Digital strategies are strategies that allow a business to gain an edge over competition by using digital products. If you want to know more about digital strategies and find some that you can apply to your business right now, you are in the right place. We will start with a simple definition, and then provide some out-of-the-box digital strategies you can follow right now.
What are Digital Strategies?
Before we can answer “what are digital strategies?”, we need to think about strategy in general. On this, we have many contrasting definitions and there is not a complete consensus about what strategy is. However, we can say that it is how you gain an edge over competition, in the long run.
Strategy is how you gain an edge over competition, in the long run.
Strategy should answer two simple questions: “where are we going?” and “why are we going there?”. This is done by identifying the markets your business is going to serve, how it will stand out from the competition, and why.
For example, you may say “we deliver groceries to rural homes in West United States with same-day delivery, we do this because this market is underserved and full of rich customers that value our service. As we have invested and are investing in our logistics network, any competitor will find it harder and harder to compete with our speed and efficiency”. This sounds like a good strategy.
If you want to learn more about strategy by itself, you can check out this timeless video in YouTube.
Now we can dive into digital strategies. What is a digital strategy? You know by now, it is a strategy that applies to the digital world, or more specifically the digital side of the business. A digital strategy is how the technology side of your business will support your overall strategy. It goes without saying, but you should build your digital strategy based on your business strategy to have good results.
Considering the delivery company, a digital strategy might be to have a strong IT system that allows seamless online ordering, visibility throughout the supply chain (when the product moves from producer to customer), and easier forecast of customer demand.
A digital strategy is how you make your business more competitive using technology. This might be internal technology, such as IT systems, but also communication technology (such as starting a podcast or a website), although those are marketing strategies. In any case, technology tends to be the mean rather than the end.
Remember, a good strategy should create a “moat” between you and the competition, so it becomes harder and harder to imitate you and you become more prevalent in your niche and can offer better service to customers.
You need to create your digital strategy yourself, adapting it to your business needs. However, digital strategies come in some general forms that are always the same. You can read those now, pick the one that best meets your needs, and readapt it for the specifics of your business.
6 Digital Strategies You Can Use
The e-Commerce Digital Strategy
Among digital strategies, e-Commerce is probably the most prominent. In fact, this is the strategy that led to the dot-come bubble of the early 2000s. However, this does not mean the strategy is flawed by itself: when applied in the right way, it can allow you to succeed. Notable winner with this strategy is Amazon.com.
The e-Commerce strategy is simple: sell your product online. Ideally, it is “sell what you are already selling, but online”. This can work with a magnitude of products, but it works particularly well in some specific conditions:
- Products that can be easily previewed digitally (e.g., books are greats, perfumes not that much), or that at least that the “idea of the product” can be given online
- Costs of online distribution is similar or lower to brick-and-mortar
- Customers see going to the store as a hassle for this product and do not value the shopping experience, and would value more the convenience of delivery
- Limited customization
These are not conditions written in stone. For example, cars are not easily experienced online – they often need test drives. Yet, Tesla succeed by having only online sales. They do that by having “stores” where they allow potential buyers to experience the car, but in the end the actual sale is made online. So, you can readapt this strategy to your need and virtually to any industry.
One thing to keep in mind, as with all digital strategies, is the cost-benefit balance. For example, Warby Parker sells eyewear online, and you are free to return a pair of glasses you don’t like on you. Other online retailers such as Zalando allow you to pick a set of clothes, have them shipped to you to try them on, and then return part of them and keep only the one you like or that fits on you, paying only that.
All of that, for free, even if the company faces undeniable cost to take returns, as they arrange their shipment on their own. Yet, these additional costs are still lower compared to brick-and-mortar operations of running a store, and as such they can balance them out.
You don’t have to go full-blown into the e-Commerce digital strategy. You can select which part of the sales process to digitalize, or which one to digitalize first. For example, you could digitalize the sale process, but keep the order fulfillment (getting the product to the customer, managing your warehouse) as it was for offline orders.
The ERP Digital Strategy
Next in our list of digital strategies, we have the ERP – Enterprise Resource Planner. This is probably the biggest and most ambitious digital strategy. There are many ways it can go wrong, but if you get it right you will have quite a good edge against the competition.
In short, an ERP is a single IT system that holds and models all information of all departments and functions of your organization. For example, it collects all invoices, outstanding credits, production information, customer demand forecasts, and more. The idea is simple: if you have everything digital, you can analyze all the data and make better decisions. You can find pattern, and exploit opportunities that would go unseen. You can find where you are wasting money and effort, and how to make your business more efficient.
That is in practice. In reality, this is the utopia you should be aiming for, but it is rarely the case. Companies are complex systems and modeling them in a technology system can be hard. The bigger the company, the higher the complexity as it will have more departments and more sophisticated business processes. There are significant examples of ERP strategies gone bad, such as the lawsuit between Waste Management and SAP, so you need to manage this digital strategy with care.
If you want to pursue an ERP digital strategy, my advice would be to follow the Pareto rule and integrate into the ERP system only things that matter and that are easy to understand. Do not waste time focusing on the tiny details that bear little impact over the big picture, as this is where things can go particularly bad.
Smart Working as a Digital Strategy
When talking about digital strategies, smart working needs to have its own place. Now popularized with the COVID-19 pandemic, it is the idea of having employees working remotely – from home or wherever they wish – but not from the office.
The basics of smart working as a digital strategy are to have work that can be done remotely (e.g., restaurant waiters can’t do their job remotely), have the correct IT infrastructure that supports it, and trust your employees. Smart working is not just working from home, is letting your staff figure out what is important to do, when it should be done, how to do it, and how to involve colleagues. Obviously, every employee needs some direction, but smart working should have an empowering approach.
With smart working, people don’t have predefined times for which they work, and they tend to pick when to start and when to end the day, so they need to be responsible. If you feel they might not be, they need to be trained to be, and a good way to do it is a gradual rollout of smart working, starting with only a few days a week.
Compared to other digital strategies, smart working is about flexibility and quality. With it, you can hire the best possible talent because you are not bound by location, and you can foster collaboration across boundaries. Furthermore, this approach tends to cater to younger generations. If you aim for flexibility as a business, smart working gets you to do that. People working from home could be more willing to put a few more hours when there is a tight customer’s deadline, compared to people who go to the office every day.
Implementing this strategy is relatively easy on the IT side. You just need to have the systems allowing people to connect to the company tools they need to do their work. If you are thinking about employee tracking and monitoring systems, that’s not the way to go and is actually against the idea of flexibility. The biggest effort for this strategy is on the HR and business process sides, as people need to be trained to work from home. Yet remember, people are smart, and with a slow rollout they can readjust.
The Data Mining Digital Strategy
Recently, “being a data-driven company” has become quite a buzzword on LinkedIn. This comes with no surprise, because being data-driven pays well. And among our proposed digital strategies, data mining is probably the most promising in that sense. It can typically be applied to any company that has an in-store experience.
The idea is simple: everything that happen in the real world is a potential source of data. That source can be mined to get useful information and insights that can help you develop an advantage over competition. This can be done with Internet of Things (IoT), a technology that involves many small sensors connected to the cloud, that aim to collect data from the environment.
Starting with a simple example, you can have some temperature sensors on a production machine to constantly monitor that it is not overheating. This sensor continuously measures temperature and sends data to the cloud, which then stores it and can produce charts and trend.
Now, pair this sensor with a humidity sensor and a system to track if your production machine is working, and maybe how fast the engine is running. At some point the machine may break, and you will have to do some maintenance. But with all this data, you know now how the machine behaved when it was about to break, in the days and weeks before. Maybe temperature raised, the engine spun slower, or humidity increased?
You can now track these parameters, and when they reach this “red zone” once more you can do maintenance before the machine breaks. This is predictive maintenance, and it is an important improvement in the manufacturing industry.
But manufacturing is not the only industry that can mine data: any sector can. Retail shops are starting to adopt digital strategies along these lines, for example with cameras tracking where shoppers spend most time in the store, if they take a product off the shelf and then put it back, and so on. With this information, they can change the store layout to increase sales or make the shopping experience better.
Data mining is about collecting a lot of data. Yet, just collecting is not a viable strategy: you need to act upon this data. You can hire data analysts and use artificial intelligence to do it. Or, most likely, a combination of both.
The Content Digital Strategy
We continue our list of digital strategies with “the content”. The idea is simple: produce some content that genuinely attracts people’s attention, and then do something with this attention. This is the strategy that Facebook and all social media platforms use and is the digital strategy of any modern influencer.
To pursue this strategy, you need to have a “good use” of the attention of your customers or visitors. Imagine you implement this strategy successfully and get the attention of many people: now what? What do you do with that attention? If you can find a good business use for that attention, then this is a strategy worth following.
To give you an example, Facebook gets the attention of many people by using content generated by users that other users really like. Then, people give their attention to Facebook (or its other platforms) because they know they will find valuable content. Now, Facebook can slide in some advertisement that will also get the attention of customers and get paid for it. They have a solid business use for people’s attention.
To be fair, having a business reason to get people’s attention is not enough. It needs to be solid and viable. Long story short, getting attention takes time and money, and if you are not able to get that money back from the attention you gain, maybe this strategy is not worth following after all in your case.
You have two options to get attention with content: you can craft the content yourself, or have some other users craft it. In the first case you have more control, it is more expensive, but you get results immediately. In the second, you might not be able to launch something that people post content to, so it is more of a bet. Either way, remember that the goal is getting people’s attention. Most companies implement some form of this strategy by at least having an active profile on social media platforms.
The Two-Side Platform Digital Strategy
No article about digital strategies would be complete without mentioning the two-side platform strategy. This is the strategy that enables the “gig economy”, most notably used by Airbnb, Uber, and similar services.
The idea behind this digital strategy is simple: some people want a thing; other people have that thing to offer. Your strategy is to create a platform that allows these two groups to get in contact with one another. As a facilitator of the exchange, you generally get a fee. For example, Airbnb connects people who are travelling and looking for lodging with people who have an extra room and would like to rent it. Uber connects drivers with passengers.
As you can see, the concept behind this strategy is quite simple. Yet, it faces some obvious challenge. The biggest one is that is a chicken-and-egg problem. If there are no providers in the platform, users don’t want to join. Yet, if there are no users in the platform, providers don’t want to join. To exemplify this, if Airbnb had no room to rend you wouldn’t register to it and look for a room. And, if you had a room to rent but no user rented through Airbnb, you wouldn’t bother renting your room on the site.
This problem is hard to overcome, but there are some good practices. The general advice is to start small, and depending on the type of service you are providing (e.g., taxi rides, rooms) focus on a small geography first, such as a city. Focusing on a small geography will make you reach the threshold at which the platform becomes self-sustaining faster.Then, you have to pay until it does become self-sustaining. For example, you may pay your providers when customers do not show up (e.g., offer then 10 rides and get 100$). This motivates people to join as providers, which then attracts more customers, which then attracts more providers, and so on.
At this point you may think that this is a digital strategy to start a new line of business. Not necessarily. You can apply this to your existing business as well. For example, you might sell something that has some complementary services or products you are unable to produce yourself. By creating such platform, you can create a convenient place for your customers to buy everything in one place.
Digital Strategies in Summary
There is no single digital strategy that can work perfectly for every business. Yet, digital strategies tend to be similar with one another, and with some tweak you can apply at least some to your business.
The six digital strategies presented here are a good glimpse in the digital world. Take them and use them to grow your business! If you are now thinking “how can I pull this off?”, start by defining the right RACI matrix with this guide.
