Today, an average user spends more than a quarter of their life on the internet, and 57% of the global population has at least some digital presence. With digitalization becoming a bigger part of our lives all the time, nearly all business leaders have started thinking about their own digital future.
Nevertheless, digitalization has remained a hot issue over the past decade – because of either competitiveness or survival. Many companies still struggled to enter the digital world, even with a smart and thorough strategy in place. Decisions were dragged. Developments were pushed. Targets were missed.
Why do so many digital strategies fail in execution, even when they are crafted by great minds within or/and outside of the companies trying to implement them?
After helping business leaders across industries transform digitally over the last 13 years, we’ve identified three common traps on the path from digital strategy to execution. By sharing these lessons, we hope to shorten the learning curve for organizations trying to excel in the digital era.
Trap 1: Unknown unreality
Thinking outside of the box is often encouraged when it comes to digital strategy, where individuals look at emerging technologies and practices beyond their industries. Based on our experience, however, many digital strategies have fallen on the other end of the spectrum: being “blue-sky”.
To stay grounded, companies need to check their reality constantly while strategizing, not after the strategy is done. A common reality check is technology readiness, keeping in mind that technology and use cases can change at different speeds in different sectors.
For example, a furniture marketplace might find it difficult to launch an image search feature, while image recognition becomes the new normal in security. The lack of tagged furniture pictures, or high-quality training data, has slowed down the development speed of image recognition in the furniture space.
Company- or industry-specific factors, like legislation, business models, and vendor relationships, are often overlooked and could significantly impact technology applications.
An airline company came across an idea of reserving luggage space pre-flight. While this feature could reduce operational hassle, it could also backfire if non-tech-savvy passengers feel disadvantaged in claiming a part of the shared space.
Even with a strategy that incorporates reality checks, companies can still end up with a challenging (if not impossible) roadmap to digitization. As preliminary feasibility studies might only yield a yes or no answer, the planned sequence of activities or features could be far from the actual requirement, especially for large-scale digital transformations with an average duration of five years.
A marketplace planned to build a machine-learning-powered recommendation engine. After looking into the key components of a recommendation engine, we decided to stage the feature, by first developing a static model based on existing analytics and a feedback mechanism to collect sufficient data for advanced modeling.
Trap 2: Missing parties in the strategy
This trap is often intertwined with trap 1. In many organizations, there is an “innovation” team, separate from the core business. These teams help companies jump on top trends, which otherwise might not be accomplished or operationalized because of the constraints of the business.
But it also happens in ways that are more subtle and harmful, catching businesses off guard.
Incompatible organizational design
While companies are aware of the impact of digitalization on their market, they tend to overlook its impact on fundamentals like organizational design, decision-making processes, and operation models.
As a result, one common pitfall in digital strategy is keeping different business units siloed, even if the same model has been effective and efficient in other units in the past.
This change occurs as digitalization breaks the conventional boundaries intra- and inter-organization to enable rapid movement of information. For example, in the traditional lending process, loan applications are manually passed down via email through borrowers, lender agents, loan officers, and underwriters. In the digital process, communication can occur between two or more of those parties in an instant.
In many organizations, business units that used to operate independently are now interrelated. But digital strategies remain a unit practice, failing to involve other parties or involving them too late.
This dissonance creates internal friction. Stakeholders indirectly impacted by the digital strategy might feel left out and unmotivated to cooperate. Meanwhile, different business units might work in silos and make inaccurate assumptions about each other’s decisions. Organizations become nimble on these interdependent yet conflicting decisions.
The head of a B2B unit decided to offer its first B2B2C product, which soon became a cross-organizational initiative. Later, stakeholders discovered several versions of the product roadmap existed across business units, resulting in confusion within the organization.
Lack of an owner
When digitalization is a collaborative act, having “too many cooks in the kitchen” becomes another problem. Decisions would take too much time to make and run in circles. While some companies have assigned a “product owner”, a product owner without decision-making power wouldn’t solve this problem.
Companies need to have people accountable for day-to-day operations and product decisions. The former acts more as a coordinator and facilitator. The latter is likely to sit outside the business lines, balance the long-term and short-term needs at different levels, and have the authority or substantial influence on key decisions.
These two roles are often separate but closely communicate. The product facilitator has front-line insights, while the product owner keeps the big picture in mind.
After three years and working with several external vendors, an organization’s new public-facing app was stuck in development. The stall was not due to technical difficulty, but organizational challenges. The product design tried to incorporate every stakeholder’s view, many of which were contradictory, causing consecutive reworks.
Trap 3: Product-driven strategy, instead of strategy-driven product
Product innovation, whether internal or external, is essential to digitalization. The 1000 global innovators identified by PwC spend an average of 4.5% of their revenue on R&D. Product plays two crucial roles to digital strategy simultaneously: an outcome and a contributor. But the gap between strategy and product poses a wide and deep trap for companies, which could easily stumble in the dark for years.
The concept of a minimally viable product, or MVP, was popularized by Steve Blank and Eric Ries around 2011 and has dominated product development since. This concept sounds intuitive but becomes tricky in practice, where “minimally viable” is often defined loosely and differently across the board.
Some companies consider an MVP as the first few features on the product roadmap, while others see it as the maximal output they could deliver under the given time. This is dangerous as the scope of a product becomes fuzzy and distorted by noise, like new features launched by a similar product to a different market segment.
An MVP should be defined rigorously by a group of key assumptions under the digital strategy that require market validation. It often touches various features across the roadmap with different depths.
A company is launching a new product. It plans to add a second revenue stream in two years that requires major integrations. Its MVP includes a simple flow consisting of basic features to validate the user interest in the second revenue stream before making the integrations.
Marginal iterations/ Built for today
Take a new digital consumer product launched by a large enterprise, for example. Should the corporation engage external product teams due to complexity, it could take more than a year to build with a team size of 15-20.
Meanwhile, the processing power of computers has doubled approximately every 24 months over 40 years (according to Moore’s Law). When it comes to AI, the speed is even faster, seven times faster than before, where OpenAI found that the amount of computational power used to train the largest AI models had doubled every 3.4 months since 2012.
The breakthroughs at the infrastructure level constantly shifts the ground for digital products, at an accelerating speed. Chances are, things that seem innovative today could lose their edge and even become obsolete before they’re ever deployed.
To stay relevant, companies need to act fast but think like infrastructure businesses. Good digital strategies budget for technological advancement and development time, allowing companies to build for a few years down the road today.
This “built for future” mindset commonly fades in the following release. After launching an MVP, companies might continue fine-tuning existing features or decide the next ones based on detailed user feedback. Both short-term-focused approaches could deviate the product from its digital roadmap in the absence of a strategy.
When driving products with strategies, companies need to be comfortable launching imperfect products. More importantly, they need to use product analytics to reiterate their strategies and consciously decide when not to fix those imperfections.
A retailer has made several updates on its mobile app. They’ve seen marginal improvements but weren’t able to justify the investment. After three years of lagging behind competitors, they decided to rethink their digital strategy on an organizational rather than a product level.
Entering the post-pandemic world, business leaders have never faced so much urgency digitalization, which is becoming as essential as air to people’s lives. We hope this article can help business leaders to avoid these common traps their peers have fallen for. While the “how” is a big topic and needs several future articles to unfold, we’d like to leave you one principal to start with – strategize agilely for streamlined execution, instead of executing a streamlined strategy agilely.