The hybrid digital strategy

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Many business leaders understand digital as putting things online that were offline before (to save cost or to enable customer’s self service capabilities). Others consider it just the latest management buzz word but like to play around a bit with fancy projects or websites.

Understanding digital as something you can just add on top of your business is a fundamental error of thought.

The other side of digital however – less deductive for established businesses but far more powerful – is to truly embrace digital and make it part of your corporate DNA. This is what the hybrid strategy is all about.

Why relational businesses need a digital strategy

Relational businesses are businesses that depend and focus on establishing long-term relationships with their customers for which high quality, a service culture, customized solutions go without saying. Typically these are service- or advisory-driven businesses such as hotels, travel agencies, B2B- or high item value sales units, advisory companies of any kind, or, a case that I just completed; wealth managers and private banks.

Many traditionally relational businesses didn’t realize digitization was a trend that was affecting them, too. The typical arguments for that went along the following lines:

“Our customers appreciate talking to someone face to face”
“We differentiate ourselves through our service”
“You can’t digitize human advice”
“We have a relationship with our customers that a machine can’t have”

All these arguments are correct. And yet they are missing one crucial point: The customers of any relational business already went digital. For a relational business, for which customer relationships are crucial for success, it’s an easy truth:

Not being digital simply means, not being customer focused anymore.

The hybrid strategy

Many businesses have tried adding digital elements to their value proposition, such as self-service booking systems, playful apps, cool looking websites, online calculators, you name it. What was wrong with quite many of those projects was that the result of such efforts lead to a cluttered customer experience that clearly felt like the parts did not belong together.

What a relational business really should do is to blend digital into every aspect of the existing business. I call this the hybrid strategy, a universal recipe of how to make “digital” a genuine part of any relational business.

The hybrid strategy means to blend digital into every aspect of your business to create a new DNA.

The core idea of the hybrid strategy is to leverage the existing strengths while blending them with digital technology to create a new DNA. This requires a process of strategic transformation.

The essential role of the value proposition

The core of it all must be an entirely customer focused value proposition. Its role really can’t be underestimated, in many ways it actually takes up the role of a corporate vision. The value proposition not only serves as guiding light, it also assures that the outcome of the transformation will really create value for customers and business.

The value proposition can serve as both a blue print as well as a corporate vision.

Creating such a value proposition for an existing, relational business is quite a complex process: The challenge is that it mustn’t result in the single-focused minimum viable product that you would find in your typical startup; such a reduced MVP may appeal to your typical VC, but it would neglect essential value creating elements and hence put existing business at risk. An existing, relational business requires a value proposition (and hence MVP) with more aspects and angles to it that reflect the true nature of a business’ particular customer value creation. I will elaborate more on this topic in another post.

But if you do it right, in the end something entirely new can emerge out of this process: A new business, which has inherited the strengths of the past and yet for which digital has become a true part of its DNA.

Don’t give up any of your strengths but on the contrary; become aware of them, focus on them and then enrich them with the power of digital technology.

The hybrid strategy is actually a universal approach of how to make digital a genuine part of any traditional, relational business. Enriching the relational essence of a business with the power of digital technology is a tremendously powerful tool. It can create and maintain the value creation for the customers and hence for the business. But in order to do so, a business will need the willingness and courage to truly transform into something new.

You will recognize your legacy in the new business, but you must still let go the past.

Conclusions

A hybrid is a new instance in its own right. In business terms: It’s not the stupid addition of digital to an existing business, it’s what results after a transformation process of blending digital into the DNA.

Don’t let yourself fool by the tempting idea that a digital strategy is something that you can outsource to a consultancy or even into a corporate venture or a startup that you acquire: As a business leader it’s your job to do the thinking about how you can enrich and transform your identity with a digital value proposition.

The ideas might come from the outside, but the transformation must be driven from the inside.

A general observation is though, that for most businesses the result of this transformation shouldn’t be a purely digital identity, nor should it be “digital pockets” within, on top or aside of your business.

The truth is: People like you and me are humans, not digital beings, and yet are we inhabitants of the digital space as well. To very much the same extent, pure digital business models are not the right thing for most costumers. This is good news as it represents a huge opportunity for your established relational business, because

The world is not online or offline. It is essentially both, at the same time!

This leads to a very simple conclusion:

Your customers are hybrid beings.
So you have to become one, too.

After this transformation, your relational business will have become a hybrid business that is both entirely at home in the physical as well as in the digital space, and anywhere in-between.

Case study

I recently completed a case of such a transformation with Leodan, a private bank for which I did strategy, business development and acted as CDO a.i. With them we went so far as to actually position the bank as the “first hybrid private bank”.