Friday, December 13, 2013

The Strategic Perspective of Digital Transformation

In the digital era, the strategy is dynamic, not static; proactive, not reactive and people-driven, not just operational efficiency.

Organizations are experiencing the new business dynamic-Volatile, Uncertain, hyper-connected and interdependent, but how to craft an effective strategy for digital transformation and on which should it put the emphasis?

Strategies have to respond to the turbulence in the business environment. In terms of practice, there is an increased involvement of the stakeholders when formulating a strategic plan. A strategy for digital transformation is cross-functional effort and multi-disciplinary, multi-dimensional planning, this brings up new functions, roles, and responsibilities, organizational collaboration, needs for intuition and emergence, complementarities, philosophy, neutron-sciences, businesses transdisciplinarity. But these are not new per se.

"Strategy-as-practice" Movement: A company has both long-term as well as short-term objectives that need to be strategized to adapt to digital disruption, either opportunities or risks. The strategy needs to change when the underlying data changes otherwise it will become outdated & no longer serve the purpose. Equally, there are some continuing efforts to marry complexity theory (focusing in particular on complex adaptive systems) with the strategic management field. Contingency theory based views of strategic management are again gaining some popularity, in particular in relation to complex / Schumpeterian environments.

The strategy needs to be proactive and not reactive: The frameworks of thoughts, consciousness and maturity assessments apply to strategy, then, now and in the future. The strategy is about living a holistic, integrative and trans-disciplinary perspective. Key topics are about repositioning companies, their value propositions, business models, via game theory, the theory of constraints, optimization vs. maximization of results, knowledge, resources management, and wise leadership, etc... in order to remain sustainable. Some of the digital trends will impact to Business Strategy and Strategic Management, there are four issues that will press on the strategic consciousness of companies:
1). risk (political, economic risks., etc)
2). Boundaries (what businesses are in and not in, what does the firm make vs. outsource),
3). Purpose (corporate values in 4-5 years).
4). Adaptive-ness

Digital Transformation also requires the new focal point of strategy: 
1). Low Costs will matter less as a Source of Differentiation
2). The human touch will become more central to Competitive Advantage
3). Collaborative relationships will multiply and intensify
4). Technology spending will shift to enabling knowledge workers to do their job better
5). Organizational Structures will Change (flatter)

Multiple-Sets of strategy to adapt to digital transformation:
1) Set 1 - The overarching strategy - the Enterprise Strategy (mission, vision, goals, etc)
2) Set 2 - The change strategy which consists of a mixture of business change (people, processes, buildings, partners, etc) and IT change (SMAC trends). This change strategy is a statement of the current structural state of the enterprise, a target structural state, intermediate states which link to the objectives from the Enterprise Strategy and a set of roadmaps and projects and programs to effect that change. It can also be classified into business change strategy and IT change strategy as integral sub-components.

A combination of internal and external factors needs to be considered in order to achieve a winning Strategy: The executives require thinking deeply in the Business Purpose and make and implement Strategic Decisions to maximize long-term Value. Strategists know that any company has many factors affecting its position and direction. These factors sometimes are internal like staff, products and so on. Sometimes are external like competition, customers, and regulations, etc. 'Cost' targets internal factors while 'Sales' targets external ones. You have to consider a combination of People, Products, Customers, and Competitors (PPCC). (P)s are internal and (C)s are external. Integration between these components will guarantee a good strategy to plan for. Reduce cost without affecting negatively on (C)s, and Increase your sales without affecting negatively on (P)s. The right questions also include such as,  how to grow sustainable profits in a way that does not violate core values and principles as an enterprise.

In the digital era, the strategy is shareware, agile and dynamic, with the new focal point of people, unique differentiation from social-technological-ecological perspectives. 


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