security stations by swiping their mobile
phones at the point of entry.
Choose Only One Strategy
Although customer engagement and digitized solutions strategies are very different
digital strategies, their paths will invariably converge over time. For example,
Kaiser Permanente’s pursuit of customer
engagement has led to the development of
remote monitoring services, a digitized
solution. Similarly, Schindler is deploying
a mobile app that communicates the real-time status of elevators and escalators to
facility managers, enhancing customer
engagement. But this convergence doesn’t
obviate the need to choose between the
two types of digital strategies.
Companies need a clear digital strategy
to develop an integrated portfolio of customer offerings. Their employees need a
clear strategy to guide their innovation
initiatives and resolve debates over priorities. Thus, the strategy predetermines the
winner in stalemates between product
and customer factions within a company,
and it discourages functional silos from
pursuing independent goals.
For example, financial services com-
Build an Operational
pany USAA, based in San Antonio, Texas,
has generated outstanding net promoter
scores by restricting the development (and
acquisition) of financial products to those
that can be integrated into a seamless
customer experience. The company’s cus-
tomer engagement strategy drives the
innovation agenda, and its digitized solu-
tions must conform to that strategy. At
Apple Inc., in contrast, a digitized solution
strategy drives innovation. The company
expects customer-facing employees to de-
liver a great customer experience, but the
product comes first, even if that means
employees must convince reluctant cus-
tomers that they don’t need a headphone
plug. At both USAA and Apple, the choice
of digital strategy provides a shared
understanding of business objectives
among employees, and it guides experi-
mentation and innovation.
To exploit the numerous opportunities for
delivering on either type of digital strategy,
a company also needs an integrated platform of distinctive capabilities — we call it
an operational backbone — that ensures
efficient, reliable transactions and customer interactions. These capabilities vary
by company, but they typically include
things like access to a single authoritative
source of information for key data about
finances, customers and products; reliable
end-to-end global supply chain processes;
or back office shared services.
Companies have been trying — and
struggling — to build such operational
backbones since the 1990s, when they
started implementing enterprise resource
planning (ERP) software and customer
relationship management (CRM) systems.
In many cases, organizational politics,
cultures, and processes reinforced existing
business silos, which hindered implementation of these systems and the accompanying
enterprise-wide capabilities. But a company
that lacks enterprise capabilities will not be
able to deliver reliable operations and thus
will not be able to compete digitally.
Kaiser Permanente’s operational backbone starts with its electronic health records
system. Kaiser Permanente committed early
on to electronic health records as the basis
for clinical record keeping and collaboration.
Now, its health records system facilitates in-
creasingly meaningful patient interactions,
and it enables new digital initiatives that
require accurate, accessible patient data.
Schindler’s operational backbone com-
prises the global business technology and
process standards that it implemented
with its ERP system starting in 2005.
Now, as the company supplements its
operational backbone with sensor data, it
facilitates the company’s ongoing mobility
In assessing their company’s ability to
execute one of the two digital strategies,
business executives must be mindful of
the gaps in their capabilities — and then,
as quickly as possible, wire them into the
organization’s operational backbone. To
succeed in the digital economy, companies must offer a unique value proposition
that is difficult for both established competitors and startups to replicate. Such a
value proposition stems from a digital
strategy that is focused on either a set of
digitized, integrated offerings or a relationship that engages customers in ways
that competitors can’t match. Without
that, you might create a flurry of innovations, but you won’t deliver value-added
applications of AI, biometrics, drones —
or the next important digital technology.
Jeanne W. Ross is a principal research
scientist at the MIT Center for Information
Systems Research in Cambridge, Massachusetts. Ina M. Sebastian is a research
associate at the MIT Center for Information
Systems Research. Cynthia M. Beath is a
professor emerita of information systems
at the McCombs School of Business at the
University of Texas at Austin. Comment
on this article at http://sloanreview.mit
.edu/x/58204, or contact the authors at
Reprint 58204. For ordering information, see page 4.
Copyright © Massachusetts Institute of Technology,
2017. All rights reserved.
A company that lacks enterprise capabilities
will not be able to deliver reliable operations
and thus will not be able to compete digitally.