry 4.0, smart factories keep popping up that are characterized by virtual planning and data-based business models and products.

Portrait Astrid Kleinhanns-Rollé

Astrid Kleinhanns-Rollé

  • Managing Director of the WU Executive Academy

Open innovation can optimize processes in research and development. New sales channels are opening up in the digital world. By adopting an omni-channel retail strategy, customers can be reached on various levels.

Key Questions to Consider:

  1. Innovation: How can I use open innovation, integrating customers, partners, and suppliers, to access new ways of value creation?

  2. Operation and sales: How can I turn the existing value chain into a digital value chain? How can I collect and analyze data on the value chain and production processes to continuously improve quality and efficiency? Which digital technologies, such as virtual and augmented reality and 3D printing, contribute to this goal and are suitable for my company?

Step 3: Know Your Customers. Now and in the Future

“When it comes to customer retention, digitization is a godsend: never before have companies been able to learn so much about their customers and address them in such a targeted way,” says Astrid Kleinhanns-Rollé.Consumers leave a wide variety of tracks online that reveal their purchasing interests, properties and characteristics, and also their needs. They also review products and services on the internet. Tracking customer clicks produces valuable data that can be used to further improve customer experience. “Customers no longer look to be informed; they expect companies to excite them. And you can do so by addressing them in a personalized way and sending them targeted ads based on smart algorithms, which also improves measurability,” explains Astrid Kleinhanns-Rollé.

Pic of a smartphone as a symbol of customer bond thru digitization
Digitization enables strong customer loyalty: it is possible to record interests, needs and wishes and thus increase the customer experience.

Key Questions to Consider:

  1. Customer acquisition: Which digital channels can I use more effectively to approach and retain customers? Can I build synergies with existing offline channels? What can I learn from a data analysis of online customer behavior?

  2. Customer retention: Which interactive ways and touchpoints can I employ so that customers come across my brand and products or services more often? Can social selling generate added value for my customers?

  3. Measurability: What do digital tools tell me with regard to marketing costs and the effectiveness of my communication with customers? How can I collect suitable data and analyze it for my purposes?

Step 4: Transform Your Organization

Digitization has an impact on virtually all divisions of a company: individual staff and whole teams are called upon to develop digital skills and work methods. Work processes and both internal and external communication are realized in a digitalized way. The way a company is organized must also be adapted and enhanced to readily incorporate innovation. It is key to clearly allocate authorizations and responsibilities with regard to the digital transformation. What is more, the move into a digitalized corporate world requires effective change management. Sounds like a Sisyphean task? Astrid Kleinhanns-Rollé emphasizes the positive side: “Digitization is visibly shaking organizational structures everywhere. But companies can use this as an opportunity to reinvent themselves and improve internal processes.”

Key Questions to Consider:

  1. Transformation: How can I tackle the challenges associated with digital transformation? Are there tasks and competences not yet allocated to anyone? What are intersections and/or departments and people I will need? Who is in charge of what?

  2. Design: Are there organizational structures that need to be created in order to enable a successful digital transformation? Can digital tools facilitate work processes and collaboration?

  3. Talent and know-how: Which skills and competences do the acting people need? Are there areas for which I need data, and how can artificial intelligence, algorithms, and automated work processes support the transformation? How can I hire new talent for my company using innovative and automated approaches?

Digitization and Digital Transformation are main topics of the Professional MBA Digital Transformation and Data Science. For more information about the program, please click here.

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