STRATEGY IN THE DIGITAL AGE

Why you need a

strategy for the
digital age, not a
digital strategy
THOUGHT LEADERSHIP

Strategy in the digital age

Developing a successful strategy in the new world of digital, data

and AI is not, as some would tell you, a separate endeavour, it’s
now the most important and fundamental element of any modern
business strategy.

What hasn't changed is that your strategy needs to be about hard

choices: what products and services you offer and what you don’t, who
your customers are and who they are not and how you go about
efficiently delivering these to create sustainable economic value. The
strategy development process should contain a diagnosis of what you
do now and where you create value; how this might change or be
disrupted in the future; some well thought out options to create new
services, customers and business models; a series of initiatives
stemming from this, and a commitment to change.

However, what has significantly changed versus conventional strategy

development are four things: the speed and magnitude of change that
technology brings; the potential rapid destruction of old business
models and value chains; the significantly greater level of uncertainty,
and the higher costs of failure.

Simply put, you need a robust strategy for the digital age, not a digital
strategy...and the one thing this strategy cannot be is incremental.

To avoid the pitfalls of incrementalism, we have developed a series of

simple rules and processes to develop a strategy for the digital age.

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Some new rules Developing a strategy for the digital age – a
roadmap
• Assume your value chain will likely be destroyed.
Find and fix the weak spots now and redefine how • Understand and debate the scale of disruption you
you create value before someone else does and your industry could face in the next 2, 5, 10
years. Today’s digital technologies are a never
• Vision, leadership and culture count more than before seen combination of exponentially
ever increasing data, exponentially decreasing costs of
processing and storage, and smart algorithms.
• Don’t fall too far behind or you will never catch up. Together they form one of the most fundamental
You can be a successful fast follower for a while inventions of mankind. They have the power to
but you should assume the cost of failure is high transform humanity in the same profound way as
and that the winner takes all fire and electricity did. Understanding the
magnitude of this change is key to success
• New digital native organisations play by new rules,
they don’t respect you, your industry or widely held • So start by imagining what your organisation and
conventions your industry might look like in the future.
• Banish hubris, ignorance, guesswork and • How and where do you make money now and how
apprehension from your executive team and will this be disrupted by technology?
replace the technology dreamers in your
organisation with doers • Which of your current partners, suppliers and
customers would compete with you in the future?
• You cannot do it alone any longer. You will need
an ecosystem of partners that is different from a • How would you remove 50% of the costs in your
traditional supply chain and you have to be industry?
prepared to genuinely share value
• What kind of organisations could you partner with
• Democratise analytical tools and technologies to reinvent the value chain?
across your organisation so that everyone has the
opportunity to learn and progress • What new products and services are required?

• Be prepared to take on new types of employees

skilled in technology and be aware that what
motivates them is not what motivates you

• The path ahead is uncertain and opaque and you

need to take one step at a time. You should be
prepared to have multiple pathways, to fail often
but to learn fast from failure.

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• Win, or at least fight hard in, the war for • Instead, you should start by being strategic and
technology talent. You will need a significantly identify where your organisation might create more
different workforce from today to remain value than your competitors and then understand
successful. They will be a mix of full time, part time what data you need to make that happen. At that
and contingent workers and you need to offer point you can develop a clear understanding of the
these skilled technologists a career and working investments you need to make in data. The
experience that makes different and scarce people investments need to be consistent with your
stay. Your traditional management pyramid needs business strategy and you will have to spend
to change, the nature of progression through your money on the boring things like data integrity and
organisation will be different, and you may need plumbing before you spend on ‘shiny objects’ such
an entirely new ‘face’ to this pyramid containing a as predictive models and AI. You should consider
distinct career model and a real path to the top for hiring a Chief Data Officer, but one that
‘role model’ technologists. The nature of understands that business strategy trumps
leadership and management in your organisation technology.
also needs to change. You need to attract, retain
and develop people who may, currently, be • Be prepared to fail often and develop a culture
counter-cultural to your organisation: they don’t that learns fast from failure. Many organisations
work 9-5, they dress and speak differently, they are effectively ‘throwing darts’ at a technology
don’t have allegiance to you or your organisation, wall, diffusing their technology spend and learning,
they get their role models, energy and reference then cutting short investments after a few months.
points from an ecosystem you don’t understand Consequently, inexperienced executives are
and they don’t aspire to be you. Get over it. But, repeatedly being taken in by ‘shiny object
alongside these technologists, you need a similar syndrome’, chasing technologies they’ve seen
new cadre of more recognisable business being used by competitors or being offered by
translators who will work alongside them to make vendors.
sure their capabilities are put to best use for your
organisation and your business priorities. The jury • As a prerequisite, you should create a robust
is out on which of these two groups is most scarce investment process that balances commercial as
currently, but suffice to say there are far too few of well as technological requirements in an objective
either and you need to create a culture that and risk adjusted way. You need to take risks,
appeals to them. you need to accept that you will fail often, but that
you understand properly why you failed and that
• Start with value not data. Don't think about how you can learn more from technology failure than
much data you have and then spend endless from success. Failing to fail, which includes
amounts of time working out how to use it. Data is ‘technology dart throwing’, will be your biggest
not, despite the headlines, the new oil. To source of weakness. You should understand, and
continue the oil analogy, most of it is hidden, copy where appropriate, how VC firms make multi-
polluted, unprocessable and too expensive to year investments in technology, how they refine
extract in a meaningful format. Much of it has little their processes, how they manage an opaque
value internally and almost no value externally. future for their investments and how they deal with
You don’t yet have a treasure trove of data that failure. If you’re not familiar with digital technology
will create a new high margin revenue stream and you should consider forming a Technology
a hedge fund won’t come knocking to improve Advisory Board of non-execs who can advise
their investment strategies. specifically on this topic.

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• Partner and create a mutually beneficial • Don’t forget the rule makers. If there’s one area
ecosystem. Unless you have a significant history where you have an advantage over digital native
of success in technology, software and managed companies is that you know how the current rules
services you ought to seek to develop a dynamic and regulations work in your industry. Changing
ecosystem of partners, large and small, who you the rules often requires the rule makers to come
can work with to develop new digital products and on the journey with you - this is your possible
services. If you’ve not developed software before, unique source of advantage vs. new digital native
don’t try to build from scratch; you won't competitors. If you can influence the pace of
understand the demands of product development, change you can determine what the technology
sales, support and the routes to market and the bleeding edge is and be at the forefront, plus it
economics of these. Even if you acquire a encourages technology firms to partner with you
software business for your new products and rather than compete.
services, you will likely still need a technology
ecosystem. • Finally, if you feel you must take your executives
on a tour of Silicon Valley, spend more time
• You will likely need this ecosystem to help you understanding the VC investment process than the
navigate and invest in big data, AI tools and to use shiny technologies on offer. The former has the
these as intelligent ‘lego bricks’ to build services longevity that the latter does not and they will likely
using your unique knowledge and IP. Managing own the good technologies already.
alliance partners effectively is very different from
managing supply chain partners. You need to be
clear on why the ‘pie is bigger’ together and how
you’re going to share the value you create so that
each continues to bring something unique to the
alliance. But, as with your enemies, keep them
close; be aware that those partners may easily
become competitors and prepare an elegant exit
strategy for the partnerships you create.

• Train ‘everybody’ in your organisation.

Technology and analytical tools are now
significantly easier to use and a self-service
market readily exists. Make data analytics truly
democratic, train the smart people in all your
business functions in them, let them elect to
become the business translators you need, but
make them aware that there are experts on hand
for the truly difficult tasks.

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 Neil Hampson is an advisor to
executives and investors in
technology businesses and
specialises in strategy
development and M&A. He is a
partner with PwC Strategy&,
based in London, leads the firm’s
Data & Analytics capabilities and
is also a member of PwC’s global
technology leadership team.

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