What is Your Digital Business Strategy?

W hat's your digital business strategy? How should you strategically manage your digital resources? Digital resources might present an opportunity for your business model, as they did for eBay, Google, Amazon, and Netflix. Or these resources might threaten your business model, as they have for Kodak, Borders, Blockbuster, and the New York Stock Exchange. Global spending on IT resources exceeds US$3 trillion a year, 1 and many organizations spend over a billion dollars every year on IT. While senior managers sometimes ask what the return is from their investments in technology, a better counterfactual question might be, how can we use technology as a strategic asset to enable new competencies or maintain a competitive advantage? Consider Netflix. IT is a vital component of Netflix's business model and strategy. The firm's business model was to provide video entertainment over the In-ternet. However, achieving this objective required extensive negotiations with those having the rights to the videos—movie studios and television networks. Net-flix also had to solve the problem of how to move video to the TV set using the Internet. To establish itself in the marketplace , Netflix's interim strategy was to use IT to create a highly efficient system for distributing physical DVDs through the mail. Its longer-term strategy was to use technology to download videos to PCs over the Internet, and to partner with services like Roku and consumer electronics manufacturers to download directly to a TV set over the Internet. Thanks to its digital business strategy, Netflix is ready for changes in technology and consumer behavior; it now reports that about 60 percent of its customers have already experimented with streamed videos over the Internet. 2 In contrast to Netflix, Blockbuster's digital strategy was too little, too late. Given the significance of IT, senior managers need to develop a digital business strategy and communicate it throughout the organization. Developing such a strategy requires synchronizing digital assets and IT infrastructure with your business strategy. 3 As managers develop a strategy to achieve their goal—for example, to be the low-cost producer or to be number 1 or 2 in each market in which the firm competes—that goal should also be informed by a discussion of how investments in IT can help achieve the objective. Top managers have an important role to play in defining the digital business strategy. They need to view IT as a lever that they can manipulate to …