How Digital Innovation Transforms Businesses

In Part 1 of our series on Digital Innovation, we defined what is Digital Innovation and why it’s needed in today’s businesses. In Part 2 we go into how Digital Innovation can help you transform your business.

Firstly, we will look at the main ways Digital Innovation can transform businesses, with examples of companies that have done so successfully. Next, we will go into specifics as to how Digital Innovation & Transformation adds tremendous value to businesses.

Ways in Which Digital Innovation Transforms Businesses

There are three main ways we see Digital Innovation transforming businesses:

  • Improving and enhancing traditional business processes

  • Revolutionizing existing business models

  • Disrupting conventional business operations and industries

Improving and Enhancing Traditional Business Processes

The first and probably most basic way Digital Innovation transforms businesses is by helping to improve and enhance the way the business currently operates and its processes. With this first approach it isn’t so much about being disruptive, but more so making better what already exists.

For instance, a retail company that decides to create a mobile app to make shopping on the go more convenient for its customers. It could also take the form of a company deciding to digitize its loan application process using a software, so applicants can apply online without having to come into the physical office of the company.

These improvements don’t take away from how business is already done by the companies, it just makes it easier for everyone involved in the process, from employees to customers.

The best example of this in recent times is the many retail banks that decided on a complete Digital Innovation and Transformation strategy. They decided to digitize their complete business process and operations. One of the first things they did was to create an app that can be accessed on smartphones or tablets. This app would be used for their account opening and later on managing process.

The challenge they had was the long lines with their customers coming into the bank to do various transactions. The app improved the banks processes in three ways:

  1. It significantly reduced the number of customers coming in, which reduced operational costs, and made it more convenient for customers

  2. If customers did come in, it reduced the time taken to open an account or perform other transactions

  3. It improved the banks productivity as more transactions processed in a day meant more revenues generated for that day

This small shift helped to significantly improve the overall customer experience.

As a result of this overall Digital Innovation throughout their entire operations and business processes, they were able to reduce cost significantly and increase profitability.

Revolutionizing Existing Business Models

The next way Digital Innovation can transform businesses is by changing an already existing business model, that is to say how a business is structured and operated in its entirety, targets its audience, and makes a profit.

To really understand how Digital Innovation can transform an existing business model let's look at a retail company that decided to go one step above simply incorporating a mobile app.

Previously, the company could only assess purchases made on their website to determine sales volumes for that week or month. There was very little insight into customer behaviour, and why their customers even decided to purchase from them in the first place. There was no big data to give valuable insight and make better business decisions to grow the company's revenue, through improving product quality or the customer experience.

They decided to integrate Application Program Interface (API) across their e-commerce website. This allowed the company to gain a full view of their customers' buying behaviours and interaction with each product.

This included which products were viewed on the website, how many times it was view, which items were clicked on the most, which were added to shopping cart, which were purchased immediately after adding to the shopping cart and which were not. The most important of all was understanding why customers made these decisions throughout the entire buying process.

Consequently, it allowed the company to become more agile in its market research and product development. They no longer second guessed what was to be done. They understood not just what products were purchased, but how the buying process flowed from start to end.

From the customers end the experience was more seamless and faster. They could log into their account and check their information from one central location. Also, they could select a product and add it to the shopping cart from their mobile phone while on the go, then complete the transaction on their desktop when they got home.

Using Digital Innovation & Transformation the company turned data into real insights, and was able to create a better customer experience that is more tailored and personalized to the customer and their buyer’s journey.

Disrupting Conventional Business Operations & Industries

From time to time you will find that Digital Innovation completely disrupts an entire industry.

If we are to talk about businesses that have disrupted an entire industry, then the name Amazon has to be in that conversation. Amazon is the truest example of a company that employs Digital Innovation and Digital Transformation to its competitive advantage.

The company started as an online store selling books, and very quickly through Digital Innovation completely revolutionized the retail industry. How it did so was by making shopping online easier and more convenient for customers. Customers no longer had to travel to a physical brick and mortar location to purchase an item they wanted. It could be ordered online, and delivered directly to their doorstep. Also, it reduced the time taken for items to be delivered.

What is amazing about this digital disruption is that Amazon doesn’t manufacture any products. Through technology, it simply facilitates and connects the manufacturers and retailers with the end user. It’s simply the digitized ‘middle-man’ of retail.

This caused several retail stores to be closed down over the last five years, as now there was no need for brick and mortar locations. Amazon single-handedly disrupted an entire industry and continues to do so. Just recently it announced their ‘cashierless’ stores.

In a sense it uses technology to track what customers put in their shopping carts and bill them automatically when they walk out, eliminating the need for human cashiers.

Companies need to be more digitally innovative or risk being disrupted. Industries disrupted by Digital Innovation by Harvard Business Review are:

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7 Benefits of Digital Innovation That Creates Business Transformation

Now that we've gone into the three ways Digital Innovation can transform businesses, let's talk about seven ways it creates value and benefits businesses:

  1. Increased Efficiency and Productivity - it allows businesses to do more with less time and resources, thus maximizing dollar spend and company output

  2. Reduced Operational Costs - since less resources and time are needed to carry out the same tasks, this means it requires less operational dollars for personnel, training, or equipment

  3. Organic Growth - by making the business more efficient, productive, and reducing costs, the business can grow organically through identifying new opportunities for growth and new product development within its existing model, instead of through mergers or acquisitions

  4. Better Data Analysis - through implementing digital as a part of their growth strategies it allows businesses to track and measure everything. Business strategies are no longer dependent on guesswork or opinions, but big data that quantifies why a certain strategic path should be taken

  5. Product Delivery is Faster and Cost Effective - as Amazon showed us by employing Digital Innovation product delivery to an end-user or consumer can be significantly increased which improves customer satisfaction. Delivery costs also decreases which benefits the business

  6. Creates New Revenue Streams - businesses can create new products and services to create new revenue streams to capitalize on new markets that were previously out of reach

  7. Creates New Markets - it allows businesses to create entirely new markets that were nonexistent. A great example of this is what Facebook did globalizing media and communication online, creating new opportunities for people worldwide

Conclusion

This goes to show the power of Digital Innovation & Transformation in enhancing and revolutionizing business operations, processes, models, and disrupting industries.

It has many benefits, key of which are making businesses more efficient and productive, reduces costs which increases profits, and improves the overall customer experience, which drives customer loyalty.

The chosen examples are deliberately common and not very innovative, aiming to demonstrate that digital innovation and consequently transformation is changing everything, not just some - take note.

This is the future, and this is the power of Digital Innovation. For businesses who refuse to see and use technology to their advantage, they will quickly see themselves being taken over and going out of business from new competitors who do.



What is Digital Innovation and Why Is It Needed in Today’s Businesses

We define Digital Innovation as the implementation of new technologies into existing business processes and systems to solve problems, increase efficiency and productivity, which reduces operational costs, and leads to an increase in bottom line or net profits. Because of this, we see Digital Innovation as a never-ending, ongoing process. This is due to the fact new technologies are constantly being developed and disrupting industries. What may be considered innovative today will not be tomorrow.

Furthermore, companies will always need to find new ways to solve existing and potential problems, and continue to be more efficient and productive. Additionally, companies will always need to communicate in a way that is up to pace with the consumers they want to sell to. By doing so, it will allow companies to remain relevant to their customers, and stay competitive in the market.

Today every business should consider themselves to be a technology company as Peter Sondergaard said in his Gartner keynote speech back in 2013, that uses new technologies to provide a product or service to an end user or consumer. Ignoring this truth means very soon companies become irrelevant and obsolete, and end up going out of business.

Why is Digital Innovation Needed in Today’s Businesses?

According to a 2018 21st CEO research report done by PricewaterhouseCoopers (PwC), where they interviewed 1,293 CEO’s in 80 countries across the world, Due to the uncertain world we live in, the major threats to their businesses are perceived to be geopolitical. However, of the top ten concerns, Speed of technological change and Changing consumer behaviours were two of the fastest rising concerns from 2015 to present, rising from 58% to 78% and 60% to 75% respectively.

Based on these findings we can identify several reasons why Digital Innovation is needed in today’s businesses.

1. Your Consumers’ Buying Behaviours Have Changed Due to Digital Innovation

The number one reason is that your consumers’ buying behaviours have changed. Previously, pre-digital world, if a consumer needed to find out more information on a particular product or service they had to rely on what the company’s marketing message had to say in a television, radio, or newsprint ad. At the very best they would seek feedback from immediate friends and family, hoping they had used the product or service before.

However, in today’s Social Media driven world a consumer’s buying process doesn’t start from a marketing message, it starts from a quick Google search, from a review on Amazon, or comments from the brand’s Facebook page. In other words it starts digitally. What this means is you can no longer reach your audience through conventional means or technology, but must adjust to find new ways of connecting and communicating with said audience. Otherwise you will be broadcasting your message to a non-existing audience.

Audiences have shifted to more digital means of communication which were made possible through Digital Innovation. If companies cannot remain current with how their audience communicates, and delivers their message in a way that is relevant, then their messaging will die out and give way to competitors who have the eyes and ears of said audience.

2. Technology Continuously Changes the Way the World Operates Through Digital Innovation

Through the ages technology has disrupted many industries and how the world now operates. Before thousands of workers would be needed in a factory to manufacture a car, to put all the parts together to make a whole. Today, machines do most of the work and there is no longer a need for a large workforce.

Before if you needed to conduct a bank transaction you would have to go into a physical bank location. Now you can do it online or from a mobile app. Even the account opening or loan application processes are no longer paper and people based, but are digital-based. Data collection is digitized, and everything happens online.

During the Industrial Revolution companies who were still doing manual labour were quickly replaced by those who had machinery and other forms of Digital Innovations that were developed. Ironically, those companies who were successful in business in the Industrial Revolution who were unable or unwilling to shift when the internet and the Information Age came about, quickly went out of business. Now we’re in the era of Automation, and moving into the era of Artificial Intelligence and Virtual Reality, and the companies who are unable or unwilling to make the necessary shift won’t be around in the future.

The point is companies who are unable or unwilling to move with the current age and market shift brought on by Digital Innovations throughout the decades found themselves no longer relevant to the market, and were replaced by their competitors who were.

3. Digital Innovation Allows Companies to Disrupt as Opposed to Being Disrupted

As mentioned in the PwC report Uncertain economic growth for companies was a leading concern for CEO’s. The reason for this can be pointed back to one thing: CEO’s see their companies being disrupted by Digital Innovation and more innovative companies, and are uncertain of how to navigate this threat and market shift.

In 1997 the digital streaming giant Netflix was born. In 2000 Its founder Reed Hastings approached Blockbuster to form a partnership. The agreement would be Netflix would distribute movies for Blockbuster online, and Blockbuster would distribute Netflix products in retail videos stores. According to a 2014 Forbes article, Hastings was laughed out of the meeting because the executives thought it was a mediocre idea at best, because they believed no one would able to find the movies online. What they failed to see was the shift in consumer behavior and in 2010 Blockbuster went bankrupt. As of July 2018, Netflix is valued at close to US$160 Billion Dollars.

Companies need to be not just more innovative, but implement Digital Innovation as a part of their growth strategy if they want to continue to remain in business, as Blockbuster clearly shows what can happen to companies who don’t.

All this leads to one simple truth: companies who aren’t willing to move and stay relevant through being the catalyst for Digital Innovation in their companies soon find that they’re out of business.

4. Digital Innovation is the Most Effective Growth Strategy

Over the years there are many companies who have allowed their current success to sabotage their future, and potentially greater success. This is because the company is locked into a mindset of ‘This is how we’ve always done things and it made us a success’. However, they fail to realize that what got them to their current level of success won’t take them to their next level of success.

This is where Digital Innovation plays its most important role in the growth and continued success of a company. That innovation isn’t just about technology.  It’s about having a better understanding of the company’s customers, brand, product, and even staff, and using technology as the means to the end.

Companies that have a Digital Innovation mindset have an agile mindset. This means they know not to get stuck into the familiar ways of working. They know how to pivot and adjust to the market, as changes in consumer behaviour and habits occur. They understand that they need to continuously improve their business processes and systems. They are certain that markets are often uncertain, and can shift without notice, especially in today’s world of constant technological changes and advancements. They see technology as simply a tool to be used to further and achieve the company’s goals, not something to be crippled or threatened by.

Once a company is flexible enough to see market shifts, and know how to get ahead of those market shifts, to constantly remain digitally innovative, they will always be successful. They will always know how to position their companies to respond to the market based not only on where the market is, but where it is going.

Conclusion

It is clear why companies need to start thinking and paying closer attention to Digital Innovation, and how it affects their company, positively or negatively. The traditional ways of doing business have been disrupted due to the shifts caused by Digital Innovation. Industries that were once stable are finding it difficult to keep up with today’s technologically advanced world.

Digital Innovation is absolutely imperative in order to remain relevant in uncertain times, stay ahead of your competitors, and current with your customers, in order to ensure that your company is around for at least the next five years as technology continues to disrupt the world.

The message for legacy companies is clear: You must self-disrupt or gobble up your disruptors, or else face obsolescence at the hands of nimble startups with access to more capital than ever before. A prime example is PepsiCo's recent $3.2 billion acquisition of Israeli company SodaStream.

#DigitalInnovation

#technology

#digitaldisruption

And the future is... Digital Innovation

Interestingly enough after spending 15+ years in the traditional business domains of operations, finance and strategy in various industries, I have "discovered" that what I am really passionate about is...technology! This is by no means to say that I have "just" embraced the digital craze. Perhaps, I have to clarify a bit - the intersection of business and technology or BizTech, is what my passion is now.

The world is moving towards technologisation & digitisation with an unprecedented speed and ferocity. Embracing all of its latest and profoundly impactful tech "features" of AI, ML, AR, VR... even technological singularity is the way forward. My overall view and intuition are that we as humans and society are not ready yet to embrace this new reality, whatever the "wisdom" of the day says.

Therefore, the issue is how to use innovation to improve the adoption of the new reality? A lot has been written about customer centricity, digital transformation, digital intelligence and even singularity and how everything and everyone is changing beyond believe.

This is understandable and due to the fact that new technologies are constantly being developed - disrupting industries, inventing new business models, creating new consumer classes. What may be considered innovative today will certainly not be tomorrow.

Furthermore, companies will always need to find new ways to solve new and existing problems, and continue to be more efficient and productive. Additionally, companies will always need to communicate at a level with the consumers they want to sell to. Only by doing so, they will remain relevant to their customers, and stay competitive in the market.

Today every smart business in whatever field it operates should consider itself to be a technology company, that uses technology to provide a product or service to an end user or consumer. Ignoring this truth means soon such companies will become irrelevant and obsolete, and end up going out of business.

Companies need to be not just more innovative, but to implement Digital Innovation as paramount part of their growth strategy, if they want to continue to remain in business, as Blockbuster, Nokia, Kodak clearly showed what will happen to companies who don’t.

All this leads to one simple truth: companies who aren’t willing to move forward and stay relevant through using Digital Innovation as the catalyst to change their industries, will soon find that they’re on an inescapable downward slope.

Strategic Innovation

Imagine your best people ideating, prototyping, and creating together — so that their innovative ideas lead to dramatic growth.

They defy what seemed impossible in their individual silos, coalesce on a shared vision and an execution road map, and work to bring to life a new business creation and innovation.

Strategic Innovation is about re-imagining your growth strategy. It’s the difference between a Black Cab-like death and the immense growth of Uber.

Strategic Innovation is NOT based on the work of a few crazy geniuses or a special team, but on collaborative effort across functions and teams aligned on a mission with shared clear vision and commitment.

Strategic Innovation is NOT creating an episodic reaction or just new one-off initiatives in isolation or even a secretive skunk works effort. Instead, you create a senior-leader-led culture of innovation that generates meaningful breakthroughs and creates value across successive horizons for your organization and its customers.

Good answer to the question Why do you need Strategic Innovation? is given in the book The Second Curve by Charles Handy. Organisations and people with any luck rise to a peak, before hitting an eventual decline and falling away. But by starting out to innovate strategically on a second curve, probably while we are still rising up on that original one, we can avoid decline and renew ourselves (illustrated by the diagram below).

 

In a nutshell in order to be consistently successful you need to reinvent yourself constantly. To have a constant flow of ideas and not being afraid to experiment with them ideally in a Lean Startup way - fast and cheap.

Strategic Innovation is a multi-functional approach that brings together all the creative assets, capabilities and disciplines of your organization to work together on producing breakthrough ideas and driving new business growth. In the ideal variant will also include your external Partners as well.

Naturally, since developing a systems approach to Strategic Innovation involves many moving parts, executives find the challenge daunting. That is why they could learn a lot from entrepreneurs.

The key is a total obsession with problem-solving. What is the problem you would like to solve? What is the community you would like to create and/or help? What would you like to change? All these questions form the environment which permits Strategic Innovation to flourish.

How do you go about developing your Strategic Innovation?

How will you re-imagine your growth strategy?

How will you renew your innovation portfolio?

What’s the fastest way to apply your capabilities - being financial, technological and most importantly human, to develop new business that creates sustained competitive advantage?

As you design your Strategic Innovation, you need to consider both the WHAT and the HOW of innovation.

The WHAT includes choices about: “what solutions, products and services to develop,” “what markets to play in,” “what brand position to build,” and “what business models to create.” All of the outlined above depend on the main question "what problem am I trying to solve?"

The HOW includes choices about: “how will you organize to deliver the work,” “how will your processes and structure be optimized,” “how will you go to market” and "how will you assemble the right team to take you there." The key however is very simple: "how to create most value for the end customer."

You need to ensure that the development of new products and services (Whats & Hows) has the end customer in its heart all the way through - from ideation to production. Key for achieving that is using novel techniques such as ‘Design & Build Thinking’ and its core habit - bias toward action. That bias toward action involves such things as creating a prototype, testing it, trying it out, iterating, getting feedback, and then trying again.

Creativity is the capacity to create new connections, to connect the dots.

Innovation is the process of applying creativity to design new products, services and solutions.

Strategic Innovation is a systems approach to optimizing your innovation portfolio, to help your organization achieve sustained competitive advantage and transformational growth.

To innovate and strategize like never before, you and senior leaders must ask new questions, and see in whole new ways. Much of our work, then, focuses on this crucial transformation.

Strategy and Innovation

Strategy and Innovation - both terms are as useful as overused. What is the link between them? Is there a link at all? Are both still mystery for most senior managers and if yes, why?

Strategy and innovation are often conflated. Recently, I even had someone say to me, “last time I checked, strategy and innovation were the same thing, is that not correct?”

No, it is not correct.  Not even close.  In fact, they are quite distinct, requiring vastly different people, skill sets and processes. Try to do both at the same time and you’ll likely do none of either. That’s a serious problem.

The conundrum is that every business needs both. Without strategy you have no direction, without innovation you lose relevance. They both need to be part of an integrated effort. So it is important to be clear about what each needs to succeed, where to deploy them, who should drive them and what to expect. Here’s a brief guide that could help to set things straight.

What is Strategy?

Strategy is probably the most overused word in business. It is often employed, unhelpfully, as a value distinction. If something is “strategic,” then it’s well thought out, if it’s “unstrategic” then does not deserve a lot of attention.

In reality a strategy is a coherent and substantiated logic for making one set of choices rather than another. In other words, it’s used to make decisions that drive action, whether that entails the overall mission of the enterprise, where it allocates resources or how it implements programs and processes.

Good strategy is clear, never confused and is often simple.  At its best it’s elegant, meaning that it explains the maximum amount of variables in the fewest number of statements. Most of all, everything strategy does is in the service of operational success. There can never be “good strategy, but poor execution”, because assessing capabilities is a crucial component of strategy.

A successful growth strategy could only be achieved through marrying external opportunities with internal capabilities. The reason most strategies fail is exactly because of lacking this marriage of convenience.

In Good Strategy Bad Strategy, Richard Rumelt points out that good strategy “brings relative strength to bear against relative weakness.”  I think that’s about right.

The Role of Failure

One thing that you never want a strategy to do is fail. That’s very bad. It means that you didn’t do your job right. You screwed up. But have you really?

Failure, on the other hand, is an integral part of innovation, which is usually neither coherent nor substantiated, but a dirty, messy business. After all, if you knew what you were doing, it wouldn’t be innovation, it would be execution.

The practice of innovation, unlike strategy, is about possibility, not direction.  It involves a lot of fumbling around, chasing wrong ideas down blind alleys, experimenting and trying things out. The trick is that you fail quickly and cheaply, then move onto the next idea - utilizing the Lean Startup concept, until eventually you’ll get to something that works. If you can survive you can thrive.

And that’s why the difference between innovation and strategy is so important. Strategy is a primary function of senior management (questionable?). Innovation is not and shouldn’t be. Once they get involved, buy-in increases, costs rise and failing quickly and cheaply becomes very, very hard.

Innovation as Combination

One important aspect of innovation is combining old things in new ways.  As I noted before, breakthrough discoveries often adapt ideas from far flung contexts.

Darwin borrowed from geology and economics, Einstein was deeply influenced by Humean skepticism and Google transformed a practice from the academic world into a new approach to searching online. The list goes on.

That’s because innovation is most important when you get stuck, when you’ve hit a wall and conventional wisdom is no longer so wise. Time tested approaches begin to fail. A new path needs to be forged.

Innocentive, an open information platform, finds that most of the solutions come from people working outside the field. A molecular biologist, for example, might find that a problem that stumps industrial chemists is very similar to one that has long been solved in their field. Newcomers have fresh eyes and can often bring a fresh perspective.

Of course, the best time to innovate is before you get stuck and start to lose customers. Small failures can be productive, but a big failure can kill you. That’s why innovation and strategy have to meet up somewhere and why there is so much confusion.

The Path to Innovative Strategy

As I noted above, strategy is best when it’s simple and clear. If something worked yesterday, it will most likely work today. Unless you have a good reason, it’s best to go with what you know works and you can do well.

Unfortunately, that’s not always possible. Business models don’t last very long anymore. Technological cycles are becoming shorter than corporate decision cycles and disruption is becoming the order of the day. That’s when innovative strategy (notice the adjective) becomes imperative.

And that’s how innovation can inform strategy and why it’s important to have an ongoing innovation effort that is separate from the overall corporate direction. All of those failures provide useful knowledge and experience that can be combined to form a new strategy.

It is, after all, the failures of innovation that can inform the future success of strategy.

Integrating Strategy and Finance for Value Creation

I have worked my whole career in the fields of Strategy and Finance, jumping from one to the other exchanging, mixing and contemplating them all the time. What I have learnt doing that is that despite both areas being intrinsically linked very often there is a degree of non-alignment between them.

The main reason is two-dimensional:

  • The relative unclarity what "Strategy" is and who`s responsible for it - the CEO, Executive Board, Strategy function, External consultants...
  • The second is the near absolute clarity what "Finance" is and who`s responsible for it - the CFO/FD and the Finance function.

This combination of clarity & unclarity is often the main reason for misunderstanding between both functions.

Strategy (not to be mistaken for strategic planning) is often abstract, subjective and too remote for the majority of finance people to grasp and find useful. What is Strategy? In a nutshell Strategy is the art & science of finding, seizing and creating opportunities for growth for the organisation.

On the other hand Finance is by definition much more focused on internal (reporting) rather than external (forecasting) activities. Furthermore very often Finance is either concerned and/or tasked to focus mostly on cost cutting or as it has become more fashionable "cost transformation" activities rather than on investment and supporting growth opportunities.

Therefore it is much easier for Strategy and Finance to diverge rather than converge in order to create value. Nonetheless understanding of financial management is key to help to determine which financial factors build or erode value in the organization.

Key concepts such as:Understanding the impact of strategic decisions on value creation; Exploring issues such as capital structures, cost of capital, diversification, risk, capital budgeting and acceptable ROI; Examining non-financial factors that contribute to value and evaluate their financial consequences are really important for organisation`s success as well.

So how could Strategy and Finance could collaborate and even integrate into one multi-faceted value creating function? Through 4 main pillars:

  • Strategy needs to become more "down-to-Earth" activity and focus on short-to-mid term time frame rather than solely on long-term projections.
  • Strategy needs to work more collaboratively  with all relevant functions most notably Finance and Sales in order to create a ideation-to-implementation framework of all strategic initiatives & projects, in fact creating end-to-end solution which is simple, practical and impactful.
  • Finance should be divided on 2 areas - Commercial Finance function focused solelyon performance management, planning and supporting growth opportunities through providing investment evaluation, capital allocation and portfolio management (the one which will engage with the business & Strategy function). Operational Finance - handling all transactional, reporting and statutory activities.
  • Both strategy and especially the finance professionals need to become much more well-rounded and have a greater appreciation about the business as a whole not only about their respective areas of expertise.

Through purposeful collaboration between these two functions significant value could be created for any organisation. Based on marrying the potential growth opportunities with robust financial evaluation & management aiming to support their realisation.

Business Planning Vs. Strategic Planing. What is the Difference?

We at Tonchev Associates have been asked constantly what is the difference between business and strategic planning and that is our take on it.

Business plan. Strategic plan. There’s a lot of overlap between the two, but there are also some crucial differences you should understand in order to help your decision making process.

A business plan answers "what do I want to do?" questions. It includes your company’s organizational structure, marketing plan and financial projections. Its purpose is to define where you want to take your business. It’s often the founding document of a new business.

A strategic plan, on the other hand, answers "how will I do it?" questions. It includes a detailed action plan for the next few years to achieve your company’s goals.

A BUSINESS PLAN SETS YOUR COURSE

The business plan is a broader, more preliminary document that sets your course when your company may still be nothing more than a twinkle in your eye.

If you were to sit down with a potential partner, investor or lender, this document contains the answers to the key questions they are bound to ask. It not only accurately summarizes what your business is all about, but why it’s a viable proposition. 

The business plan answers the “what” by telling us exactly what the business provides and how they provide. Product and services and operations are all explained so that we understand how the claims are being met and if the business is run effectively and efficiently.

WHAT A BUSINESS PLAN CONTAINS

A good business plan typically includes three key parts:

Marketing plan - this includes a specific description of the goods or services you propose to offer, your target market and your unique selling proposition to customers. What’s compelling and different about what you’re offering compared to the competition? How will you market it?

Operational plan - what do you need to execute your vision? This is your organizational structure, talent requirements to create or compliment your team and your needs in terms of space, equipment and distribution.

Financial plan - here’s where you outline your detailed financial projections, including growth expectations over the next couple of years. Lenders and investors want to know they’re going to get paid back or make a return.

HOW A STRATEGIC PLAN DIFFERS

If much of what we just covered sounds like it belongs in a strategic plan as well, you’re right. However, a strategic plan is different in that it sets out the detailed roadmap you will follow in the next few years to achieve your objectives.

Therefore, it must contain an action plan with specific activities, due dates and who is responsible for each activity. A strategic plan ensures any growth initiative is undertaken in a coordinated, systematic and informed way, for the best possible odds of success.

Bottom line, the strategic plan is the action plan for your business.  A strategic plan is used to provide focus, direction and action in order to move the organization from where they are now to where they want to go. It’s the task, milestones, and steps needed to drive your business forward.

Typically a strategic plan is lined out for a 3-5 year period, with specific phases rolled out quarterly. Benchmarks are often set in six month and yearly increments to allow time to plan, execute, and gain traction between milestones.

LIVING DOCUMENTS

Both a business plan and a strategic plan are living documents that must be reviewed regularly at least bi-annually.

However, a strategic plan should also be reviewed every time there’s a major event impacting the business, such as a new competitor entering your market, a new product launch, a sudden cash flow challenge, an important currency fluctuation or an acute talent shortage.

The business plan and the strategic plan are both essential planning tools for your business. In both cases, you need a team of players on hand to help you plan, develop, and execute both the business and strategic plans. Remember, your business needs both to give it a clear foundation and a sense of direction, as well as to help you grow and develop. Without them, you’re practically driving with the brakes on.

If you are interested to learn how Tonchev Associates could help you to create a strong growth-orientated business or strategic plan why not get in touch to discuss?

 

Why Innovate: The Link Between Strategy and Innovation

The “why” of innovation is simple: change is accelerating and we don’t know what’s coming in the future, which means that we must innovate to both prepare for change, and to make change.

If things didn't change, then your company could keep on doing what it’s always done, and there would be no need for innovation.  If markets were stable, if customers were predictable, if competitors didn't come up with new products and services, and if technology stayed constant, then we could all just keep going as we did yesterday.

But all the evidence shows that change is racing at you faster and faster, which means many new types of vulnerabilities.  Technology advances relentlessly, altering the rules of business in all the markets that it touches, which is of course every market.  Markets are not stable, customers are completely fickle, and competitors are aggressively targeting your share of the pie.  So please ask yourself, “Are we managing with the realities of change in mind?  And are we handing uncertainty?”

Since the alternatives are either to “make change” or to “be changed,” and making change brings considerable advantages while being changed carries a huge load of negative consequences, then the choice isn't really much of a choice at all.  You've got to pursue innovation, and you've got to do it to obtain long lasting benefits.

The decisions to be made focus on how best to prepare for future markets, and the actions relate to transforming the innovation mindset into meaningful work throughout the organization, work that results in the development of innovations that impact the market, and improve the position of the organization relative to its competitors.  This means, finally, an organization-wide commitment to designing and implementing your version of the innovation strategy plan.

Innovation by your competitors and by your own firm causes existing products, services, and business models, and indeed entire businesses, to become obsolete.  Since innovation is the driver of change, and change is the most fundamentally important driver of business strategy, then it’s not an exaggeration to say that innovation is the means of achieving strategy, as we find in the story of Apple’s turnaround from the abyss.

"Trying to define what will happen three to five years out, in specific, quantitative terms, is a futile exercise. The world is moving too fast for that. What should a company do instead? First of all, define its vision and its destiny in broad but clear terms. Second, maximize its own productivity. Finally, be organizationally and culturally flexible enough to meet massive change.” 

Jack Welch

What is Design Management?

Simply put, design management is the business side of design.


Design management encompasses the ongoing processes, business decisions, and strategies that enable innovation and create effectively-designed products, services, communications, environments, and brands that enhance our quality of life and provide organizational success.

On a deeper level, design management seeks to link design, innovation, technology, management and customers to provide competitive advantage across the triple bottom line: economic, social/cultural, and environmental factors. It is the art and science of empowering design to enhance collaboration and synergy between "design” and "business” to improve design effectiveness.

The scope of design management ranges from the tactical management of corporate design functions and design agencies, including design operations, staff, methods and processes—to the strategic advocacy of design across the organization as a key differentiator and driver of organizational success. It includes the use of design thinking—or using design processes to solve general business problems.

Professionals that are practicing design management include design department managers, brand managers, creative directors, design directors, heads of design, design strategists, and design researchers. However increasingly design management is being used by innovative managers and executives responsible for making decisions not just about product development but business development, strategy and planning.

Design Thinking and Growth

Have you ever seen a 7-year-old make paper airplanes? Then you've seen design thinking.

So why isn’t design thinking an established problem-solving tool in business?  Because most of us receive more than a decade of formal education that focuses on a very different approach to problem-solving: prove the answer with data first, before you try it.

The analytics-first mindset works fine for process improvement, but not for innovation. Our over-reliance on analytics denies our human capacity for creativity and results in uninspiring products and services, low growth, and pessimism about the future.

Design thinking is the way out of this trap.  Great growth opportunities are indistinguishable from bad ideas at first, and there is no handy source of data to tell you which is which.  Only a customer playing with a prototype or experiencing a new service can answer that.

With design thinking, we can nurture disruptive possibilities and unlock the zeal in your organization.  This is the catalyst which will change profoundly how you do business. We could show you how.

Practiced throughout the organization, the collaborative pursuits between design and business create a powerful platform to both support incremental improvements (reduction in time to market, increased margin, better product/market mix) and to drive innovation.