How to Create a Great Digital Strategy

Customer Engagement

A digital customer engagement strategy trans- forms a company’s go-to-market approach. The strategic focus is on creating loyalty and trust and in the best cases, passion by providing superior, innovative, personalized customer experiences. In many cases, a customer engagement strategy targets a seamless omni-channel experience so that customers can order, inquire, pay, and receive support in a consistent way from any channel at any time. But the goal is customer loyalty, so you’ll need to constantly raise your game as you identify new opportunities to connect.

The non-profit integrated healthcare organization Kaiser Permanente (KP) is an example of a company with a customer engagement strategy.[foot]For a detailed discussion, see M. Kagan, I.M. Sebastian and J.W. Ross, “Kaiser Permanente: Executing a Consumer Digital Strategy,” MIT Sloan CISR Working Paper 408, March 2016.[/foot] Fueled by what it calls its “consumer digital strategy,” KP approaches healthcare as a collaboration between providers and members. Digital technologies provide seamless, low-cost access to care teams as the company tries to facilitate both preventative and traditional patient care.

Kaiser Permanente capitalizes on opportunities created by SMACIT by:

• Offering digital channels to increase opportunities for patient interaction with care delivery teams
• Applying data analytics to identify the need for—and most effective approach to—personalized medical outreach
• Leveraging social media both to develop communities of patients with similar interests and needs and to create care circles where patients and their families can engage with care providers

Ten years ago Kaiser Permanente was widely disparaged for inconsistent customer service.[foot]Jeff Goldsmith, “An Interview With George Halvorson: The Kaiser Permanente Renaissance, And Health Reform’s Unfinished Business,” Health Affairs Blog, September 30, 2014.[/foot] As it delivers on its consumer digital strategy, Kaiser Permanente is earning the healthcare industry’s highest net promoter scores. In addition, 70 percent of members are actively engaged online, and KP studies have shown that members who engage digitally are healthier, more adherent with medications, more satisfied, and twice as likely to stay with the organization.

Initially, Schindler focused data and analytics on operational excellence— helping service technicians diagnose problems, identify needed parts, and repair assets quickly. More recently, data and analytics are helping Schindler develop predictive models and new products and services. Complex algorithms apply sensor data to predict equipment failure and spare part demand. In addition, Schindler’s elevator control technology applies authentication and smart algorithms to optimize elevator routes. At morning and evening peak times, this technology helps manage the efficient movement of as many as ten thousand people in large buildings. It also helps visitors gain authorization to enter buildings using their mobile phones, allowing them to bypass lobby security stations when they arrive.

Staying Focused

Digitized solutions strategies and customer engagement strategies address two different types of digital disruption, product development vs. go-to-market. Companies can choose their strategy based on which opportunity [threat] holds the most promise [concern]. You may be tempted to address both strategies simultaneously—and indeed, ultimately you probably need to be great at both. However, our research suggests that companies must focus on one of these strategies to drive their transformation. This focus is necessary because both customer engagement and digitized solution strategies require business integration.

Companies that pursue two strategies at once during a transformation will head in two different directions and start creating business silos. If you clearly prioritize one strategy, you can easily expand your strategic initiatives to include either (a) products and services that fit into your customer engagement strategy or (b) customer engagement initiatives that help sell and service your digitized solutions.

For example, while pursuing a customer engagement strategy, Kaiser Permanente recognized the potential value of remote monitoring services to expand its digitized solutions that emphasize preventative care and wellness. Similarly, as Schindler innovates around elevator control technology, it has deployed a mobile app that communicates real-time status of a facility’s elevators and escalators to facility managers. In both cases, the primary strategy guides the choice and timing of initiatives in the other strategic area, thus allowing tighter integration of digital initiatives.

Aim for Direction—Not at a Target

A great digital strategy adopts a kind of start-up mentality about business success. This means that the strategy addresses a perceived customer need as a starting point. Leaders then adapt the strategy based on market response, seizing additional opportunities that present themselves. Because market response cannot be predicted, your digital strategy must be directional rather than targeting a given end state (e.g., earnings per share, market penetration).

For example, Kaiser Permanente is constantly searching for the next best opportunity to assist the joint efforts of providers, patients, and families to enhance patient health. The company’s vision adapts as it progresses on a journey of continually enriched patient experiences. Similarly, Schindler is attempting to become a provider of urban mobility solutions without clearly defining what that means. It is working to improve the efficiency of people movement within buildings while being open to possibilities beyond buildings.

Build Digital Capabilities

The success of digital strategies depends on your ability to execute flawlessly. In other words, every company needs digital capability to ensure predictable products, transactions, and inter- actions. An operational backbone is essential to delivering this kind of consistency. Common characteristics of operational backbones include capabilities for end-to-end transaction processing, shared customer or product data, efficient execution of back office transactions, and visibility into core processes (e.g., supply chain processes).

While these characteristics do not make a company digital, they are essential for operational excellence. And in most industries, operational excellence is table stakes for competing in the digital economy.

Kaiser Permanente’s operational backbone starts with its electronic health record (EHR) system. EHR systems have been implemented at many health- care organizations. However, KP committed early on to the EHR system as a backbone for clinical record keeping and collaboration. With this focus, the organization rolled out an integrated EHR system that supports organizational integration and facilitates services that depend on accurate, accessible patient data.

Schindler’s operational backbone comprises global business technology and process standards, particularly as they relate to supporting field technicians. In addition, Schindler’s backbone supports technology standards and value chain optimization across formerly independent subsidiaries. Technology and process standardization have made it possible for Schindler to enrich processes and products with sensor data. (See figure 1 for comparative approaches to digital strategy as executed at Kaiser Permanente and Schindler Group.)

Executing Your Digital Strategy

Defining a digital strategy is an essential first step in the journey to becoming a digital company. It starts with clear thinking about both the opportunities and risks that new digital technologies pose to your business. Then it requires constant adaptation as new opportunities emerge—and various experiments succeed or fail.

The toughest challenge in achieving digital business success, however, is not defining a strategy. It’s executing the strategy. You’ll start by making sure your core capabilities are wired into your operational backbone. But the operational backbone will not provide the agility you need to become digital. Start designing a digital services backbone to enable a constant flow of digital innovations and connections with partners. In our next briefing, we’ll explore the nature of this digital services backbone and how successful companies go about building one.

© 2016 MIT Sloan CISR, Ross, Sebastian, Beath. CISR Research Briefings are published monthly to update MIT CISR patrons and sponsors on current research projects.