Publikation

Four factors for a successful digital strategy

02.08.2019

New perspective: Combining the ideas of employees and managers.

The business world is changing rapidly.  Companies must respond to the constant changes with new digital business models. To do this, they require direction from management. At the same time, employee initiatives should be promoted and implemented as soon as possible to remain competitive.

In the age of globalization and digitization, only the two or three largest provider of a product or service will survive in the long term because they are already known to potential customers, which alone gives them a great advantage.

Today, every company should strive to become a digital leader and to be in a position where they can manage digitization. It is the only way to secure long-term business success despite disruptive technologies and extremely agile start-ups. But it also means that companies must have the flexibility to make strategic decisions that quickly respond to changing environments.

Ever shorter product life cycles give way to significantly shorter planning horizons. Companies must adjust their strategy development process to respond to the new business models of their competitors. To this end, they must integrate new digital trends and developments into the strategy and implement the same.

 

From top-down to bottom-up

The classic top-down approach of strategies specified by management is no longer sufficient because it is based on two basic assumptions:

  • First, the person formulating the strategy possesses all knowledge about the environment, and enough expertise.
  • Second, the environment is sufficiently stable and predictable.

But today, these requirements often no longer apply as new competitors, technologies and business models are constantly changing the business environment. This increasing volatility makes systematic and strategic planning more difficult. Classic strategic decision-making systems fail in these unstable conditions. Hence the increasing importance of emerging strategy elements, which are initiated bottom-up by employees in unstructured and quickly changing contexts. In this way, tactical decisions are often made outside of strategic planning processes and are subsequently integrated into the business strategy. This allows companies to respond more quickly to novel opportunities or risks.

Fundamental differences

Traditional top-down plans are created in agreement with the business objectives for realizing the strategic intentions of management. In contrast, bottom-up plans can arise independent of strategic directives, since they are the result of employees’ autonomous initiatives.

The defining feature of bottom-up strategies is their unplanned nature. They originate during the exploratory search process for new opportunities, which are identified and formulated by employees at subordinate hierarchy levels. In the best case, the result of these processes has the effect of changing management’s intentions and thus exerts influence over the business objectives.

 

Strategies for the entire company

Until now, the focus of digital strategies has frequently been on the transformation of products or processes. Particularly effective digital strategies are concerned with transforming the entire company, however. In that case, many digital technologies must be integrated into human collaboration, processes and functions in order to generate competitive advantages.The following four success factors can be considered:

  1. Creation of a common vision
  2. Maintaining strategic flexibility with bottom-up initiatives
  3. Top-down specification of a strategic framework for digital initiatives in order to avoid inefficiencies
  4. Continuous reflection and adjustment of the digital strategy
Creation of a common vision

Managers and employees must work hand-in-hand in support of the company's digital objectives. A strategy with a common vision can create a uniform understanding and digital culture in the company. This is more important than just building technological knowledge. The digital culture should promote a willingness to take risks, agility, collaboration, rapid experimentation and innovation. All of the above are supported by a clearly defined vision.

Maintaining strategic flexibility with bottom-up initiatives

Emerging strategies that are created with a bottom-up approach are particularly relevant in today's dynamic market environment. They give companies the necessary flexibility for the strategy formation process, enabling them to react to new developments at an early stage. In addition, these emerging strategies frequently arise more quickly than planned strategies.

Top-down specification of a strategic framework

However, companies must nevertheless specify a certain direction from the top down, so that these bottom-up initiatives do not proceed in an uncontrolled and inefficient manner. It means that the initiatives must first be made visible to management (bottom-up disclosure), and they must be integrated into strategy formulation and implementation. Management can then specify a framework for the resulting changes to the strategy, and it can also compare the initiatives with other strategically-relevant issues and adjust them if necessary (top-down alignment).

Continuous reflection and adjustment of the digital strategy

A dynamic environment means that the general competitive framework is constantly changing. Therefore strategy formulation and implementation must also become a dynamic process that quickly adjusts to changing market conditions. Speed has become an essential competitive factor, particularly due to the ever faster product introductions in the context of the digital transformation.

Promoting innovation by combining processes

Having a top-down process for digital strategies is still important, but emerging elements must be given room to guarantee a certain level of flexibility. This statement is confirmed by almost 90 percent of managers who were surveyed by Campana & Schott as part of a study.

In this context, most of the digital strategies actually implemented are the result of bottom-up initiatives. Top managers must monitor these promising initiatives in the company, recognize their dynamic nature and finally take an active role in promoting their further development.

Support for bottom-up initiatives by employees and the specifications provided by management should therefore complement each other. Because - uncoordinated initiatives lead to inefficiencies and a lack of transparency regarding the digital transformation projects that already exist in the company. Excessively strict specifications, which do not provide enough design leeway, smother flexibility.

It means that a combination of top-down and bottom-up processes for formulating and implementing digital transformation strategies is the ideal approach for promoting innovation that emerges from both employee ideas as well as top management specifications. The successful combination and coordination of these processes leads to faster innovation in the company and hence to increased competitiveness.

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Fazit

On the way to becoming a digital leader, companies must learn to focus on the innovation process, let go of the desire for specific results and allow strategic elements that are created from the bottom up. Only then can they become fully engaged in the digital transformation and develop the flexibility that is required to increase competitiveness.