Going digital can be a powerful move for an organization, but it must be done strategically. While digitization is changing the way we do business, good strategy doesn’t necessarily change just because the world is becoming digital. On the other hand, if we want to leverage the full potential of digitization, it is essential to make sure we digitize the business in a way that aligns with organization strategy.
With digitization as with anything else, strategy starts with clarity on how you’re going to win in the marketplace. Do you want to be the easiest to use, or the fastest, or cheapest, or highest quality, or more innovative than your competitors? Getting clear on this will help you digitize in a way that aligns with the goals of your organization.
Let’s take the financial services firm Charles Schwab as an example. They decided that a winning approach for them is to put themselves on the cutting edge of online and mobile responsive technology. They followed through with this decision with digital innovations such as mobile apps that allow their customers to deposit a check directly from their mobile phone. This has enabled them to distinguish themselves in the minds of their customers from some of the more traditional financial services companies like Morgan Stanley and Goldman Sachs.
This is not to say that the other firms can’t digitize their businesses (or aren’t already digitizing their businesses), but they will likely come up with a very different way of thinking about how they will win digitally in the marketplace than Schwab has. What they digitize, how they digitize, how that digitization provides service and value to the customer, what value it produces, what experiences it enables – all become a consequence of answering the strategy question.
ANCHORing Your Strategy
Achieving clarity around your digitization strategy can help avoid the very common pitfall of investing in digital systems, services, or capabilities that don’t deliver what your customer really wants (or more importantly how you want to differentiate yourself in the market). One of the tools we like to use to help leaders gain clarity about how their company will win in the marketplace is called the ANCHOR tool.
ANCHOR is an acronym that stands for Audience, Need, Channel, Omit, and Revenue:
- Who is your targeted Audience?
- What Need does that audience have that you are distinctly positioned to fill?
- What Channels of distribution will you use to access or distribute to customers?
- What will you need to Omit or trade off to deliver value to your customers?
- How will this generate Revenue for your business?
Answering these questions helps leaders clarify their winning position in the marketplace. This is important because it is easy to get distracted by technologies, capabilities, or even by your competitors in the race to digitize.
Take data and analytics, for example. Big data and analytics can, without a doubt, be powerful tools in the digitization process. However, they are costly and must be applied appropriately if they are to become a worthwhile investment. A company who has achieved clarity around their winning position will know what data and analytics capabilities are needed to enable their strategy and will truly bring value to their own customers.
Strategic positioning thus becomes one of the foundational elements that helps an organization digitize in a way that allows them to differentiate and win in the minds of their customers.
Winning Through Digitization Strategy
It’s critical to have the discipline to ask the hard questions about how you’re going to win, and how you’re going to set yourself apart from your competitors. These are the questions that need to trigger or start off digitization efforts. As the answers to these questions come into focus, then the opportunities, capabilities, and solutions that can be realized through digital transformation will start to make sense.