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[NEW RESEARCH] Crafting A Digital Strategy

A Process and Checklist for Digital Strategy Development

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[NEW RESEARCH] Crafting A Digital Strategy

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  1. Preview Only CRAFTING A DIGITAL STRATEGY: A Process & Checklist for Digital Strategy Development By Ed Terpening with Aubrey Littleton Altimeter, a Prophet Company August 16, 2016

  2. Preview Only EXECUTIVE SUMMARY Brands face an ever-increasing array of digital disruptions, including social media, digital transformation, Big Data, omni-channel customer experience, and the Internet of Things (IoT) — to name a few. Brands can adapt and thrive to remain relevant in this complex connected world by building a digital strategy. The best strategy answers the right questions. To help you create one, we’ve taken the world of digital planning and broken it into manageable steps. For each step, we’ve created a list of questions strategists should answer to make their strategy an effective plan. Alongside these questions, we’ve included insights from 11 digital strategists to provide real-world examples of the process in action. The world of digital strategy is broad. To keep focus, our digital strategy process is designed for customer-facing functions—such as sales, service, and marketing—as opposed to back- office functions—such as IT, supply chain, or operations. TABLE OF CONTENTS Executive Summary Introduction Digital Strategy Development Barriers Digital Strategy Development Catalyst Leadership Champion Team Building Research & Benchmark Strategy Co-creation Strategy Synthesis Alignment Summary Endnotes Ecosystem Input Author Bio About Us 2 3 5 6 7 8 9 10 12 14 17 19 21 23 24 24 www.altimetergroup.com | @altimetergroup | info@altimetergroup.com 2

  3. Preview Only INTRODUCTION DIGITAL TRANSFORMATION & DIGITAL STRATEGY Much has been written about digital transformation as an approach to rethink business models in the digital era, but these approaches don’t always come with an actionable strategy. This report provides a bridge between business transformation and an actionable strategy for implementing it by defining a process and a set of questions a digital strategy should answer. The challenge of connecting digital and business transformation was a recurring theme in our research. Businesses are intimidated by the thought of transforming their core products or value proposition into digital form. They forget that digital can simply be a tool to meet business objectives in new ways. Claudia Gorelick, US Business Design Director of Accenture Interactive, takes the view of digital as a business enabler. “Uber’s founders did not create a digital company; they created an unprecedented transportation and communication service that users experience primarily offline,” says Gorelick. “In a similar way, Amazon is not a digital company; it is brilliant at distribution and data and enabled by digital.” The strategists we spoke to are seeking this balance between being a good digital business and using digital to meet business objectives. Here then is the distinction we make between the broad world of digital transformation and the targeted impact of digital strategy: Digital Transformation Digital Strategy The realignment of or new investment in technology, business models, and processes to more effectively compete in an ever- changing digital economy. A plan of action to achieve business objectives using digital technologies. www.altimetergroup.com | @altimetergroup | info@altimetergroup.com 3

  4. Preview Only WHY DEVELOP A DIGITAL STRATEGY? Business leaders are increasingly aware of how the digital era impacts their bottom line — as either a new opportunity or a threat to business continuity.1 Case studies of one-time industry leaders like Kodak and Blockbuster remind them that there is no immunity to technology disruption.2 In-house experts espousing “digital for digital’s sake” thinking may intimidate leaders, making them hesitant to explore an area they are less comfortable leading. But that is not sustainable and leads to silos of digital experience. The best digital strategy aligns with goals that cross silos and leaders. For example, pursuing growth can be a key driver for creating a digital strategy that crosses departments. In retail, while total retail sales only grew 2.2% in the first quarter of 2016, ecommerce sales grew 15.2%.3 Based on that stat, brands focused on growing their marketshare (in an otherwise slow-growth economy) would shift their focus to increasing digital sales. This requires a firm-wide digital strategy, not just one that applies to a single department. Building a digital strategy gives brands a place to start in their fight to remain relevant in the digital economy. How consumers connect digitally to each other and the brands they favor is now a centerpiece of a business strategy. The emergence of the web was just the first step in connecting people to people and people to brands at massive scale. Whether developing mobile, always-with- you apps or more intimate IoT4 connected devices, brands have an abundance of options for connecting with and understanding the digital consumer. Building a digital strategy gives brands a place to start in their fight to remain relevant in the digital economy. www.altimetergroup.com | @altimetergroup | info@altimetergroup.com 4

  5. Preview Only DIGITAL STRATEGY DEVELOPMENT BARRIERS In order of frequency, we heard the following barriers from strategists in our interviews: Alignment. Digital can be used as a tool by any business function in isolation to meet its objectives. But in order to use digital to solve problems that cross business lines, consumers, and geographies, different departments need to align. This is no easy task. Without alignment, data is created in silos across each digital touchpoint, which makes it difficult to see, understand, and optimize the customer experience. Skills. Consumers adopt new behaviors at rates faster than most businesses can adapt. We were told of senior leaders that haven’t used digital products they offer their own customers, which can lead to a lack of empathy and understanding for the environment their customers live in. Without digital training and a holistic brand point of view, organizations can miss the opportunities digital provides and risk being disrupted. Silos. Historically, siloed hierarchies within organizations have served business well. While the autonomy inherent in silos is powerful, without proper planning, it can lead to a disjointed digital experience and uneven brand perception for customers. As Bennet Harvey, Director of U.S. West Coast Digital Strategy at Wipro Digital, told us, “Many companies are realizing that top-down organizations can’t drive significant improvements in customer experience,” but then again, completely breaking silos — as Zappos attempted with its shift to a holocracy — isn’t easy either.5 Metrics. The path from digital initiatives to measurable business results can be a complicated route. For example, the mix of owned, earned, and paid media and engagement across platforms and devices complicates sales attribution and our understanding of customer experience. Without a strong measurement culture, lack of proof metrics can slow the adoption and spread of digital. Resources. Assuming alignment, a strong business case, and success metrics are in place, budget barriers remain. For many brands, unfortunately, digital innovation is funded as an R&D cost center — prone to cuts during challenging economic times. It is only after meeting leadership objectives that digital budgets become predictable year to year. Culture. Some businesses have a culture of deliberateness that is a requirement of their industry but not suited to the pace of digital change. Examples include pharmaceuticals and financial services, where consumers expect an extra degree of caution. While there are successful disruptors in these industries, they often find themselves fighting an uphill battle without strong leadership support to back them up. Regulations. Violating regulations can result in fines and negative publicity. However, governments are often behind the curve in understanding technology’s impact on consumers, and so they struggle to either reinterpret existing regulations or develop new ones for the digital era (such as the Digital Millennium Copyright Act).6 In addition, strategists struggle to interpret existing regulations and regulatory guidance is rarely as specific as it needs to be. www.altimetergroup.com | @altimetergroup | info@altimetergroup.com 5

  6. Preview Only To download this report in full at no cost, please visit our website at: http://www2.prophet.com/crafting-a-digital-strategy HOW TO WORK WITH US No matter where you are in your digital planning efforts, we provide options to engage with us, ranging from engaging individual Altimeter analysts to our global consulting team via our parent company, Prophet Brand Strategy. Offerings related to digital strategy, include: • Education – Presenting within your organization or at an event to make the case with leaders or key brand stakeholders. Connect the dots between business objectives, key brand, communication, and digital moves. • Advisory – You may work with our industry analysts for advice as needed on your approach. • Strategy consulting – You can engage our global consulting team across our digital transformation offerings (including digital strategy, planning and roadmaps, digital customer experience, digital readiness, business model innovation, digital marketing planning), as well as brand and customer experience and growth acceleration offerings. To learn more about Altimeter’s offerings, contact sales@altimetergroup.com. www.altimetergroup.com | @altimetergroup | info@altimetergroup.com www.altimetergroup.com | @altimetergroup | info@altimetergroup.com 6

  7. AUTHOR BIO Ed Terpening Industry Analyst at Altimeter, a Prophet Company Ed Terpening (@edterpening) is an Industry Analyst at Altimeter focused on Social Business and Digital research. As former VP of Social Media at Wells Fargo, Ed led the charge to develop the first social media team of any national US bank. He founded CNET’s first Online Community Team, where he added user ratings/reviews to CNET.com and “Talk Back” to NEWS.com. He is a founding member company of SocialMedia.org. Aubrey Littleton Researcher at Altimeter, a Prophet Company Aubrey Littleton (@aubreylittleton) is a Researcher at Altimeter. He supports Altimeter’s broad research mission and advisory efforts, working with analysts to understand the ever-transforming digital world. His research is currently focused on social business, employee advocacy, and digital transformation at large. ABOUT ALTIMETER, A PROPHET COMPANY Altimeter is a research and consulting firm owned by Prophet Brand Strategy that helps companies understand and act on technology disruption. We give business leaders the insight and confidence to help their companies thrive in the face of disruption. In addition to publishing research, Altimeter analysts speak and provide strategy consulting on trends in leadership, digital transformation, social business, data disruption, and content marketing strategy. Altimeter, a Prophet Company One Bush Street, 7th Floor, San Francisco, CA 94104 info@altimetergroup.com | www.altimetergroup.com @altimetergroup | 415-363-0004 www.altimetergroup.com | @altimetergroup | info@altimetergroup.com 7 7

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