Breaking Down the Digital Strategy on Business Unit Level

Authors of the chapter: Dieter Timmermann (original publication: Digital Cookbook Series)

As described in the previous sections, preparation for the successful implementation of the digital change process begins with the development of a suitable digital strategy, including a new business model, a modified business portfolio and a roadmap.

Overarching enterprise goals must be mapped onto departmental targets

To execute the strategy within the business, it is of great importance not only to define the targeted goals for the enterprise as a whole, but also to examine the individual business divisions, departments and projects in detail and to apportion the higher-level business goals among them.

As long as the strategy process[1] of an enterprise functions properly, it remains an excellent medium to drive the digital change. Of course, the strategy process is interpreted differently between various enterprises.

In well-led enterprises it not only aims to carry forward rolled-over mid-term plans, but also allows both reactive and anticipatory changes to re?ect the market environment, and the integration of new products and market segments into the portfolio. Typically, the CEO sets the goals for the different business divisions, while the business divisions develop their individual plans to achieve these goals. However, if the strategy process is not in good shape, for example when the strategy process runs too slowly or is downgraded to merely an administrative procedure, it is the responsibility of the CDO to revitalise and improve the strategy process to meet the needs of the digital transformation.

Appropriate reporting and governance tools must support strategy execution

An appropriate strategy process bears several obvious advantages: viewed from a pragmatic angle, one of the foremost advantages is the benefit of a well-functioning procedure that reaches all business divisions. Then, once the process is completed, standard reporting and governance[2] can be deployed to track the results across the year. This allows the detection of deviations from the original plan and measurement of actual achievements.

The strategy process can take the following form: initially, the CEO and CDO draw up superordinate digital goals. Typically, these are a mix of traditional goals, such as turnover and profit, and their contribution to digitalisation. Most importantly, the business divisions will have to modernise their portfolios and increasingly generate revenue from digital offerings.

In addition, the divisions must acquire the necessary capabilities.

The next step comprises the development of an operational plan to meet those digital goals. Generally, responsibility for execution should stay in the individual business divisions – coordinated by the CDO – unless several digital activities are consolidated and executed by shared service units or newly established departments. Even in this case, the newly established divisions must participate in the strategy process, because they require enterprise resources and contribute to the outcome. In large enterprises the strategy process typically runs in annual cycles. For example, in the autumn the CEO might announce the strategy for the upcoming year, and the business divisions go through an iterative process until mid-December to re?ect the business goals in their plans and submit their investment proposals to the Executive Board, combining CEO, CFO, CDO and CMO as well as the heads of the most important business units.

As seen in the digital transformation of the German publishing house, Springer Verlag, a digital journey can also be advanced through rather ‘simple’ strategic goals. In 2004 Springer announced that within 10 years 50% of its turnover would be generated from digital business divisions. This goal was met.[3]

One of the most critical decisions relates to budget adjustments among the divisions. For example, this may take place if shared services are implemented as part of the digital backbone, or if budget is redirected to finance innovation projects in particular divisions. It is of paramount importance that the CEO, CDO and CFO can see through such potentially unpopular decisions which are necessary to facilitate the change.

And – to make this point clear – most enterprises do not have the cash reserves to create a new digital business on top of their existing traditional operation without using synergies. The importance of these budgetary considerations is enormous: if the enterprise is unable to enforce clear investment decisions, a digital transformation will most probably fail.

Execution of the digital transformation is supported by strategy management techniques

The CDO must simultaneously consider multiple dimensions. On one side, he or she oversees the transformation of the business portfolio and the resulting implications for the balance sheet. It must be guaranteed that the combination of all divisional digital strategies mould into a consistent overall business strategy. The CDO typically shares this responsibility with the CEO and CFO. On the other side, the CDO develops the digital capabilities of the enterprise as discussed in the section on the digital matrix later. In this role, the CDO is also responsible for strategic investments. For example, the takeover of technology partners or hiring personnel required for the digital transformation fall into this category, if digital transformation tasks cannot be delivered by internal departments. Furthermore, factors such as customer and employee satisfaction must also be considered on the digital journey. Consequently, the CDO requires his or her own budget to finance all these tasks.

It is important to establish proper reporting and governance tools in order to achieve the goals of the strategy. As we have mentioned above, a well-functioning strategy process already comes with its own reporting and governance requirements. The continuous tracking of progress generates the necessary transparency for the efficient implementation of overarching business goals. The digital matrix and business portfolio management are effective tools that can be integrated in the strategy process to achieve the digital transformation.

Last, but not least, another critical success factor needs highlighting. At the end of the strategy process, each business goal contributing to the digital transformation must be assigned to a named person. The personal goals – perhaps connected with a reward system – and the goals of the transformation process must be in alignment. In other words: if nobody is responsible for the success of the digital journey, or – even worse – if people are rewarded for counterproductive activities, the digital transformation will fail.

[1]        Venzin, M., Rasner, C., Mahnke, V.: ‘Der Strategieprozess – Praxishandbuch zur Umsetzung im Unternehmen’, Campus Verlag, 2nd ed., 2010.

[2]        Selig, G. J.: ‘Implementing effective IT Governance and IT Management’, Van Haren Publishing, 2nd ed., 2015.

[3]        Friedrichsen, M., Grüblbauer, J., Haric, P.: ‘Strategisches Management von Medienunternehmen’, Springer Gabler, 2nd ed., p. 70, 2015

About the Author

Dieter Timmermann has worked for more than 30 years in executive management positions as CIO and CFO after his studies in economics. He has led global transformation initiatives for Unilever, Kraft General Foods, Braun AG, Gillette, Bombardier Transportation and Zurich Financial Services. Alongside those change initiatives, he conducted process standardisation and implemented off-the-shelf software solutions. Dieter is married, has two children and lives in Buchholz, near Hamburg in Germany.