Digital Transformation

The six types of digital strategies

types of digital strategies

I would like to promote the recent survey from the Harvard Business Review that identifies six types of digital strategies that I’m summarizing below.

The offensive types of digital strategies

Here is a list of three types of digital strategies that aim at targeting new demand, new supply or new business models.

1. The platform play

A digital platform consists of bringing together on the same platform both customers and suppliers of the business value chain, in order to create a network effect. Check out this article if you want to know more about what is a digital platform.

A typical example is Accor opening their online hotel booking platform to independent hotels offers a good case. According to the HBR survey, only one-third of companies have engaged to some degrees in platform strategies.

2. New marginal supply

This model consists of creating new revenue streaming by tapping into new market opportunities with low operational margin. Leveraging digital technology allows to operate a model with minimal cost and become profitable, while the legacy model was making this profitability impossible to achieve.

A typical example is Ikea who is offering online reseller options for their own customers, allowing them to sell used, branded products to each other. According to the HBR survey, 13% of incumbent firms were using this type of digital strategy, often combined with a platform digital strategy.

3. Digitally enabled products and services

This third type of digital strategy consists in adding digital technology on existing products.
A typical example is Nike self-lacing shoes or P&G’s Oral-B connected toothbrush.

According to the HBR survey, 55% of companies are using digital technology to rebundle their products or services to better serve their existing customers.

The defensive types of digital strategy

Those three following types of digital strategy are defensive in nature since they are aimed at improving what the firm already does, and therefore not a source of differentiation.

1. Rebundling and customizing

This type of digital strategy consists in using digital technology to customize their existing services or rebundle them. A typical example is an online newspaper allowing their audience to customize their reading lists according to their areas of interest.
According to the HBR survey, 60% of companies have adopted this digital strategy model.

2. Digital distribution channels

This type of digital strategy consists in facilitating access to their products and services by leveraging the new digital distribution channels. E-commerce web sites of retailers are a typical example of this model. According to the HBR survey, almost 60% of companies have invested in digital distribution channels.

3. Cost-efficiency

This type of digital strategy consists in using digital technologies to reduce costs, typically through automation or cost scaling.

Read more about architecting your digital innovation strategy.