Digital businesses are becoming a larger and larger part of every company's pie. Often, the planning and growth of digital businesses are the domain of chief digital officers or chief information officers. Yet upper management, especially chief executive officers, need to know how the digital business is developing and being implemented as part of their business leadership.
How can CEOs make sure they are asking the right questions about digital business?
According to a recent article in the Harvard Business Review, CEOs should focus on five questions.
Questions to Obtain an Overview
The first is to ask how broad the scope of the digital business is in terms of customers, devices, or third-party users. One of the common business strategy mistakes that traditional businesses make in digital strategy is to plan the digital component to simply port existing customers, devices, or third-party users to it. Yet it is very likely that future users will come to the digital business with new sources. What might they be? Can they be added with no additional cost? The latter question is particularly important in making sure that a digital business is profitable and pays for itself quickly.
The second question focuses on the pace of change in the digital world and in governmental response to it. CEOs should know how much it would cost for their digital business to response to a change in the regulatory environment or in the business. Sensitive information, for example, may well be a focus of regulation and changing consumer behavior in the future.
One method of ascertaining the following - questions to which a definite answer may prove elusive - is to create multiple scenarios for the regulatory and consumer environments of digital businesses.
The third question is whether the digital business could partner with third parties to add value. One method is to provide application programming interfaces (APIs), which let third-party developers build products that go with a company's digital products. Apple's Siri voice assistant, for example, was recently opened to other developers.
The fourth question is how the digital initiative stands in relation to open standards and open sources. In one scenario, these factors can increase competition and allow your customers to be snared by competitors rather than your company. However, open standards and sources often have advantages for a business in terms of lowering costs and increasing the ability to scale. Here, again, creating multiple scenarios can help a digital business adapt to changing scenarios and manage them adequately.
Finally, how could the digital business monetize or otherwise gain value from its product? The digital world is characterized by large volumes of information, all of them indicating something of potential value about the customers. What are their preferences? What are their patterns of purchase and utilization?
Once you have this information, more questions follow. Can the patterns and preferences be data mined? Monetized? Can the information be used to create digital products of even more value to a certain group of users?
These questions will ensure that CEOs have a sufficient overview of digital initiatives and developments.