Aligning Your Digital Strategy With Your Business Strategy
23/09/2015
First things first, numerous studies have shown that alignment between digital and business strategies delivers tangible value. For example, in a study by Apigee they showed that aligned organisations were six times more likely to be able to be a leader in their industry by improving their employee’s experience, customers, and portfolio of products and services. MIT and Capgemini also showed that alignment helps organisations to be 26% more profitable than their industry competitors, to generate 9% more revenue, and to generate 12% higher market valuation ratios.
There are many other benefits of alignment including speed to market, business model innovation, and improvements in value creation and capture. So let us say that alignment between your digital and business strategies is a good thing.
Before we go any further, it is worth pausing to confirm that we are on the same page in terms of what we mean by digital strategy and business strategy.
Is there a difference between digital and business strategy?
Business strategy is a defined path of action to create value by differentiating yourself in the market. Digital strategy is a subset of business strategy whereby you are focusing on the application of information and technology to create differential value. In its purest sense, there would be no such thing as digital strategy as the application of information and technology should be a key consideration in developing the business strategy.
I understand that reality does not always operate in the ‘purest sense’. Alternate scenarios occur where the organisation does not have a formal business strategy, where the organisation has not sufficiently considered ‘digital’ when they developed the business strategy, or where the level of detail required for a specific business function or process would be too much to consider at the organisational level (for example, catering for a digital marketing strategy).
For the rest of this article, I will assume that you have a business strategy and that you have a need for a separate digital strategy.
The components of alignment
There are three key components of a strategy – differentiation (or focus), action, and value. You must cover each of these components to gain the benefits from alignment.
Differentiation: This provides the direction for your digital strategy. While digital can support multiple forms of differentiation, it is critical that this is limited to your agreed strategic focus. Reducing focus dilutes the required action and resulting value.
Action: Digital requires access to resources in terms of people, money, and assets. The wider your variance in alignment, the more difficult you will find to get access to the required resources to deliver on your digital strategy. Further, digital strategy often requires access to resources that sit across multiple business units. This means that you must create or at least approve the digital strategy at the C-level.
Value: This defines the expected benefits from differentiation and action. These benefits generally consist of benefits to the organisation, customers, staff and partners, and or the community. If you can prove that your digital strategy contributes directly and or significantly to the expected benefits, you are much more likely to get access to the resources you need for successful delivery.
The process of alignment
We use a three-step process to align digital and business strategies:
Understand the existing business strategy including the underlying key performance indicators, measures, and reporting cycles.
Complete an investment logic map as an input to the digital strategy. This will provide you with the key drivers for a change that will leverage information and technology, and the expected benefits from making a change. When you define the expected benefits, you can easily reference these against the value statement in the business strategy. An investment logic map also provides you with a strategic response to deliver the expected benefits, and the top-level change requirements. Together these last two points help you to understand the resource requirements and helps you ensure that the proposed change supports the agreed organisational focus (for differentiation).
Develop your digital strategy and then use the relevant key performance indicators from the business strategy to determine the success of your digital strategy. Note that the measures are likely to be different but the key performance indicators must be the same. I also recommend using the same or shorter reporting cycles so that you have the appropriate proof to support your standard strategic reporting process.
Note that this is our process for alignment. If you are interested in our full process for creating a digital strategy, send us a message, we would love to talk.
Written by Peter McHannigan
