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.