Digital Stractics

How Strategy Met Tactics and Killed the Strategic Plan

Chris Outram

• Publisher: Palgrave Macmillan
• Year: 2016
• Print ISBN:
  9781349558698
  9781137574817
• eBook ISBN:
  9781137574831
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

In the world of digital business, the line between strategy and tactics is blurring. Traditionally large companies would adopt strategic frameworks which planned over three- to five-year timescales, while most digital start-ups had little interest in comprehensive and rigorous strategic processes and simply set themselves vision and worked out how to get there along the way. 

In today's digital economy even large companies are finding that their planning horizons are being measured in months rather than years or quarters (if not yet in the weeks or even days of startups). On the other hand, investors are less swayed by the excitement of 'digital' and expect harder and more rigorous medium term planning from start-ups.

As a result, while the empirical process of learning by doing is becoming part of traditional companies' strategy processes, digital pure plays are no longer just making it up as they go along, but actively learning and changing as they go along. In short: on the battlefield of online commerce, strategy blends with tactics. 

Indeed, the distinction between pure play and hybrid is increasingly redundant as more holistic business models begin to emerge. Digital Stractics captures the experience and insights of some 60 entrepreneurs, CEOs and chairmen of both pure plays and hybrids to formulate frameworks within which both pure plays and hybrids can shape their strategy and business models. 

As timescales between 'plan' and 'do' collapse strategy and tactics have to blend. The world of STRACTICS is upon us.

chapter 1

Why Traditional Strategy Does Not Work Anymore!

Traditional strategy processes require time as well as thoughtful analysis about consumers, markets, competitors, and the detailed workings of business models, as well as a deep understanding of industry/player economics.

Once this broad range of insight is assembled, companies go through a complex process in order to make sure that they have sufficient consensus to debate and conclude around a winning, straightforward, and compelling – not to mention sustainable – strategy.

The ability to execute such processes does not exist in the digital world, where things move fast, technology evolution can spring surprises upon the unwary, competitors are non-obvious and information about them is sparse and ephemeral.

“Three-year plans are indeed giving way to Stractics!”

Marc van Gelder, former CEO of Peapod, the world’s first online grocer, originally founded in the US and ultimately bought by Ahold in 2000, and Mediq, the leading Dutch pharmaceutical wholesaler, said,

Although it took longer to get going than originally predicted the Internet revolution has fulfilled all its early promises. We are still in the very beginning of this revolution which will have major impact on traditional players in many sectors like Retail, Banking, Insurance – and it will impact large FMCG players as well as traditional wholesalers. Social media are only just beginning to affect traditional players.

“The world is different now,” observed Andy Street, MD of the John Lewis Partnership, one of the UK’s leading department stores. “You just have to pay attention – the world is speeding up in the digital era.” A senior executive of one of the world’s largest pure plays concurs: “The imperatives in the digital world are very simple – execute faster, cheaper, and better.”

But just how different is that world today?

We believe that there are some fundamental and irreversible shifts in the world which require companies to re-examine how they compete and win. They are:

• 
  Consumer adoption of technology
• 
  Channel proliferation
• 
  Technology and data explosion
• 
  Competitive dynamism

These changes of behavior belie even more fundamental shifts in the cost of doing business which are heralded by the digital age. Costs are lowered in many parts of the cost structure:

• 
  Cost of search/access which allow customers and suppliers to find each other
• 
  Cost of transactions (ordering and paying)
• 
  Cost of innovation (and its speed)

Consumers have adapted to the digital era at a speed which could not have been contemplated a decade ago. As Professor Aris of INSEAD Business School said, “Adoption curves in the digital age show a very strong tipping point effect and at the same time the speed of adoption is increasing fast.”

Nowhere is this phenomenon starker than when you consider the rate of growth in smartphone penetration, which has been rapid and pronounced, particularly in the emerging economies.

Figure 1.1 shows this acceleration in the pace at which consumer technologies have been “democratized” over time. The iPod, which was a successful introduction, sold circa 35 million units in the three years after its launch. The iPhone was nearly eight times more far-reaching, with circa 240 million units over the equivalent post-launch period. Only two years after the iPhone, the Android operating system has far surpassed that with nearly one billion devices sold only three years after launch.

This acceleration of technology and technology adoption has also enabled the creation of a more level playing field for consumers in different countries. The gap between the traditional digital “haves” and “have nots” is being closed. When we consider m-commerce (mobile commerce) penetration, the emerging economies now surpass many of the G7 nations as Figure 1.2 shows.

Behind this technology adoption lie fundamental shifts in consumer behavior. If you do not understand or track these shifts you will be left behind. Traditional approaches often have to be abandoned in favor of more responsive business models as evidenced by Tom

Traditional approaches often have to be abandoned Seery, CEO and Founder of RealSelf, who said, “Companies need to abandon their product roadmaps, however compelling/logical, and start listening to customer feedback which will align them with the customer journey. You should never be so arrogant to think you know more than your consumers.”

FIGURE 1.1Sales of key devices three years post launch

FIGURE 1.2Emerging economies are the m-commerce leaders (percentage of smartphones used for making purchases*)

Note: *Smartphone owners who have ever used their phones to make a purchase.

Nevertheless, it is not all downsides for the traditional player, as evidenced by Michael Polk, CEO at Newell Rubbermaid, the leading US marketer of consumer products:

The digital age should be seen as an era of entrepreneurial opportunity. It is also an era of challenge where risks need to be understood, the consequences of no-barriers-to-entry predicted, and the impact of fundamentally changed consumer behaviors/choices internalized. In other words, fast moving consumer goods companies need to understand, explore, and take advantage of their understanding of how consumers think and navigate their choices. This heralds new marketing models for brands.

In terms of channel proliferation, today’s consumers are confident about digital commerce and therefore happy to interact with businesses in multiple ways. They think nothing of moving between a PC, their mobile, and a tablet, and engaging with brands via their website, Twitter and YouTube – all in the blink of an eye. As Luis Arjona, Head of Market Expansion of eBay Brazil, commented, “People do not want to go to malls where they can only visit a few stores of a given category, when they can go online and visit hundreds.”

The consumer is spoilt for choice, often being able to access both the physical manifestation of the business they wish to patronize as well as the online version, which will often offer multiple delivery options in terms both of speed of delivery and location of delivery (home or a collection point). This point was emphasized by Jean-Christophe Garbino, CEO of Kiabi, the French multichannel retailer, and raises particular challenges for multichannel businesses as they seek to “provide a customer experience which is fully integrated across all channels – it’s what customers expect nowadays.”

And if consumer attitudes and channel proliferation were not enough to convince you when you try to explain this phenomenon of the fundamental nature of market change, constant and rapid evolutions in technology and its ability to collect, disseminate and process huge amounts of data certainly would.

In terms of itemizing what has changed, it is difficult to know where to start. You certainly have to cover, inter alia:

• 
  The rise in computing power
• 
  Device proliferation
• 
  Networking
• 
  Internet connectivity (4G, Wi-Fi etc.)

In addition, the ability to collect and store vast amounts of data opens up the potential for a seismic shift in the possible insights into consumers and their behavior on a scale never witnessed before. Increasingly, simpler-to-use tools are being developed which allow you to query and analyze these massive databases and to draw out insights well beyond the ability of mere mortals. And we have hardly even started, given that artificial intelligence and machine learning are set to advance these capabilities even further over the next five to ten years.

The dissemination of this information through internal corporate mechanisms is dwarfed by the power of consumer-managed networks like Facebook, WhatsApp, etc. Reputations and brands can be made or destroyed within hours. Wonderful or embarrassing incidents can be experienced around the world in minutes. The Internet is truly unforgiving and must be harnessed enthusiastically, but with great care. Robert Hohman, CEO of glassdoor, a US jobs and recruiting site, gave a good example of this, “The biggest challenge recently has been the adoption of mobile and social media, meaning that connectedness on the Internet has experienced a tectonic shift. You only have to think about Uber (taxi bookings/payments) or Airbnb (bed and breakfast booking) to see how fast emergent models can become ubiquitous.”

By harnessing these shifts in consumer behavior, channel options, and technological capability, it is not surprising that the more enterprising entrepreneurs and entrepreneurial companies have built new business models and attacked the more slow-moving traditional competitors and markets. They are new, agile, aggressive, and focus more on growth than profitability – a dangerous combination against which to compete if you are a traditional business.

Competitive dynamism has therefore incr...

Table of contents

• Cover
• Copyright
• Title
• Contents
• List of Figures and Tables
• Preface and Summary
• Acknowledgment
• List of Contributors
• Introduction
• 1 Why Traditional Strategy Does Not Work Anymore!
• 2 Everything Needs to Change – Or Does It?
• 3 New Business Models for the New World: Stractics in Practice
• 4 Pure Plays and How They Change the World
• 5 Hybrid Players – Waking up to the New Digital Reality!
• 6 Pure Plays versus Hybrids – A Fight to the Finish?
• 7 The Principles Underpinning Success in the World of Stractics
• 8 Strategy Processes in the World of Stractics
• 9 Advice from the Top: Stractical Tips from Our Digital CEOs
• 10 The Future of Stractics
• Acknowledgments
• Contributor Biographies
• Index