Digital strategy

In the fields of strategic management, marketing strategy and operational strategy, digital strategy is the process of specifying an organization's vision, goals, opportunities and initiatives in order to maximize the business benefits digital investments and efforts provide to the organization. These can range from an enterprise focus, which considers the broader opportunities and risks that digital potentially creates (e.g., changes in the publishing industry) and often includes customer intelligence, collaboration, new product/market exploration, sales and service optimization, enterprise technology architectures and processes, innovation and governance; to more marketing and customer-focused efforts such as web sites, mobile, eCommerce, social, site and search engine optimization, and advertising.

Overview

There are numerous approaches to conducting digital strategy, but at their core, all go through four steps:
1. identifying the key opportunities and/or challenges in a business where online assets can provide a solution;
2. identifying the unmet needs and goals of the customers that most closely align with those key business opportunities and/or challenges;<ref>Center for Digital Strategies (2003): Enabling a Customer-Focused Organization: Thought Leadership Summit on Digital Strategies, Center for Digital Strategies at the Tuck School of Business and Cisco Systems</ref>
3. developing a vision around how the online assets will fulfill those business and customer needs, goals, opportunities and challenges,<ref>Quinn (2006): Ready for the Digital Future?,pg. 30-31, Supply Chain Management Review.</ref> and
4. prioritizing a set of online initiatives which can deliver on this vision.
Within each of those stages, a number of techniques and analyses may be employed.

Identifying the key opportunities and/or challenges in a business

• Stakeholder interviews

Includes one-on-one interviews, group interviews and workshops with a company's senior management, marketing and sales, operations and service stakeholders with a goal of understanding the business strategy, challenges and opportunities, products, organization, processes, supply chain and vendors, distributors, customers, and competitive landscape, as well as the potential role of their online assets.

• Competitive analysis

Includes evaluations of a company's main competitors and potential substitutes with the goal of understanding a company's strengths and weaknesses relative to their competitors and potential substitutes. While this often includes steps found in traditional marketing competitive analysis, such as products, prices, etc. Competitive analysis for Digital Strategy includes two unique items:

• Heuristic evaluation

An evaluation by a usability expert of the usability and user experience of a company's online assets compared and contrasted to those of it competitors and potential substitutes.<ref>Nielsen (2004): How Big is the Difference Between Websites?, Jakob Nielsens Alertbox.</ref>

• Features/functionality analysis

An evaluation of the features and functionality provided by a company's online assets, compared and contrasted to those of its competitors and potential substitutes.

• Financial analysis

An analysis of a companies financial data (which may include everything from public financial statements to private ERP data) with the goal of understanding the financial impact (positive and negative) that certain changes would have on a company.

Identifying the unmet needs and goals of the customers

• Customer interviews

Includes one-on-one interviews and focus groups with a company's customers with a goal of understanding customers behaviors, needs, goals and perceptions of the company and their industry both in the broadest business context as well as specifically online. In addition to standard marketing strategy methodologies and questions, customer interviews for Digital Strategy may includes usability testing, an analysis of how effective customers are at using the online assets developed by a company for their intended purposes. In digital strategy this is used to uncover usability barriers in the present state that may prevent the accomplishment to the online vision.

• Ethnographic research

An analysis of customer behaviors in their environment, for example: field observations of shoppers at a store. In addition to standard ethnographic research, digital strategy may include video taping of a customer using their computers or specific computer applications or web sites.

• Web analytics

An analysis of the usage patters of a company's online assets with the goal of better understanding customer behavior as well as identifying strengths and weakness of the company's current online offerings. This may include understanding how many people are visiting a web site, what are the most popular pages, what are the most popular paths, where are people coming from, where do they drop off, how long do they stay, etc.

• Performance Assessment: Review of effectiveness of current digital technologies. Barriers. Needs.

• Funnel analysis

A specific methodology for web analytics where the company's online assets are modeled as a sales funnel, with a visit or impression representing a new leads, a certain page or action in the web site considered a conversion (such as a user hitting the purchase confirmation page) and specific pages in the web site representing specific stages of the sales funnel. The goal of the analysis is to provide insight into the overall conversion rate as well as the key weak points of the funnel (the stages in which the largest percentages of users drop out of the funnel).<ref>McFadden (2005): Optimizing the Online Business Channel with Web Analytics, Tactical Uses of Web Analytics, Web Analytics Association.</ref>

• Analytical CRM

An analysis of a company's customer databases and information repositories with the goal of segmenting customers into homogeneous groups across one or more dimension of behavior, demographics, value, product or marketing message affinity, etc. In digital strategy this often includes the online customer registration database which companies use to provide access to their customer specific, protected areas.

• Multi-channel analysis

An analysis of a customers behavior (such as their purchase behavior or their service behavior) that looks across all the different channels in which customers interact with a company's products or information. There are lots of different ways to do this, be a representative example would be, a company focuses on the customer purchase process (how a customer becomes aware of a product, how a customer develops the intent to purchase a product, and how a customer actually purchases the product). The analysis would look at which channels (example: phone, catalog, retail store, web site, 3rd party search engine, etc.) a customer uses at which stage of the purchase process, attempts to understand why each channel is used, and evaluates the company's strengths or weaknesses in that particular channel for that particular stage of the process.<ref>Bean (2001): The Application of Technology to Marketing: A Twenty Year Perspective,pg. 5, Center for Digital Strategies at the Tuck School of Business.</ref>

• Statistical surveys

An approach to collection customer feedback in a quantitative manner from a large population. In digital strategy, surveys may be used to validate or invalidate key questions raised in more qualitative exercises such as customer interviews and focus group. Depending on the breadth of the survey population and the degree of variation within the population, survey results may be segmented to form homogeneous groups across one or more dimension of behavior, demographics, value, product or marketing message affinity, etc. Surveys are often conducted online using web intercepts, e-mail lists, or 3rd party panels, although phone surveys or other offline means may sometimes be used when they are questions as to the online savvy-ness of a particular target population.

Developing a vision and prioritizing a set of online initiatives

• Business plan or case

A spreadsheet with supporting documentation that quantifies the investments and returns over time that will result from the execution of the online strategy. The Business plan also defines the Key Performance Indicators (KPIs) that will be used to measure and evaluate the success of the online strategy.

• Technical assessment

A design of a technical architecture which will meet the needs of the business vision and conform to the business plan and roadmap. This is often done as a gap analysis where the current technical architecture is assessed. A future technical architecture, which meets the needs of the online vision, is designed. The gaps between the current state and future state are identified, and a series of initiatives or projects to fill those gaps are developed and sequenced.

• Organizational and process assessment

Similar to a technical assessment, organizational and process assessments look at the changes that need to be made to an organization and its processes in order to achieve the online vision. They may involve a series of business process reengineering projects focused on the areas of an organization most affected by the online initiatives.

• Portfolio management

A way of prioritizing various initiatives by comparing their cost of implementation to their expected business benefits. This is often done by creating a two by two matrix where cost of implementation runs along the x-axis (from high cost to low cost) and expected business benefit runs along the y-axis, from low benefit to high benefit. Individual initiatives or projects are then plotted on the matrix in terms of their calculated costs and benefits and priorities are determined according to which projects will provide the greatest benefit for the least amount of cost.

• Online media plan

A plan detailing the allocation of media spending across online media (as of 2007, this includes: search engine marketing, banner advertising, and online affiliate networks) usually as part of the customer acquisition or retention portions of the digital strategy. Since 2007, social media has become increasingly important in engaging with customers both for marketing and customer support purposes, which particularly benefits smaller businesses<ref>http://digitalconsultant.co.uk/independent-businesses-need-a-digital-strategy-to-compete-in-the-global-economy/</ref>.

• Proof of concept

Graphics representations or comps of key ideas or processes of the digital strategy. These are often created in order to better communicate a key concept or to build excitement among stakeholders when building consensus or socializing a digital strategy.

• Roadmap

A high-level project plan which details the durations and dependencies of all the initiatives in the digital strategy. The roadmap will often include checkpoints to assess the progress and success of the digital strategy.

• Measurement plan

A description of the key performance indicators used to measure the effectiveness of the digital strategy as well as the process for collecting and sharing the information. The measurement plan usually covers the financial, operational, and e-business metrics and their relationships.<ref>Kim (2006): Reinventing The Marketing Organization: Customer Groups Should Trump Channels, Products, Or Geography. Forrester.</ref><ref>Burns (2006): Leaders Take A Strategic Approach To Web Analytics. Forrester.</ref>

• Governance model

The organizational structure, roles, and process description of the operational entity the will manage the initiatives in a digital strategy. The governance model describes who is responsible for what, how decisions are made, how issues are escalated, and how information on the performance of the projects is communicated within the organization.

Role of personas in digital strategy

As of 2007, a trend in digital strategy is the use of personas as a framework for using customer information to prioritize online initiatives. Personas are character sketches which represent a typical member of one customer segment and highlights their needs, goals and behaviors. Because it is representative of a customer segment, it allows decision makers to prioritize various features based on the needs of the segment. Because it is a character sketch, it is sometimes easier for decision makers to internalize the key needs of the segment than it would be by reading reams and reams of data. A typical approach is to create the segment based on customer analysis such as customer interviews, ethnographic research, and statistical surveys. Then assemble key decision makers or stakeholders, present the findings of the personas, and use them to kick start a brainstorming session around different online initiatives which can meet the personas needs and goals.<ref>Manning (2006): Lessons From AD TECH Persona Panel, Forrester.</ref>

Execution of a digital strategy

Historically, execution of a business or digital strategy is done as a big bang, with large initiatives such as site redesigns and transactional systems taking 6–12 months to develop and often an additional 6–12 months before they deliver any results. As of 2007, a trend has emerged where companies adopt a more iterative approach to rolling out their strategies, one which leverages a series of smaller tests, which are carefully measured and analyzed and used to modify or optimize the digital strategy. An example of this test-measure-optimize-scale approach is that a company might take some key pages on their site and test a number of versions of those pages with different marketing messages, design approaches, user experience optimizations, navigation optimizations, and even new features and functions using a multivariate or A/B test. The company would then identify the page which had the best combination of changes in terms of some key business metric (such as conversion), analyzing the results to understand which changes where most instrumental in affecting the high conversion rate, and applying those learnings to future pages and future tests. The advantage of this approach is that in the long run, it tends to be more successful in delivering business results, because each step is measured and adjusted for. In addition, it tends to favor smaller (less risky, less expensive) steps rather than larger (more risky, more expensive) initiatives before getting the payback.<ref>Davenport (2006): Competing on Analytics, Harvard Business Review, January 2006.</ref> The disadvantage is that over time this approach tends to converge on a solution (local optimum), not necessarily the best solution (global optimum) that might have been reached if a company starts from scratch instead of building each step on the previous one. Another disadvantage is that although this solution tends to favor smaller, more incremental changes, there is often a larger up front cost to setting up all the measurement systems and staffing a company with the right analysts and change processes to react to these tests in a timely and effective manner. As a result, companies often adopt a mix of big bang efforts augmented by some smaller, more iterative efforts as part of their overall strategy.

Digital strategy vs. online strategy

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