Wednesday, October 28, 2015

Digital Master Tuning #112: How to Manage Capability-based Digital Strategy Effectively

An emergent digital strategy has to incorporate disruption.

Digital strategy is a type of business strategy, enabled by information science and technology, so once that is understood, it is always going to be driven top down, especially for a large enterprise. The key question is how much to anticipate disruptive digital business strategy by investing in information technology without either constraining the thinking or ability to pivot, which investment will tend to do or wasting that investment when the game changes. And what are important success factors in managing digital strategy more effectively?

C-levels has to lead the effort by convincing the shareholders and management team about the core direction. Once this is done, it will be easier for functional leaders to define the sub-strategy and plan the implementation. The psychological and organizational factors that get in the way of understanding that critical dimension of true 'digital strategy' is about disrupting the conventional ways of creating value within established markets. So rather than how do we use information related science and technology to 'organically' make things better, 'digital strategic' thinking is more about the big 'WHY' about digital transformation, how do we use it to change the game!

An emergent digital strategy has to incorporate disruption. The focus is on why companies focus on evolution (perhaps, digitally-enabled extensions of existing operational capabilities) vs. disruption (tear up the road map.) It's tough to plan for disruption because what's disruptive is inherently unexpected. It's very much like positioning yourself for playing a game. You can get caught playing for one move when your opponent makes a different one. Alternatively, you can choose a conservative position that should allow you to react and respond to a number of different moves and still get beaten. Every company has to decide what strategic framework to employ and architect the enterprise, its processes, and infrastructure consistent with the plan they derive from it. A valid strategy that has existed for some time is 'second mover,' in which a company validates the viability of a new (possibly even disruptive) technology before employing it, themselves. Failures in some percent new technology-enabled business models are guaranteed and sometimes, waiting for a little maturity can put later adopters on a preferable learning and cost curve.

Building a set of digital capabilities is the preparatory steps in Digital Strategy Management:  There may be many elements of digital infrastructure that are foundational to almost any foreseeable digital strategy so implementing them could be viewed as a valid preparatory first step in readiness for a strategic opportunity when it is recognized. Maybe you have identified a characteristic of disruption--a discontinuity between the operational processes that can be supported with the existing structure and architecture and new ones are required to adapt to the changes.  'Digital infrastructure,' whether this might, for example, include establishing a data analytics capability or change/innovation ability, in any case, to monitor or seek disruptive opportunities requires something more like a digital capability than infrastructure only.

Embed the startup culture to accelerate innovation: For an existing organization to successfully progress almost any kind of discontinuous, or indeed truly innovative strategy, it somehow needs to embed a start-up culture. This can and has been achieved by establishing a kind of parallel organization within the organization that is able to field and move new ideas forward rapidly without the kind of psychological and process barriers. The corollary perhaps is that without such a mechanism, 'digital strategy' typically ends up as business as usual, IT related evolution with a fancy new title.

IT's a balancing act. It always was and always will be. IT is a significant component of core business capabilities. Building flexibility, agility, sustainability and performance into applications and systems infrastructure is expensive. Building reusability into components is, likewise, expensive. The offsetting benefits for these incremental investments come only when planned-for scenarios are realized and the capabilities in which you invested get you to a desirable state more quickly, at lower cost and with less disruption than you might have otherwise. If the world doesn't cooperate or you've missed the boat on events, you may have made an unnecessarily large investment and get nothing in return.

Digital Strategy Management is an iterative continuum, managers need to have admirable core strengths and highly effective people skills to lead, influence and empower others. It is not only about how much they know, but it is also about what they can and do that really matters. Therefore, setting the right priority and delegation is very important to improve management effectiveness and ensure first doing right things, and then doing things right.

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