By Ed Terpening with Aubrey LittletonAltimeter, a Prophet Company

August 16, 2016

CRAFTING A DIGITAL STRATEGY:

A Process & Checklist for Digital Strategy Development

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EXECUTIVE SUMMARYBrands 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 CONTENTSExecutive Summary 2Introduction 3Digital Strategy Development Barriers 5Digital Strategy Development 6Catalyst 7Leadership Champion 8Team Building 9Research & Benchmark 10Strategy Co-creation 12Strategy Synthesis 14Alignment 17Summary 19Endnotes 21Ecosystem Input 23Author Bio 24About Us 24

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INTRODUCTIONDIGITAL TRANSFORMATION & DIGITAL STRATEGYMuch 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.

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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.

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.

Building a digital strategy

gives brands a place to start in their fight to remain relevant in the

digital economy.

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DIGITAL STRATEGY DEVELOPMENT BARRIERSIn 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.

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DIGITAL STRATEGY DEVELOPMENTStrategy defines both what you will and won’t do. The best strategies are made of this basic level of clarity — they answer the right questions to move the organization forward, together. So where do you start? By asking and answering the right questions. Using the steps below, we formulate the questions a sound digital strategy must answer and provide examples of how strategists have answered them. Below (see Figure 1), we have indicated the degree to which common barriers are typically addressed in each step of the process.

FIGURE 1 DIGITAL STRATEGY DEVELOPMENT STEPS & BARRIERS ADDRESSED

CATALYST TEAM BUILDING

STRATEGYCO-CREATION

RESEARCH &BENCHMARK

STRATEGYSYNTHESIS ALIGNMENT

1

LEADERSHIPCHAMPION

2 3 4 5 6 711

Alignment

Skills

Silos

Metrics

Resources

Culture

Regulations

Barri

ers A

ddre

ssed

As you progress through these steps in the following sections, refer back to these common barriers to ensure each is addressed at the right time.

The best strategies answer the right questions.

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Making the case to orient to a digital perspective is the first and often most difficult step. This step is driven by the emergence of a catalyst, which could be a move by a competitor, an internal team staffed with disruptors (e.g., Innovation), or changes in consumer behavior. Organizations realize they need to be more effective among both an increasingly digital employee workforce and “connected consumers”, 7 who engage with a myriad of apps and digital platforms in both their personal lives and in commerce. Status quo bias tends to put a damper on catalysts, so it’s important the “change agent”8 explain digital disruption through the lens of business fundamentals, to prepare leadership for investment in change. You’ll know you’re through the catalyst phase when you’ve identified the biggest threats and opportunities that lay the foundation for recruiting the appropriate Leadership Champion.

Questions to consider during the Catalyst phase:

Where is the consumer friction or weakness in my business that could be exploited by a digital disruptor or competitor? Businesses risk disruption if they don’t keep a watchful eye on how digital is changing their industry and consumer behavior. In addition to thinking about existing points of friction within the business, strategists reinforced the need to look outside their industry to understand where customer expectations are headed. Katharine English, Chief Marketing & Customer Experience Officer at the National Association of Professional Women, adopts this broader perspective. “It’s easy to forget that the benchmarks for customer experience are not necessarily being set by organizations in your industry. They’re being set by companies like Amazon, Uber, and Netflix,” says English. “It doesn’t really matter what your industry is or what your marketplace is delivering; you have to look at what the disruptors, and the innovators, and the leaders are delivering. And that’s the kind of customer experience you need to be thinking about.”

What business objectives will leaders expect my digital strategy to address? This sets the overall context for strategy and alignment, ultimately freeing resources to pursue ideas that may push leadership’s comfort level. We often heard that an objective could be as simple as “we need to learn.”

1. CATALYST

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

“It doesn’t really matter what your industry is or

what your marketplace is delivering; you have to

look at what the disruptors, and the innovators, and

the leaders are delivering.” — Katharine English, Chief Marketing & Customer Experience Officer at the National Association of

Professional Women

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Change requires leadership, and digital is no exception. The digital strategist will partner with a leader to set the context for change and prepare for enterprise-wide cooperation. The leader will identify peers that may be impacted — in which case, a digital steering committee may be formed — and identify the right business objectives that will inspire support and action. You know you’ve completed this phase when the champion has secured the support of peers to assign resources to proceed to team building for strategy co-creation.

During this phase, consider the following:

What principles guide strategy? In an environment where decisions need to be made quickly, having foundational principles helps strategists create a plan that aligns with company culture. Sample guiding principles we heard included “Fail fast; learn fast” and “Customer experience guides us.” Digital strategy can be viewed as transformative; but in most cases, it shouldn’t be viewed as a radical departure from the culture, values, and mission of your organization.

How much risk is leadership willing to assume? This is among the most difficult conversations to have with leaders: Do you have permission to take calculated risks? Agility allows the business to quickly abandon or reorient a strategy that isn’t working. Prior to making your pitch to leaders for digital, create a list of risks (including doing nothing, the status quo) and identify the controls you’ll put into place to manage each. This will help you design a strategy that aligns with your company’s risk tolerance. If your Champion is unwilling to accept the risk inherent in digital moves, go back to the Catalyst phase and reconsider your case or request a check-in after the Research & Benchmark phase to present a stronger case backed up by data.

Is the budget horizon sufficient for the team to fail and learn? Developing for digital can be deceptive: On the one hand, a “minimum viable product”9 to market test with early adopters can often be completed relatively quickly, but building something truly integrated for the average consumer—with solid metrics, integration with legacy operational systems, and a solid infrastructure to scale—can take much longer. To secure your Champion’s long-term commitment, discuss the need for short-term wins and regular KPI checkpoints to proceed.

2. LEADERSHIP CHAMPION

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

Change requires

leadership, and digital isno exception.

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Recognizing that customer-facing digital initiatives almost always cross organizational boundaries, it will take a cross-functional team of business functions (HR, legal, PR, etc.) and expert digital platform practitioners alike (web, mobile, social, IoT, etc.) to co-create strategy. Throughout this report, we’ll refer to this as the co-creation team. Strategists we interviewed cast a wide net early on to include groups often brought in at the end — like Legal and HR — to both identify the right tactics and provide “skin in the game” that ensures alignment during execution. Prior to forming the strategy co-creation team, your Champion should clear the way with their peers, freeing the team members up to participate.

Consider the following when building a cross-functional digital strategy co-creation team:

Will the scope of my strategy be enterprise-wide, or will it be local to a business unit or geography? It’s important that the cross-functional strategy co-creation team you form include remote geographies or business units that operate with autonomy. This will allow you to identify early on where strategy may differ, plan exceptions accordingly, and build their support for alignment early in the process.

What new digital teams are required? While some strategists create whole new digital teams with a Chief Digital Officer, many more place digital strategy in Marketing. This follows the pattern of social media: Today, more social media teams report to Marketing than any other business function10. Rohit Prabhakar, Head of Digital Marketing & Technologies at McKesson, pointed out its valuable position. “Marketing is a good place to start because you can influence the top of the funnel. Sales and service will fall into place after,” says Prabhakar.

Where will we partner vs. build in-house? Strategists need to understand what commercially available capabilities can be licensed or acquired vs. building in-house to speed the development process. There are numerous products and services that can help teams prototype and build digital solutions11. An added benefit of investing in partnerships is that they provide an external source of insight to keep close to the market. Marketo’s Scott K. Wilder told us, “The key is that you can’t be successful on your own and do it all yourself. We rely on partners not just for technology, but also to advise us on what’s going on in the marketplace.” Revisit the partnership question again during the Strategy Synthesis phase when you’ll have greater visibility into gaps between strategy aspiration and current digital readiness.

3. TEAM BUILDING

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

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The path to change starts by understanding where you are today. For digital, consider both external and internal truths through research.

External research includes moves by competitors and your industry in general, business intelligence, digital behaviors of target customers and markets, and analysis of existing data sources, such as Customer Relationship Management (CRM) systems.

Internally, just about every strategist we spoke with talked about drowning in a sea of customer data that could provide important research insights. IDC estimates that — for the next decade — the amount of digital data will double every two years, reaching 44 trillion gigabytes by 2020.12 The influx of data from search engine analysis, social media, and, increasingly, IoT devices provides unprecedented opportunities to better understand consumers. However, as Bennet Harvey told us, there is a discrepancy between the availability of data and execution. “Very few organizations and individuals are capable of translating insights from their data into truly innovative concepts or experiences,” says Harvey.

In this phase, look with a critical eye at internal readiness to execute digital, including skills, culture, and technology infrastructure. Readiness gaps should not limit strategy, but rather identify which new capabilities are needed to address digital successfully. Add those initiatives that close gaps to your overall roadmap. They need to be visible.

Proceed to the next stage when you have the proof points requested by your Champion and the strategy co-creation team has enough research-based insights to begin ideation.

Answer the following key questions in the Research & Benchmark phase:

What new value propositions can I offer my digital customer that I can’t with other channels? Your fight for brand relevance must include continuous reassessment of the value your brand can deliver. Retailers are playing a leading role here. One example is Walmart’s mobile app, which switches modes based on where the customer is — in or outside a store. Its SavingsCatcher13 feature compares Walmart’s price for an item vs. competitors, giving consumers confidence in their purchase. The other side of this coin is how to leverage your physical “brick-and-mortar” (or other non-digital assets) in digital. According to Kevin Hofmann, Home Depot President of Online, 40% of Home Depot’s online orders leverage existing physical assets — its stores.14 For example, after buying online, the customer can opt to pick up their order in their local store. This is now Home Depot’s fastest-growing shopping feature, and it accounts for nearly half of its ecommerce transactions.

4. RESEARCH & BENCHMARK

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

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Could digital change who my target customer is now or in the future? We heard from strategists the need for in-depth consumer research as the range of digital use can vary dramatically among demographic and other factors. Start by researching high-priority consumer segments to understand their behavior in digital, and then identify high digital adoption segments that could support new growth. For example, Enterprise Rent-A-Car expanded its target customer base when it acquired Zimride in 2013,15 a digital ride-sharing platform for universities and companies to host their network of drivers and riders. The typical Zimride customer is the cost-conscious student or young professional who prefers carpooling to car purchase or rental – a segment not previously targeted by Enterprise.

Can digital change how I supply my products? With digital leadership often housed in Marketing, the demand side of the commerce equation will be top of mind, but you shouldn’t neglect the supply side. The digitization of many consumer goods — like music and movies — has had a dramatic impact on how products are supplied. The same applies to services. A good example of this is Uber’s surge pricing,16 which encourages the supply of more drivers by raising prices during peak hours. For an example of internal use, consider P&G’s Connect & Develop community,17 which crowdsources the supply of IP it needs from inventors all over the world to create new products.18

What skills are needed to execute and what gaps do employees have that we must solve for? The skills gap is among the most common challenges we heard among strategists interviewed, including Monu Kalsi, VP, Head of Digital at Zurich North America. “For a lot of people within the organization, digital is a foreign concept,” says Kalsi. Addressing this challenge ranged from hiring a new dedicated digital team to the introduction of new training programs for existing employees. Leading brands today are either building digital courseware or curating courses from expert providers, like Lynda.com, to build skills that keep their workforce up with the market. To sustain digital approaches over the long term, partner with HR to define digital competencies required by role to influence job requirements and future hiring for digital skills.

Is my technology infrastructure mature and flexible enough to support new digital moves? In our interviews, we heard of newly created digital innovation teams that seek to be agile, using rapid-prototyping tools, while also integrating well with the legacy IT infrastructure that keeps the organization running. McKinsey refers to this “two-speed IT” as being “one [organizational strategy] that decouples the management of customer-centric, front-end systems and applications from the management of existing transaction-oriented back-end systems.”19

Although a technology bridge between pilots and production systems is important, as Rohit Prabhakar from McKesson told us, it shouldn’t lead the conversation. “Technology should come last. Firstly, it should be people, processes, projects, and skills. Then think about how can technology enable those priorities? Technology is nothing more than an enabler,” says Prabhakar.

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While you may have superb digital strategists, avoid having them build strategy in a vacuum. To execute a well-orchestrated digital strategy that crosses silos, you need strong alignment from day one. One of the best ways to achieve alignment is to hold a cross-functional workshop (or an ongoing series of meetings) with key stakeholders that secures both their “skin in the game” and eventual support among their own leaders when formulating budgets for execution. Any number of techniques may be used to generate ideas among your team to co-create strategy, but begin the process by ensuring they understand the insights you’ve developed in the previous research phase. Have your Leadership Champion begin the process by reinforcing the need to address digital together, in service of shared customers and company objectives. You know you’re ready for this phase when the co-creation team feels confident that they have the basic insights necessary to begin strategy ideation. Don’t allow “analysis paralysis”20 to stall the process: Not every data point will be available to support strategy, and you will have a chance to revisit the research findings in the next stage anyway.

Consider the following questions during strategy co-creation:

What business objectives will my strategy focus on? Some strategists we spoke to found the traditional SWOT analysis21 (Strengths, Weaknesses, Opportunities, and Threats) a starting point for identifying specific business objectives. Your Leadership Champion plays a strong role here in defining the boundaries that will keep the team focused. Objectives could range from internals, such as building a digital culture and increasing collaboration, to externals, such as being more competitive and agile or improving customer experience.22 As you create objectives, identify which ones the organization is ready to tackle today versus those that will require additional preparation, such as new technology, skills, etc.

Who are key stakeholders, and how must we engage with them to succeed? While small, agile co-creation teams may be used to explore ideas, eventually the broader organization must be convinced to follow. Leverage the team to identify a list of key stakeholders to consult in later phases as you synthesize strategy and seek alignment. A key barrier here is that stakeholders will align with their near-term departmental (silo) goals as opposed to thinking “outside the box” in digital. One strategist spoke of the challenges of hierarchical silos. “The sheer amount of coordination and friction that you endure in trying to get marketing, product development, and the legal team to buy into it, using soft power, is a big challenge. Everything around the company is focused on silos, so there’s no real incentive for them to stop what they’re doing.”

Do employees play a role as a sounding board for new digital approaches? If your workforce is large and diverse enough, it may provide quick, honest, and confidential feedback on digital approaches and minimize risk in the process.23 The Home Depot has invested in an internal community with over 270,000 members24 (called “The Warehouse”) to connect and share customer and product experiences. The community is used to discover internal social media “stars” who can then be used by the brand’s customer-facing DIY community to create content. Employees that write well for this medium are then shifted to work two days writing

5. STRATEGY CO-CREATION

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

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and three in store — to remain connected to the customer’s experience and needs.25 In addition to finding internal digital talent, testing new approaches with employees first is quite common.26

Who are the intermediaries in my business that may be impacted by this strategy? As brands use digital to get closer to their connected customers, it is inevitable that intermediaries between the brand and customer can be affected. How do you bring your partners along, or does their role evolve or devolve? Evaluate whether established partners are assets that can fuel strategy or crutches that prop up outdated business models.

How does my strategy impact customer experience in existing channels or platforms? When defining digital moves, the co-creation team should ensure that existing customer experience touchpoints are considered, both within and outside of digital (e.g., stores, events, etc.). All too often, digital platforms like the web, mobile apps, and social are developed in their own silos. Tools like customer journey maps27 that span platforms are one means of keeping experience connected. For others, such as strategist Alison Woo, digital content plays a pivotal role in maintaining a consistent experience. “The connection between digital and social is more important now than ever. I find the content theme being the connective thread among all channels. I think Web 3.0 is the connectivity of content, channels, and a whole new mindset,” says Woo.

Are existing operational IT systems up to the requirements of new digital approaches? In order to align the existing technology infrastructure with digital strategy ideas, your IT team should be part of the strategy definition process. There will no doubt be gaps, and this is the time to identify them. For example, back-office legacy systems that track financials and supply chain may be impacted by mobile payment and ordering methods, which may not be up to the task. Some brands are building “data lakes” (or data warehouses) to make connections between new digital approaches and back-office systems.28 Data lakes support the ability to connect the unstructured, real-time data typical of new digital platforms with operational data for the purpose of insight, or to complete the user experience.

Is our approach to take small, incremental steps in digital with a series of small wins, or do we seek immediate impact in one wave of digital change? To co-create a strategy means to be aligned on approach, such as deciding whether it’s more important to make incremental progress in the short term vs. achieving a huge impact after long, sustained effort. Almost every strategist we spoke with recommended iterating and learning quickly vs. a “big-bang” approach to digital. Brad Blake, SVP, Associate Director of Digital Strategy at Hill Holliday, sees the experiential value of prototypes to bring ideas to life. “It’s often easier to create or prototype a digital experience than try to sell it to [someone] on paper,” says Blake. That said, eventually you reach scale and must focus on reliability. Facebook dropped its initial “Move fast and break things” mantra for that reason, said CEO Mark Zuckerberg. “We used to have this famous mantra ... and the idea here is that as developers, moving quickly is so important that we were even willing to tolerate a few bugs in order to do it. What we realized over time is that it wasn’t helping us to move faster because we had to slow down to fix these bugs and it wasn’t improving our speed,” says Zuckerberg.29 In the end, a mix of the two approaches works for many; Scott K. Wilder builds digital strategy roadmaps with progress the team can celebrate at least every 30 days. “Waiting a year to launch a new feature or implement a new program is a long time,” Wilder says. “It’s important to celebrate key milestones along the way as you work toward the larger goal.”

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Even the most productive, aligned co-creation efforts rarely result in a strategy ready for approval and budgeting. Digital strategists need to synthesize results from the co-creation team into a coherent whole, which includes: resolving differences between departments; finding the right balance between short-term wins that keep the team energized and longer term moves with greater impact; identifying key gaps in digital readiness to execute; seeking alignment and consistency with related strategies (such as social, content, mobile, ecommerce, etc.); and thinking about which operational governance components must be in place to execute and operate digital long term.

There’s a lot for the strategy team and their key partners to do in this phase. You know you’re ready to proceed to the next phase when you have a short presentation ready for your Leadership Champion to evaluate and approve for broader distribution in the alignment phase.

Consider the following questions as you combine team input into a coherent strategy:

Roadmap & Staffing Plan What initiatives, work streams and dependencies form my roadmap? You will find

initiatives defined through co-creation (and addressing the questions in this report) will naturally lead to themes of related work. Creating work streams of related initiatives simplifies the roadmap and is a means for the team to “divide and conquer” execution. Of course, work streams will evolve and change over time, so it’s important to have regular check-ins to ensure the roadmap is accessible to key stakeholders and that a change management process is in place for the roadmap to remain relevant.

Are new partnerships required to execute our strategy roadmap? As your plan takes shape and you identify internal teams to execute, chances are you’ll have gaps. Depending upon the guiding principles and objectives agreed to by the Leadership Champion, some combination of new hires or partnerships will be needed. Most of the strategists we spoke to reinforced the need for brands to be open to partnerships in digital. In today’s market, we see traditional brands wholly acquiring or investing in digital businesses, such as GM’s investment in Lyft or Visa’s in mobile payment system Square.31 These investments can give leading brands the head start, talent, and tools their digital strategy requires.

Technology & Data What data will be required or created to execute? You will identify data needed to

execute strategy and if that data needs to connect to legacy data stores, such as CRM, ERP, BI, etc. Working with a data analyst, define the scope of data required and any possible points of integration with existing systems. This work is a very high-level picture of information requirements — what a data analyst would recognize as a Conceptual Data Model.32 The conceptual model serves as the starting point for later developing physical databases.

6. STRATEGY SYNTHESIS

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

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What data must I capture to measure success? As digital platforms continue to evolve, so do the data signals we can use to measure business effectiveness. With the help of a data analyst, it is in this stage that you’re in the best position to connect the dots between business objectives (refined in the last stage) and specific metrics.

How do we anticipate scaling digital pilots that succeed? Migrating digital experience pilots to production scale is not an easy matter. As mentioned before, it is likely there will be a handoff from a digital innovation team to IT’s data center and operations. Include these key stakeholders early in roadmap planning to ease the transition from early-phase pilots to scaled systems.

Economics What budget is required and what

milestones can be tied to granting additional funding? Most strategists try to secure funding for at least two years so they have the runway to make mistakes and learn. It is also a good idea to separate the R&D budget from the development of digital products that will scale beyond early adopters. For ideas that are successful, you’re in a better position to secure funding. One strategist we interviewed made an early alliance with the CFO to get feedback on shifting revenue models and commitment to long-term investment.

In complex, multi-BU, multi-geo businesses, how will investment and execution of digital strategy occur? Understanding variations to accommodate local markets will inform roadmap budget and timeline. You must define a common set of initiatives and digital components that are shared globally vs. those that must be specialized by market. An obvious variation is language, but this work must also consider in-country regulations—especially consumer privacy, which can vary dramatically. A balance of overall vision with increased autonomy for those closest to the customer in-market is key. As Claudia Gorelick told us, “I think you have to give people a little more autonomy, but at the same time everyone has to rally around understanding the user in order to create the best strategy.”

Operational Governance Are existing technology governance processes sufficient to manage new digital

approaches? Most governance processes are focused on maintaining solid operational excellence, but an agile digital strategy requires added flexibility. If there is a handoff between a digital innovation team and IT, it’s important that roles and processes are clear. One strategist we spoke to created a dedicated governance work stream in his roadmap with his co-creators: “Let’s devote a part of our work stream to fit the plumbing — who’s going to do what, what’s the mechanism for reporting, what’s the cadence, who do we need in the group, what sort of alignment do we need? All that is the boring, change management stuff — but it’s also the

Digital strategists

need to synthesize results from the co-creation team into a

coherent whole.

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make-or-break stuff. That’s going to define whether [the strategy] is going to succeed or not.” Defining agile governance for emerging digital platforms isn’t easy. To keep things moving, your team needs guardrails — not speed bumps. Claudia Gorelick expressed this beautifully: “To be really effective, you need a strong but flexible governance structure: something that feels like silk, not something that feels like steel.”

How will change to strategy be managed? A good change-management process includes input or approval from decision-makers that allows for changes to strategy in light of business practicality and increasing costs. Wilder says, “Change management is a team sport. I try to get as many people involved as possible early on in the process. They can opt out if they want.”

What risks to my business might I face, and what controls should I identify to mitigate them? The belief in break-through, optimistic outcomes is part of a strategist’s DNA, and — like a bug in a program — they expect a certain degree of failure. Incidents like a data breach can have a profound impact on brand reputation and can weaken the credibility of your digital initiatives internally. This is a good time to partner with legal, compliance, risk, and finance to analyze how large digital moves may introduce new risk. Those same partners can help identify mitigation controls to protect the brand. Although written with social business in mind, Alan Weber’s Altimeter research report Guarding the Social Gates: The Imperative for Social Media Risk Management33 identifies a framework that may be used for digital risk management.

Which existing business processes and policies must change, and what new ones must be created? The rapid pace of digital evolution today requires new levels of agility to keep up. Processes that guide the organization must be reevaluated (where they touch digital strategy) and new processes created. One example of policy that is changing to meet the needs of digitally connected employees is Social Media Policy. With the rise of employee advocacy, policies are shifting to allow more employees to represent the brand in social and for employees to build personal digital brands.34 While operational change management is important, cultural change management (e.g., building organizational skills and confidence in digital as a business tool) dominated our interviews as a key challenge.

What criteria will I use to shut down digital strategy that isn’t delivering results? As part of risk management, work with your Leadership Champion to determine the criteria for failure. The definition of minimum viable metrics for each digital initiative is a starting point for determining the right time to end a digital program. These metrics could include anything from downloads for mobile apps to new product orders. Put in place an exit strategy35 to make shutting down initiatives that don’t show results a part of regular practice.

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The tasks leading up to this phase prepare for aligning key stakeholders and the change that will be required across the company. With the detailed strategy roadmap worked out, at this point the Leadership Champion can provide feedback and start to identify peers needed to execute across departmental silos.

Strategists we spoke to told us they spend a lot of time in this phase, including Rohit Prabhakar from McKesson. “There is no digital transformation or marketing transformation. It’s all about change management,” says Prabhakar. “If you’re working in this area, you’re spending a lot of time on change management. You have to keep on selling your business case — your transformation agenda. Always. It never stops. If you stop having that conversation [internally], you stop transforming.” As part of alignment, a roadshow ensures strategy is understood, and it lets other teams know that a strategy and governance framework for digital is in place for them to extend to their own parts of the business. The strategy roadshow can inspire new digital innovation and help the organization develop skills required to apply digital to goals.

Is there alignment around the digital vision and business outcomes it will enable? While getting alignment from leadership is essential, success will require support from many parts of your organization. Approach this with more rigor than a roadshow by presenting what a successfully executed strategy will require of the internal teams involved.

Among the most difficult aspects of this challenge is to get people out of their comfort zone. Start by creating an aspirational — yet achievable — vision narrative for what digital means to the organization, then drill down into specific digital objectives, initiatives, teams, and governance. As one strategist pointed out, the vision narrative should even define the basics, such as the term digital: “Lack of alignment on what digital is, and alignment strategy, is typically the biggest risk of failure. Alignment across the company is critical.” To align business objectives with customer needs, digital strategist Katharine English starts by envisioning the future.“I never start with the problem they’re trying to solve,” says English. “Instead, I ask: What does a better future look like for your organization? And then I work

7. ALIGNMENT

Barriers Addressed

Alignment Skills RegulationsCultureResourcesMetricsSilos

“It’s all about change

management. You have to keep on selling your business case — your

transformation agenda. Always. It never stops. If you stop having that conversation, you stop

transforming.” — Rohit Prabhakar, Head of Digital Marketing

& Technologies at McKesson

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backwards and connect it back to the customer. What does your customer want? Is there a way that those two visions of the world can intersect and synergize, or are they going to collide? If they collide, then your future state clearly hasn’t fully accounted for what the customer wants.”

It’s important for the strategy to be both clear and opportunity-focused. As we heard from Blake, “As they say in politics, if you’re explaining you’re losing. If they don’t understand something, people’s first instinct is often to turn to fear or rejection.” One method Blake follows is to put a human lens on strategy: “People will still latch onto a human story. A couple of human stories can be even more effective than an 80-page slide deck with data and statistics.”

What difficult decisions do we need to make as we orient the business around digital? Alignment is as much about what you’ll no longer do as what you will do. Your strategy should identify and make recommendations to wind down current approaches that are duplicative. All too often, tough choices are punted for the sake of protecting budgets, organizational silos, and the comfort in thinking that whatever you did yesterday will work tomorrow. As Katharine English told us, “You’ve got to have a strong stomach. You’ve got to be able to dive in, embrace change, be an advocate for it, be enthusiastic, and give people the tools they need.” During this alignment phase, realize that your audience for strategy feedback may not be prepared to make decisions that shift resources from legacy budgets. This is where the importance of an Executive Champion or Steering Committee comes in — you need their support.

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Developing an internal culture of digital agility

is as important as any digital

strategy initiative.

SUMMARY While choices for meeting evolving customer needs and exploring new business models continue to emerge through technologies like artificial intelligence, virtual reality, and IoT, we believe a holistic, business lens in the form of digital strategy provides a practical approach to prepare and grow. As the digitally connected customer continues to grow in marketshare, organizations must co-create digital strategy to span internal silos and technology platforms. The phases we’ve identified in our research — and most important, the questions that digital strategy should answer — will help strategists address this ever more complex, connected world. Keep the following four points top of mind as you proceed:

1. Collaborate to align. Although strategy through co-creation with key stakeholders may take longer at the front-end of the process, you’ll save time in the long run and have greater impact with an informed, aligned team. Avoid digital silos and set the stage for the most effective customer experience across both digital and traditional channels.

2. Make it live. Don’t think of digital strategy development as an event, but rather a continuous, closed-loop process and way of working that matches the pace of technology change. Technology disruption shows no sign of slowing, so developing an internal culture of digital agility is as important as any digital strategy initiative.

3. Leaders are accountable. Leaders have looked to their IT or digital teams to guide them. Just as senior leaders today need to know something about finance, HR, public relations, and any number of disciplines, they need to build digital business acumen to ensure they are prepared to make important decisions that impact the long-term health of their business.

4. Data informs but doesn’t dictate. Digital is a vehicle to meet business objectives, but it’s more than a function. Data is the fuel of digital, but also its exhaust. The results of your digital efforts will show evidence of success, failure, or something in between. Pay equal attention to the data side of digital strategy as you do function.

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FIGURE 2 DIGITAL STRATEGY PHASES, KEY DRIVING FACTORS & OUTCOME

Market forces, externallyCultural shift, internallyCompetitor moves

3 KEY FACTORS OUTCOME

Business objectivesGuiding principlesInvestment / budget

Organizational structureBuilding alliancesIncluding key stakeholders

Confront internal & external truthsIdentify new value propositionsIdentify threats

PriorizationEngage to bridge silosEnsure tech infrastructure & teams engaged

Create roadmapConfirm economicsBegin governance discussion

Strategy roadshowShare the visionConfirm KPIs

Identify driving forcesfor digital moves

Secure commitment froma leader who can bridgeorganizational silos

Form a team with “skin in the game” to source the best ideas and ensure alignment

Create a clear picture ofboth internal readiness and market opportunities

Formulate digital strategy alternatives

Synthesize ideas intoa coherent direction

Seek leadership and keystakeholder commitment tostrategy roadmap execution

CATALYST

TEAMBUILDING

LEADERSHIPCHAMPION

RESEARCH &BENCHMARK

STRATEGYCO-CREATION

STRATEGYSYNTHESIS

ALIGNMENT

1

2

3

4

5

6

7

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ENDNOTES 1 Brian Solis, Digital Darwinisim blog archive: http://www.briansolis.com/tag/digital-darwinism/.2 Brian Solis, “Digital Darwinism: What Killed Borders, Blockbuster and Polaroid and How to Survive,” LinkedIn Pulse, February 27, 2013.

3 Rebecca DeNale and Deanna Weidenhamer, “Quarterly Retail E-Commerce Sales 1st Quarter 2016,” US Census Bureau News, May 17, 2016.

4 Jessica Groopman, Customer Experience in the Internet of Things: Five Ways Brands Can Use Sensors to Build Better Customer Relationships, Altimeter, a Prophet Company, March 2015.

5 Jennifer Reingold, “How a Radical Shift Left Zappos Reeling,” FORTUNE, March 15, 2016, http://fortune.com/zappos-tony-hsieh-holacracy/.6 https://en.wikipedia.org/wiki/Digital_Millennium_Copyright_Act.7 Brian Solis, “The Connected Consumer and the New Decision-Making Cycle,” LinkedIn, April 7, 2015, https://www.linkedin.com/pulse/connected-consumer-new-decision-making-cycle-brian-solis.

8 Study.com, “Change Agent: Definition & Role,” http://study.com/academy/lesson/change-agent-definition-role-quiz.html.9 Minimum Viable Product, as defined by Techopedia: “A minimum viable product (MVP) is a development technique in which a new product or website is developed with sufficient features to satisfy early adopters. The final, complete set of features is only designed and developed after considering feedback from the product’s initial users. This concept has been popularized by Eric Ries, a consultant and writer on startups,” https://www.techopedia.com/definition/27809/minimum-viable-product-mvp.

10 Ed Terpening, “The 2015 State of Social Business: Priorities Shift from Scaling to Integrating” Altimeter, a Prophet Company, July 28, 2015.

HOW TO WORK WITH USNo 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.

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11 Gartner, “Digital Transit Map,” https://www.gartner.com/technology/research/digital-marketing/transit-map.jsp.

12 IDC, “The Digital Universe of Opportunities: Rich Data and the Increasing Value of the Internet of Things,” April, 2014, https://www.emc.com/leadership/digital-universe/2014iview/executive-summary.htm.

13 https://savingscatcher.walmart.com/.14 Tracey Wallace, “Home Depot’s Innovative, Successful Multichannel Strategy Your Brand Should Copy –– Now,” Business 2 Community, June 28, 2015, http://www.business2community.com/branding/home-depots-innovative-successful-multichannel-strategy-your-brand-should-copy-now-01260714.

15 https://zimride.com/.16 Nicholas Diakopoulos, “How Uber surge pricing really works,” The Washington Post, April 15, 2015.

17 http://www.pgconnectdevelop.com/home/pg_open_innovation.html.18 Nesli Nazik Ozkan, “An Example of Open Innovation: P&G,” ScienceDirect, July 3, 2015, http://www.sciencedirect.com/science/article/pii/S1877042815039294.

19 Oliver Bossert, Martin Harrysson, and Roger Roberts, “Organizing for digital acceleration: Making a two-speed IT operating model work,” McKinsey, October, 2015, http://www.mckinsey.com/industries/high-tech/our-insights/organizing-for-digital-acceleration-making-a-two-speed-it-operating-model-work.

20 Wikipedia definition, https://en.wikipedia.org/wiki/Analysis_paralysis.

21 SWOT defined on Wikipedia at https://en.wikipedia.org/wiki/SWOT_analysis.

22 Brian Solis with Charlene Li and Jaimy Szymanski, Digital Transformation: Why and How Companies Are Investing in New Business Models to Lead Digital Customer Experiences, Altimeter Group, 2014.

23 Sachin Kamdar, “The Value of Having Employees Test Your Products First”, Forbes, May 3, 2016, http://www.forbes.com/sites/sachinkamdar/2016/05/03/employee-testers.

24 Michael Rambus, Manager of Internal Social Media & Ideation, The Home Depot, LinkedIn profile, https://www.linkedin.com/in/michaelrambus.

25 Natalie Zmuda, “Home Depot’s Social-Media Strategy Pays Off,” AdAge, September 19, 2011.

26 “Peek Inside 7 of The Banking World’s Coolest Innovation Labs,” The Financial Brand, June 8, 2015, http://thefinancialbrand.com/52177/7-of-the-coolest-innovation-labs-in-banking/.27 Chan Suh, Harry West, and Andres Nicholls, “The Ever-Changing Customer Journey: Multi-Device Meandering Has Replaced The Once-Linear Path,” Prophet, July 23, 2014.

28 Juergen Urbanski, “Driving the Digital Transformation in Retail and Hospitality,” Silicon Valley Data Science, http://www.svds.com/driving-the-digital-transformation-in-retail-and-hospitality.

29 Samantha Murphy Kelly, “Facebook Changes Its ‘Move Fast and Break Things’ Motto,” Mashable, April 30, 2014.

30 Caitlin Huston, “Why General Motors invested in Lyft,” MarketWatch, Jan. 4, 2016, http://www.marketwatch.com/story/why-general-motors-invested-in-lyft-2016-01-04.

31 Telis Demos and Chelsey Dulaney, “Visa Details Stake in Payments Startup Square,” The Wall Street Journal, Feb. 12, 2016, http://www.wsj.com/articles/visa-details-stake-in-payments-startup-square-1455286504.

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ECOSYSTEM INPUTThis report includes input from market influencers, vendors, and brands who were interviewed by or briefed Altimeter for the purposes of this research. Input into this document does not represent a complete endorsement of the report by the individuals or the companies listed below.

BRANDS Zurich North America, Monu Kalsi, Vice President, Head of DigitalNational Association of Professional Women, Katharine English, Chief Marketing & Customer Experience OfficerMcKesson, Rohit Prabhakar, Head of Digital Marketing & TechnologiesWells Fargo, Nathan Bricklin, Partnership & Strategy, Innovation Group & Darius Miranda, VP, Innovation Group

INDEPENDENT THOUGHT LEADERSAlison Woo, Corporate Digital and Social Media Strategy Leader

TECHNOLOGY & PROFESSIONAL SERVICES Salesforce, Vala Afshar, Chief Digital EvangelistMarketo, Scott K. Wilder, Sr. Director / Global Nation BuilderHill Holliday, Brad Blake, Senior Vice President, Associate Director of Digital StrategyAccenture Interactive, Claudia Gorelick, US Business Design DirectorWipro Digital, Bennet Harvey, Director, U.S. West Coast Digital StrategyProphet Brand Strategy, Saurabh Wahi, Management Consultant

ACKNOWLEDGEMENTS Many thanks to Altimeter Principal Analyst Brian Solis and researcher Jamie Szymanski for their early Digital Transformation research and strategy frameworks. Additional thanks to Omar Akhtar, Julia Dennison, Lindsay Malone, Saurabh Wahi, Charlene Li, Chan Suh, and the greater Prophet team.

OPEN RESEARCH This independent research report was 100% funded by Altimeter, A Prophet Company. This report is published under the principle of Open Research and is intended to advance the industry at no cost. This report is intended for you to read, utilize, and share with others; if you do so, please provide attribution to Altimeter, A Prophet Company.

PERMISSIONS The Creative Commons License is Attribution-Noncommercial- ShareAlike 3.0 United States, which can be found at https://creativecommons.org/licenses/by-nc-sa/3.0/us/.

DISCLAIMER ALTHOUGH THE INFORMATION AND DATA USED IN THIS REPORT HAVE BEEN PRODUCED AND PROCESSED FROM SOURCES BELIEVED TO BE RELIABLE, NO WARRANTY EXPRESSED OR IMPLIED IS MADE REGARDING THE COMPLETENESS, ACCURACY, ADEQUACY, OR USE OF THE INFORMATION. THE AUTHORS AND CONTRIBUTORS OF THE INFORMATION AND DATA SHALL HAVE NO LIABILITY FOR ERRORS OR OMISSIONS CONTAINED HEREIN OR FOR INTERPRETATIONS THEREOF. REFERENCE HEREIN TO ANY SPECIFIC PRODUCT OR VENDOR BY TRADE NAME, TRADEMARK, OR OTHERWISE DOES NOT CONSTITUTE OR IMPLY ITS ENDORSEMENT, RECOMMENDATION, OR FAVORING BY THE AUTHORS OR CONTRIBUTORS AND SHALL NOT BE USED FOR ADVERTISING OR PRODUCT ENDORSEMENT PURPOSES. THE OPINIONS EXPRESSED HEREIN ARE SUBJECT TO CHANGE WITHOUT NOTICE.

32 Conceptual data schema, Wikipedia, https://en.wikipedia.org/wiki/Conceptual_schema.

33 Alan Weber, Guarding the Social Gates: The Imperative for Social Media Risk Management, Altimeter Group, 2012, http://www.altimetergroup.com/2012/08/the-imperative-for-social-risk-management/.34 Ed Terpening, Social Media Employee Advocacy: Tapping Into the Power of an Engaged Workforce, March 15, 2016, Altimeter, a Prophet Company.

35 Exit Strategy defined by Wikipedia, https://en.wikipedia.org/wiki/Exit_strategy.

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AUTHOR BIOEd 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.

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