CHAPTER 3

The First Principle of Digital Business Strategy—Know Yourself

In order to create an effective digital business strategy that will allow us to effect change, and improve our business, we must first understand the business. Knowing yourself is more than having access to data that tell you the current state of things; it is understanding the capabilities of the business in relation to customer desire and marketplace demands and setting realistic goals that will guide us to where we want to be.

We’ve mentioned before that no single principle of the seven can stand alone. They are all connected and interdependent with one another. Often, addressing one principle can be a catalyst for returning to a principle we have already visited in order to incorporate new information. That said, know yourself can be a good place to start, because we already have all the necessary information immediately available to make our analysis.

Know yourself is made up of two different parts: ambition and value proposition.

Ambition

To understand what we mean by ambition in the context of the Seven Principles of Digital Business Strategy, we must realize that we are discussing the ambition of the strategy itself, rather than the ambition of the business. The word “ambition” is used by management and management consultants often, but usually they are referring to the company’s mission (or vision) and values. Mission and values are not irrelevant to digital business strategy—indeed, a business strategy’s ambition will often be in pursuit of meeting or furthering a business’s mission, or adhering to its values—but the ambition of a strategy is shorter term and informs the strategy’s scope.

Relative to a vision, the mission of a business is a short-term desire for its future position. A business’s vision is longer term and aspirational, often involving an ultimate destination. The mission of a business explains why it exists. In order to form good strategies, we must have a clear idea of what our strategy’s ambition is—an idea of what we actually want to see happen upon the execution of the digital business strategies we create and the mission helps guide that strategic direction more explicitly and immediately.

The values of a business speak to its culture and are displayed daily in the behaviors and interactions of its staff. Businesses usually list their values as being things such as integrity, compassion, innovation, and knowledge—values relate to “how the company does business.” Again, an awareness of what sort of culture we wish to create within our businesses is a good thing, and values are an excellent way to convey our cultural desires. In many ways, the values and the manifestation of them in practice help codify the mission of the organization, and in so doing it enables the strategy to be developed, understood, and implemented in line with that mission.

Values require strong leadership if they’re to be embedded within a new organization, and that leadership must be present if a business is to keep moving toward achieving its mission. Both are important concepts in successful business, and they both inform the ambition of a strategy, but for a successful strategy we must have a clearly defined strategic ambition.

Ambition is what you plan to achieve in the shorter term, within the strategy, in pursuit of your organization’s mission and in keeping with its values. Ambition is important in the digitized economy as it provides an emphasis within strategy development that props up the importance of aiming high and always seeking to aspire to be better. It is an attempt to remove complacency from the equation, always a very present risk particularly in successful enterprises.

Given that the ambition of a strategy must be specific to be effective, we must ask ourselves how we define strategic ambition in larger organizations with multiple departments. We do this by creating a specific digital business strategy for each department. In creating department-specific strategies, we can ensure that the ambition of our strategy is specific and relevant to any given department, such that it can inform effective strategy, while still acting in pursuit of an organization’s mission and in keeping with its values. If however a business chooses to digitally transform, it often has to look across business silos. To keep this example simple however, we’ll assume that the business is not setting out to transform, simply creating a plan of action that aligns with its existing plans.

To illustrate this, we’ll look at the local government of Armagh city in Ireland: Armagh City and District Council (AC DC).

AC DC’s mission is to become the most desirable city in Ireland in which to live and the most desirable city in Ireland for tourists to visit. AC DC is up against some very stiff competition, and they’re aware of that. As a large organization, they tackle this heavy marketplace competition by ensuring that each division within the organization has a strategy that has an ambition that maintains a focus on propelling the business toward its vision.

Having looked at its resources and at its marketplace, AC DC has pinpointed that, in terms of tourism, it has a vision to become the center for religious tourism in Ireland. It will not reject tourists who visit for nonecclesiastical reasons, but the city holds two cathedrals and is the ecclesiastical capital of Ireland. The Primate of All Ireland (a title denoting ceremonial precedence in the church) resides with the Archdiocese of Armagh, for both the Roman Catholic Church and the Church of Ireland. AC DC has realized that it is in a prime position to leverage these ecclesiastical attractions in pursuit of its vision. The tourism department’s strategic ambition, then, becomes specific to the promotion of ecclesiastical tourism, and in this way, the department remains in pursuit of the organization’s higher level vision of becoming the most desirable city for residence and tourism in Ireland.

The dog warden of AC DC has no interest in ecclesiastical concerns as they pertain to the mission of the organization. Instead, the dog warden’s strategic ambition, in pursuit of the mission, comes down to ensuring that animals are rescued and rehomed. The leisure department’s ambition is to reduce obesity and promote better nutrition and a healthier lifestyle for those who live in the district. This ambition is relevant to those who live in the district, but not necessarily to those who visit. Nonetheless, the department’s strategic ambition contributes, in the most meaningful way it can, to the organization’s mission. The planning department’s ambition is to create the most sustainable environment possible for residents, while maintaining the heritage and architecture that will attract tourists.

All of these ambitions are very different and very specific to each department, its remit, resources, and capabilities, but they are all relevant to the organization’s mission, never taking eyes off the higher level goal.

When we understand ambition in this way, we can look at how we form ambitions in relation to the Seven Principles of Digital Business Strategy. A digital business’s strategic ambition is often a short-term plan lasting from 3 to 12 months that helps a business move toward its mission and vision. It is used to drive action and to encourage positive decision making. If written effectively, a digital business’s strategic ambition will allow participants to do less activity, which is more focused. Their efforts more effectively move toward achieving the strategic ambition, which in turn has a greater impact on working toward the business’s vision.

At the core of every effective strategic ambition are three fundamental characteristics—we must be able to communicate them to others, be able to understand them, and be able to measure them. Let’s take a look at an example of an effective strategic ambition.

The ambition of the strategy is to help position our company as an industry authority for (insert the company’s industry subcategory). This will be demonstrated when peer-reviewed publications and social media influencers link to us upon launching our (new innovative product or service). This body of work aligns with our ambition because ____________.

Setting our ambition out in this way works, because it can be easily communicated to, and understood by, those involved. It has a clear point of measurement (linking and mentions in social media and peer-reviewed publications).

Compare the ambition statement above to this one:

“The ambition of the strategy is to improve our website and leverage social media to create a community. We will use e-mail marketing as well as Pay-Per-Click advertising (PPC) to drive attention and we will measure success by sales conversion.”

This ambition statement is less than effective because, rather than being strategic, it is tactical in nature. The strategy is to improve the website (a tactical point) and to leverage social media and create a community (tactical points). There is no context provided as to why or how the community will engage with us. We say that we will use e-mail marketing (a tactic) and PPC (another tactic).

This propensity to outline tactics when tasked with outlining an ambition is very common, but it’s a good way to ensure that our strategies become unworkable. As we discussed in Chapter 1, when we looked at Richard Rumelt’s Good Strategy, Bad Strategy, we are looking to create guiding policy, rather than tactical instruction. The guiding policy should allow those involved in delivering the strategy to understand the parameters.

To use an analogy, when we create guiding policy, we are creating the highway, setting out directions, lanes, and speed guidelines. The guiding policy, or good strategic ambition, doesn’t specify the lanes we use, nor the speed at which we drive. In bad ambition, we aim to dictate the style of driving, the exact lanes, used and when. Strategies created in this way can work for a time, but challenges arise when there are obstacles in the road. If we need to switch lanes or change speed to tackle an obstacle, but our guiding policy dictates that we must continue in the same lane and at the same speed with no option to adapt, we are heading for disaster.

Value Proposition

Once our ambition is defined, we need to look at our unique value proposition. This part of the analysis is often misunderstood. The unique value proposition of our business, while it emanates from within the firm (and is therefore internal in origin) is not motivated by internal desires. Rather the value proposition is focused externally on the customer’s perception of what we solve and on what value the customer places on our ability to solve it. We derive our unique value proposition not from what we believe our customers should think, nor on how we believe our customers should value our products and services—but on how they actually do think and on the actual value they place on our products and services.

An appropriate value proposition helps us to communicate the value we’re delivering to the customer and the customer experience. Put simply, it is a statement of why the customer should buy from us—what service or product they see and the advantage they see in purchasing it from us. It is a business or marketing statement that summarizes why a customer should buy our product or use our service, and the statement should convince a potential customer that our particular product or service will add more value or better solve their problem than any similar offering.

The key to creating an effective value proposition is clarity. We must be clear about what differentiates us from our competition and what makes us the customer’s clear choice. While our task during the creation of a digital business strategy is to pin down our unique value proposition, the customer-centric culture and values permeate our business at every level, in every interaction with our customers. The value proposition is the offering through which we convey to our customers the very specific benefits and advantages of doing business with us—and we convey it through multiple modes of communication, from slogans to videos to written communication.

In terms of digital business strategy, the creation of a value proposition is slightly different. Inside the value proposition for a digital business, laser sharp specificity is key.

By having a single point of difference that we specify in our value proposition, we will enable ourselves to potentially build larger market share. It is much easier, in the Internet age, to connect with groups that have shared interests, regardless of how specific they are. Specificity is what will differentiate our businesses from others in the marketplace.

Michael Porter proposes that “Strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.”

To be unique on the web, where customer choice is almost boundless, we must make tough strategic decisions and pick just one thing we wish to emphasize when conveying our value proposition to our customers and communicate this with clarity.

It’s important to note that emphasizing one element of our business in our value proposition has no negative effect on other elements of our business. In the case of a city hotel, the value proposition might leverage our cooking, stating our unique feature as “the city’s best steak sandwich.” We mention our steak sandwich in our communications with our customers, through slogans, headings, and other modes of communication, but none of our potential customers are led to believe that we’ve done away with beds and stopped serving breakfast. On the contrary, they realize that we still do all of those things and that if they come to stay with us, they will additionally be able to sample the city’s best steak sandwich.

People who love a steak sandwich will almost certainly pick our hotel, and people who don’t are no less likely to stay with us than they were before. We are now able to focus on those people who have a particular need or desire that plays to the strengths of our business and leverage those strengths as competitive advantages in attracting customers.

The following diagram gives a visual representation of the steps we need to take to create a value proposition for our digital business strategy:

The first step is to create a positioning statement—this is an internal statement where we define what we are best at in our world, without looking to the outside world. This internal statement allows us to create effective external marketing messages that accurately convey our strengths to our customers. As mentioned before, for a digital business strategy, this statement of what we’re best at must be highly specific and relative. We can then borrow from the book Zag, in which Marty Neumeier, referring to this internal positioning statement as an “onlyness” statement, suggests that it can be stated as “our brand is the only _______ that ______.”

For the case of our value proposition for digital business strategy, we will use the following structure to account for the necessary specificity:

“We are the _______ in _______ for _______ because we do ______ better than anyone else.”

So:

“We are the leading provider in a particular field for a specific product/service because we do our selected element better than anyone else.

Let’s have a look at a quick case study of how internal statements such as these can lead to the external statements and marketing messages shown in our funnel diagram.

Case Study 3.1

Damian Maloney is an English entrepreneur who runs a company called Position Field Solutions, which makes software for field service engineers. Throughout the last 15 years, Damian has noticed a change in the way that field service engineers operate. Where they used to be reactive, and respond to what was happening when service calls came in, service engineers started to become more proactive, whereby if a floor’s light bulbs were due to fail, they would change the entire floor’s bulbs at once to reduce the cost associated with servicing each bulb separately at the point of failure.

In more recent years, Damian has noticed that the area of field service software is becoming very crowded. When he looks at the marketplace, at demand and at competition, he can quickly see, by using analytical keywords tools like Google Adwords, that for field service management software there are a very high volume of searches and that the cost of each Adword click is also very high.

Damian understands that the website to which he is trying to attract customers is very similar to those of his competitors within the marketplace; they talk of reactive and proactive software that permits the management of field services companies.

As a businessman who understands how business works, Damian realizes that all products go through a time during their life cycles where they are considered innovative. A growth period follows, and inevitably the product reaches maturity within the market and eventually goes into decline. The high volume of keyword searches and high cost of Adword clicks in his analytics, when combined, point to market maturity and to current or imminent decline. The market seems to be waning.

Damian can see this is happening in his own marketplace, and he has choices. He can reduce his margins and fight on price, attempting to keep ahead with a decreasing profit margin and an increasing cost per conversion, or he can innovate again.

Having been an innovator for the last 15 years, Damian can spot the next trend coming—a reactive way of working, and reactive software, has led to a proactive way of working, and to proactive software. Having collated data from the industry and done his research, he believes that predictive modeling, which will allow field service engineers to be put on site before an incident even happens, will be the next wave of innovation.

When creating a strategy for his business going forward, Damian’s outlined ambition is to become the UK and Ireland thought leader for predictive field service management.

When he starts to research further, he can see there are peer-reviewed research publications by Oracle and IBM that suggest that his thinking is right. Predictive field management using analytics could be the next big trend in the market for field services management software—but to date, no one has a product in this marketplace. Damian sets to work with his software team trying to understand whether they could lead this wave of innovation in the UK and Ireland if they were to create the software.

Despite the fact this technology doesn’t yet exist in the world, Damian keeps his focus on the UK and Ireland market. He understands, when he looks at his resources (which we will discuss as the fourth principle of digital business strategy), that he only has sufficient resource to lead the marketplace in this geographical area. There may be other interested parties that join him in the debate online around predictive analytics and field service management, but his company currently only has the capacity to deliver to the chosen market.

Of course there is inertia within the organizations that provide field services management. Many will make the case that customers are not demanding predictive field services management software, so they have no reason to provide it. Additionally, they will worry over what will happen to the current software they provide that is not predictive.

Damian realizes that he doesn’t necessarily wish to speak to all people. Since he will be launching an innovative technology, there will be an early minority who decide to adopt the innovative technology that will in turn make their field services management more innovative. Similarly, there will be a late majority, who will be happy with their current reactive and predictive models. Damian needs to speak to “the innovators”—the 2.5 percent noted in Everett M. Rogers “Diffusion of Innovation” model. The people already looking for a new competitive advantage, who are willing to try new things. He needs to speak to utility providers who want to have greater efficiency in their manpower distribution, who have the wealth to be able to invest in new innovation, and who have the desire to be leading the front end of customer service.

And as to the existing players—Damian’s current customers, using the reactive and proactive software what happens to them? The answer is “nothing.” They are glad to see that he’s innovating and that something new is coming along, and they continue to be customers as before. There is no downside to his innovation in this circumstance.

His internal statement, then, becomes:

We provide the most effective field service management solution because our software is the only tool that predicts future events based on historic data allowing you to deploy resources more cost effectively and improve service.

In this case study, we can see that Damian has created an internal statement. It allows people within the company to focus on defined goals, and it informs the company’s ambition. He wants to be first, focus on the UK and Ireland, and provide predictive field services management software. Because they’ve created the world’s first effective predictive modeling solution for field service management in the wider world, in their internal world, it means they can start to make some very strong statements about the value of their company (in the context of our funnel diagram, an external value proposition) when it comes to their external marketing messages (the final piece of our funnel).

In external marketing we have to understand the power of context from a digital perspective. People are only on our website reading our messages because they’ve typed something in to be there. The idea that we have to have full explanations as to everything we do isn’t so relevant when we’re doing digital business. We have the knowledge that our customers have searched for us, or linked to us, and we have the power of visual cues. Before the Internet, we had to assume that our statements and strap lines had to be explicit and explained, visually or otherwise.

The only time people will see our headlines and strap lines is in context with other things that are going on in the environment. From a digital perspective, that’s typically search referral links, social media, and other commentary that supports our message. Understanding that all our commentary and external marketing pieces are in context with other ongoing actions, Damian can choose a strapline of “predicting tomorrow’s field service challenges today” as his primary external message.

Because this context exists in the digital environment, he then has secondary messages he can use, such as a visual representation of the path from reactive to predictive field service management software. Such visual messages can be very simply conveyed. He may then have tertiary messages that explain predictive modeling and software features, but also normal proactive and reactive modeling features. These reactive and proactive products have not gone away, and he’s not going to frighten off new people still looking for proactive and reactive software—but he will attract a new, additional audience for predictive modeling.

He also finds that when he goes to complete the rest of the strategy in line with the Seven Principles of Digital Business Strategy and aims to become a thought leader, the new and innovative approach is what opens doors. If he wants to speak at a conference, predictive services management software is what people will want to hear about. The innovation will get him a platform, get his content shared, get people talking, and get sales requests coming via the website.

It’s that strongly defined ambition and unique value proposition that gives us the ability to propel our businesses forward, and we must have the strength of conviction and leadership to build our strategies around highly specific strengths.

Once we have our ambition and value proposition drafted, and we move on through the rest of the seven principles, we will almost always end up back at the first principle, revisiting and redrafting as we learn more throughout the process. What we must do after every visit is ensure that our ambition and value proposition have COURAGE. They must be as follows: