We are constantly analyzing the digital environment and how various strategies play out for competitive advantage.
What strategies are disruptive? What approaches have the power to transform the marketplace to your competitive advantage?
These insights are at the heart of modern business strategy.
Harvard Business Review Identifies Six Strategies
In 2017, Harvard Business Review examined 2,000 companies of various sizes, industries and regions, examining the types of digital strategies they’ve developed and launched over the years.
The study found that digital initiatives often lead to underwhelming results. In fact, it’s not unusual for a campaign to have no impact.
Do not get discouraged. There is a differentiator – the study concluded a strategy’s boldness ultimately determined its overall successful.
The bolder the digital strategy, the more likely
the company is to have a successful digital transformation.
Harvard Business Review
The Harvard study takes six strategies and categorizes them in two categories: offensive strategies and defensive strategies. Offensive strategies are externally-focused; they target new demand, new supply or new business models. Defensive strategies are internally-focused; they aim improve what the firm already does.
Before we dive into the six strategies, let’s remember that the Harvard study does a good job categorizing these approaches, but it’s not a prescriptive strategy exercise. For example, some of these strategies may seem obvious. Strategies like enhancing customer access and reducing your supplier costs have been around since the Internet first emerged as a business tool. Nevertheless, it’s helpful to have a high-level reminder at what’s happening, what others are doing, and what had led to successful outcomes.
Let’s have a look.
Strategies 1, 2 and 3 take company’s game on the offensive. They include:
Strategy 1 – Platform Play
The starting point is using your platform to bring more people into what you’re doing. The survey found that one-third of firms had used some type of platform strategy, redefining their value chain so customers and suppliers can interact more directly with it. An example is AccorHotels opening its online booking platform and giving independent hotels access to their customer interface.
Strategy 2 – New Marginal Supply
The next step is using digital technology to reduce your marginal supplier costs. 13 percent of firms said they had used this approach, and often in combination with platform play.
Strategy 3 – Digitally-Enabled Products and Services
While strategies 1 and 2 have been around since the earliest days of the dot com days, strategy 3 brings us to the modern era. Think of all the digital features on your smartphone, home, car, payment apps and other items. Not surprisingly, 55 percent of firms reported using digital technology to develop products with digital features.
Strategies 4, 5 and 6 are the defensive approaches that strive to improve on your core business. Your business model is already in place, you’re just leveraging technology to improve efficiencies at various points.
Strategy 4 – Rebundling and Customizing
60 percent of firms report using digital technologies to rebundle products or services to better serve existing customers.
Strategy 5 – Digital Distribution Channels
Similarly, almost 60 percent of firms invested in digital distribution channels, aiming to make it easier for customers to access their products or services. In today’s world, it’s hard to imagine a company not turning to digital to enhance customer communications.
Strategy 6 – Cost Efficiency
Finally, nearly half of all companies report using digital technologies to improve their cost efficiency. This can include employee communications, outsourcing, or automating internal functions.
We arrive at the differentiator. Those factors separating the winners from the also-rans.
The Harvard study found “The bolder the digital strategy, the more likely the company is to have a successful digital transformation.”
Researchers assessed each company’s strategy in two ways:
- Boldness – measured by the degree of changes leveraged in the offensive or defensive strategies; and
- Commitment – the degree to which the firm made those changes at the expense of their current revenue (i.e., how much you were willing to invest in digital technology)
The researchers found that companies going “big and bold” – pursuing radical adaptation and investing significantly more than peers, were more successful.
The authors conclude: “In our dataset, bold corporate strategies were associated with significantly superior performance on all counts: revenue growth, profitability growth, and return on digital investment.”
Qui audit adipiscitur – Who dares wins
Click here to read the full study. Contact us today to learn more about digital strategies and modern business marketing.
See: Jacques Bughin and Nicholas Van Zeebroeck, “6 Strategies, and Why Some Work Better than Others,” Harvard Business Review, July 31, 2017.
Paul Lalonde is content lead at Lalonde Muller Digital Strategies. He began his professional working life with the federal government’s Task Force on Electronic Commerce, and has maintained a long-standing interest in digital commerce.