How to Develop a Great Digital Strategy

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.