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Digital Strategy vs. Digital Skills

2010 November 3

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.

- Greg

19 Responses leave one →
  1. Been there, done that. permalink
    November 3, 2010

    You may not know this, but the Disney/Infoseek thing was reeaaaally good for them – they were then able to pick up the basis of the technology that runs all Disney digital assets today.

    [Reply]

    Greg Reply:

    Been there, done that,

    That’s true, they still use the .go in all of their domains. However, it’s really tough to see what specific tech or skills they acquired (Infoseek was primarily a search engine and that obviously didn’t work out) and I think they could have developed the skills they needed for considerably less than the half billion dollars they paid for Infoseek.

    - Greg

    [Reply]

  2. November 3, 2010

    Indeed, Greg. But consider the rush to tactics that most marketers have made with regard to social media. The result for most is mediocrity (at best). Worse, by following the advice of guru consultants they feel a sense of achievement. All thanks to rushing into tactics — focusing on them.

    But your point is not wasted on me. It seems to be the same point Mike Moran (IBM Distinguished Engineer and author) made in his book, Do It Wrong Quickly.

    [Reply]

    Greg Reply:

    Thanks, Jeff.

    I haven’t read “Do it wrong quickly,” but it seems that I should! It’s now on my list at amazon.

    Also, I’m not saying that you should abandon strategy altogether, just that with the amount of variables we have to deal with today, the likelihood of your strategy being right is relatively small. Therefore making big strategic bets before you establish an operational direction usually ends pretty badly.

    - Greg

    [Reply]

  3. November 3, 2010

    Digital Strategy awaits digital skill. For most the oversimplification of digital strategy is because the complimentary digital skills required is not there, not because we can’t learn it, but because they are trying to match analogue skill with digital strategy.

    In other words, digital skill in my opinion requires a basis of emotional, functional and technological jobs, Thus, digital strategy requires you to be well rounded digitally skilled.

    What’s lacking is the emotional jobs the understanding that in a digital strategy you cannot think push marketing, you have to think value in use marketing, you can’t think inside out, you have to think value co-creation… you can’t think demographics, you think value network analysis…

    Digital strategy then becomes a “way of life” when the skill set is understood…
    Spiro Spiliadis´s last blog post ..spirospiliadis- RT @goonth- The Meaning Organization by @umairh – http-htly-33JHM NewWorldEconomics

    [Reply]

    Greg Reply:

    Some good points there, thanks for sharing. (Although I do believe that broadcasting will continue to dominate).

    - Greg

    [Reply]

    Jeff Molander Reply:

    Spiro…
    While I agree I respectfully suggest you’re injecting complication. Digital isn’t something new — that needs to be learned. Your third paragraph extends into buzzwords that describe old ideas as something new (“you have to think value” — we always have “you can’t think inside out, you have to think value co-creation” — again, successful companies have always looked to customer demand when creating “you can’t think demographics, you think value network analysis” — wha?)

    Again, respectfully, I think you might agree. Digital can learn a lot from direct response. Strategically and tactically speaking. Thanks for considering.
    Jeff Molander´s last blog post ..White paper-Social media &amp mobile in financial services

    [Reply]

  4. November 3, 2010

    Your last comment is arguably your most powerful…

    “Even in this highly technical era, good strategy starts with good sense.”

    Unfortunately no matter what era we find ourselves in, good sense is often a luxury that many brands, companies, people feel they cannot afford… and it shows.
    steve olenski´s last blog post ..Ideas are worth sharing just as long as someone picks up the tab

    [Reply]

    Greg Reply:

    Thanks, Steve.

    I’ll be in Philly next week. Would be great to meet up.

    - Greg

    [Reply]

  5. November 6, 2010

    Interesting post Greg, Im surprised why nobody here is talking about Mintzberg especially when it comes to digital strategy. I get a strong feeling that most of the strategies are conceived the Porterian way, with its immanent focus on long-term strategic planning. I have had a personal experience in this, as in my management course, most of the lectures about strategy often focus on Porter with less thought about other schools of strategy. Of the ten schools of strategy which are talked about by Henry Mintzberg in his books,I think, the learning school where strategy is conceived as emergent process is most suited to digital strategy.
    Venky´s last blog post ..Reflections up in the air about our connected age

    [Reply]

    Greg Reply:

    Venky,

    I haven’t read Mintzberg, but he looks interesting. I’ll be sure to check him out.

    btw. Do you recomend “Managers not MBA’s” or “Strategy Bites Back.”

    - Greg

    [Reply]

    Venky Reply:

    To be honest, I’ve read lot of his articles and papers. Im yet to get my hands on his book. I’ve been exploring it quite a lot especially, after I found strong resonance with most of the ideas he talked about with the peculiar challenges in the digital space. I would personally recommend an amazing research paper of his , ‘Of strategies: deliberate and emergent’.
    Venky´s last blog post ..Reflections up in the air about our connected age

    [Reply]

    Greg Reply:

    Venky,

    Thanks, I’ll take a look.

    - Greg

  6. December 12, 2010

    Greg: to your point on “How can we leverage digital technology to strengthen what we already do well?” It’s incredible that many a marketing guru can’t wait to spend your time and money on the next new digital idea, all the while ignoring what already works and ignoring how it will integrate with how things work.

    It seems everyone is ignoring the old e.g. email, personal calls, in face meetings and declaring everyone get with the new ‘reach and connect’ media venues like Linked In, MySpace, FaceBook, and Twitter or die. I’m the first to admit that while these have garnered some traction in very specific applications, there’s nothing universal about them especially when compared to the universality of email or the telephone for exemplary two way communication.

    [Reply]

    Greg Reply:

    I agree, Bill. The new doesn’t obviate the old, it augments it.

    - Greg

    [Reply]

  7. Robert H. permalink
    October 1, 2011

    Wandered back here after a while for this tasty bite. You might be interested in the view from the other side of the CD-ROM disaster of “new media” that happened a while ago. Or, considering how long ago it was, maybe not.

    It was posted as a reaction to the IPad’s new media app “Elements” that’s supposed to “…hint at the possibilities promised by Apple for iPad: a device that makes it possible to merge book, game, entertainment, reference app, internet search, and who knows what else in a new and pleasingly hands-on way. ”

    http://www.oblomovka.com/wp/2010/04/01/cd-roms-and-ipads/

    Robert

    [Reply]

    Greg Reply:

    Robert,

    Thanks for this. The article makes some good points, but I think it misses the central one: Just like CD-Rom, we don’t really know what to do with apps. We need to experiment and go down some blind alleys to learn how to use our new capabilities. People and companies that are trying to push the limits of the technology are doing it right.

    It doesn’t matter if the effort fails as long as it’s sustainable failure and you learn something from it. The only way to do that is to test it in the marketplace.

    - Greg

    [Reply]

    Robert H. Reply:

    Ah, didn’t get the central point that like that. Just thought it was a bemused techie seeing failure after failure with no learning from the failures happening. Using failure as a learning tool to iterate into new possibilities is worth doing. At least if you can afford the losses *and* the possibility that you might not figure it out no matter how you try.

    Robert

    [Reply]

    Greg Reply:

    Sure. You always need some portion of your research to be “pie in the sky”

    - Greg

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