Digital Strategy vs. Digital Skills
Do you need a digital strategy or digital skills?
Every business today is essentially a digital business. It’s hard to think of anything you can do without being affected by digital technology. This is especially true in the realm of media and marketing.
However, in seeking to compete in the digital arena, many companies make the mistake of focusing their efforts on strategy and neglect skills. The result is usually not only failure, but expensive failure.
Failed Digital Strategies
Strategy is all to often considered to be solely in the domain of consultants, investment bankers and top management. Invariably, the upshot of all of these high powered people being involved is major acquisitions involving lots of money (how else to justify the time and expense of such important people strategizin’?)
As I wrote earlier in a post about the winner’s curse, this often leads to disaster. Over the years, major strategic acquisitions like Disney’s purchase of Infoseek, News Corp’s of misguided venture into MySpace and, perhaps most famously, Time Warner’s ill fated merger with AOL have made huge headlines and then resulted in major write-offs.
On a less spectacular level, media companies often launch e-commerce initiatives involving selling real estate, travel and other businesses that they would never enter into in the offline world, but, for some reason, see as perfectly suited to complement their online activities.
Interestingly, despite all the talk about traditional media companies going bankrupt during the crises, operating profits were surprisingly strong during that period. There was an enormous amount of red ink for sure, but it came from investment write-downs, not from operations. Now of course, traditional media companies are making a comeback.
The Value of Digital Skills
Some firms, on the other hand, have been more successful with a skill based approach. I profiled three of them in an earlier post about unlikely digital heroes.
Conde Nast: After struggling online for years, Conde Nast made two very small acquisitions and then used the skills learned from those companies to revamp all of their online brands. Although financial results are not available, the turnaround has been impressive. They managed to turn digital disaster into one of the best online publishers around.
Time Warner: Despite being probably the best example of failed digital strategy, Time Warner has also shown itself to be able to acquire the digital skills needed to bring it’s offline brands, such as CNN, Time, Fortune and People, online successfully.
Again, no financial numbers are available, but I strongly suspect that the revenues they earn from their adapted products greatly exceed that of AOL, the acquisition of which roughly halved shareholder equity.
Naspers: A South African based publisher, Naspers has parlayed it’s expertise in emerging markets into a thriving web business. Although they have expanded mostly through acquisition, they have been extremely effective at transferring skills to and in-between web subsidiaries.
Skills For the Digital Age
Clayton Christensen, in his 1997 classic The Innovator’s Dilemma, argued that in times of disruption the best business practices often sow the seeds of disaster. As digital technologies create a continuing disruptive environment, old methodical, systematic and proprietary approaches must be augmented with new skills.
Here’s some of what’s needed:
Integration: In the analog world, things moved slowly enough that people with diverse abilities had time to learn to collaborate as new technologies developed. Digital technology, however, moves at dizzying speed and people of varied talent and expertise must find a way to work together on the run.
Today, points of operational interface need to be the primary focus of managing digital activity.
Partnerships and Frenemies: The world is changing so fast that nobody can really keep up with it. We’re all a little bit lost. Therefore, it is important to be able to develop mutually beneficial partnerships, in the form of licences, standards and joint ventures, even with competitors. No one can do it all.
Empowerment: Another consequence of the digital age is the multitude of capabilities involved, which means management knows very little about each individual speciality. Control has become an illusion and the lunatics really do run the asylum.
If people aren’t empowered to share their views, an important part of the strategic picture is lost. Even worse, since very few people understand the work of highly skilled specialists, those with coveted skills will often simply do what they think is best and not tell anyone. Why fight to get your voice heard when you and you only control what you actually do?
Truncated Strategic Process: In a traditional business environment, strategy moves along methodically. Their are lots of hurdles, both organizational and financial, that any project needs to clear in order to be green lighted.
For most things we do in the digital world, that’s way too slow. By the time a decision is made, the context has already changed and the idea has lost relevance. Approval processes need to be streamlined to the bare minimum with regard to both the number of people involved and their seniority.
Iterate to Scale: A consequence of a truncated strategic process is that projects need to be launched much smaller. Features, and the complexity that comes with them, can be added over time.
Strategic Flexibility: In a changing environment, long term planning is a pipe dream. That doesn’t mean that plans shouldn’t be made or overall direction laid out. It just means that you’re usually going to be wrong, so you have to be prepared to turn on a dime.
Leveraging Digital Technology
All to0 often, the digital revolution is seen as a threat rather than an opportunity. Newspapers worry about devaluing their highly profitably classified advertising business (and lose it entirely), content publishers fear illegal downloads and advertisers bemoan the loss of prime-time in a time-shifted media landscape. In the rush to adapt, it is easy to neglect core values and competencies.
The operative question for any digital strategy is: How can we leverage digital technology to strengthen what we already do well? As we saw with Time Warner, bringing their brands online created value while the bold strategic move of acquiring AOL destroyed it.
The skills needed for the digital age are not necessarily mutually exclusive with the ones from the analog age. Acquiring new skills doesn’t mean long learned lessons need to be completely abandoned. As with any management exercise, judgments have to be made about what tools are needed to get the job done.
Even in this highly technical era, good strategy starts with good sense.