How to Develop a Great Digital Strategy

To succeed today, companies need a unique value proposition that incorporates digital technologies in a way that is difficult for competitors to replicate.

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An MIT SMR initiative exploring how technology is reshaping the practice of management.
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As leading technology companies embrace biometrics, artificial intelligence (AI), drones, and other exciting digital technologies, senior business executives at many other companies feel pressured to do the same. But if they are to maximize the value from investment in new technologies, business leaders first must make sure that their companies have a great digital strategy.

We studied digital strategies as part of a research project on designing digital organizations that the MIT Center for Information Systems Research conducted in partnership with The Boston Consulting Group; in that project, we interviewed more than 70 senior executives at 27 companies. Our findings underscored the importance of developing a winning business strategy that takes advantage of digital technologies. A great digital strategy provides direction, enabling executives to lead digital initiatives, gauge their progress, and then redirect those efforts as needed. The first step in setting this direction is to decide what kind of digital strategy to pursue: a customer engagement strategy or a digitized solutions strategy.

A customer engagement strategy targets superior, personalized experiences that engender customer loyalty. A digitized solutions strategy targets information-
enriched products and services that deliver new value for customers. The best strategy for a company will depend on its existing capabilities and the way it wants to compete. The most important requirement for a great digital strategy, however, is to choose one kind of strategy or the other, not both. A digital strategy aimed at operational excellence may appear to be a third choice, but increasingly, operational excellence is the minimum requirement for doing business digitally, not the basis for a sustainable competitive advantage.

Customer Engagement Strategies

The focus of a customer engagement strategy is the development of customer loyalty and trust — and, in the best cases, passion. Companies choosing this approach offer seamless, omnichannel customer experiences, rapid responses to new customer demands, and personalized relationships built upon deep customer insights. Recognizing the always-rising bar of customer expectations, companies with a great customer engagement strategy are constantly identifying new opportunities to connect with their customers.

Kaiser Permanente, an integrated provider of health care and not-for-profit health plans based in Oakland, California, is following a customer engagement strategy. Driven by what it calls its “consumer digital strategy,” Kaiser Permanente approaches health care as a collaboration between care providers and members.



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Comments (7)
Arnaud Gaudin de Lagrange
Very good analysis. But defining a strategy implies that the top management is able to decide, want decide.. That is THE problem: decision = risk, so who can take a risk for himself ? This is a sociological problem.
Senthil Kumar
I agree that a mature backbone of systems, data, processes, culture and other enabling factors is one of the success factors success of the digitalization.  But, in my opinion, the goal and objectives of the Digitalization determine the digital strategy. Therefore, I don't think Customer Engagement Strategies and Digitized Solution Strategies are mutually exclusive and shouldn't be.
Kheepe Moremi
The key for me is the second sentence of the second paragraph; "The importance of developing a winning business strategy that takes advantage of digital technologies." 

I would add that the key is to develop a winning competitive strategy that takes advantage of opportunities brought about by digital technologies whilst minimising the risks, threats and costs of digital technologies.
mina ada
Every technology with transformation potential starts in isolation, and digital is no exception. Mobile, cloud, process, customer, supply chain, etc. Each had its own siloed strategy before it blended into business strategy. As a result of these strategy waves the terms ‘digital’ and ‘strategy’ have become overused and misapplied terms.
In my opinion, both customer experience strategy and digital solution strategy should co-exist and align with each other.

I think each of them leads into the other depending on the origin of the engagement ( Customer looking for a product or starts with a service on an existing product).
Not sure why we cannot have one strategy. I am now limiting myself to Digital Finance Services, where both customer experience and delivery of services are important. So a financial institution's digital strategy should encompass both: (I) how it will ensure enhanced customer experience and thus make them more loyal; and (ii) how the institution can increase market penetration by more efficient delivery of its products (like using data for risk assessment and e-channels for delivery). Like you say, ultimately both converge, as doing one also has an effect on the other. So this should be a part of the digital strategy from the beginning.
Bala Ramakrishna
Well said. Digital strategy for operational excellence is a prerequisite before we decide on one of the digital strategies.