Four factors for a successful digital strategy

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

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.