Strategy plays a key role in digital transformation in a twofold way: to cope with digital change, a strategic approach is of pivotal importance. At the same time, the methodological instrumentarium which is at the foundation of any strategy formation is subject to digital change itself.
Strategy is one of the fundamental methodological approaches for mastering the challenge people face from the need to make decisions under conditions of uncertainty.
In times of change, uncertainty is particularly pronounced. The multitude of individual developments, their interdependence and their manifold interaction lead to hardly foreseeable effects. Strategy is an important instrument for mastering the resulting uncertainty.
Strategic management in the context of digital transformation: methods of decision, strategy and leadership in a state of change.
Digitalization is an upheaval of unprecedented magnitude and speed. Its consequences are so far-reaching that it is considered to be the turn of an era. The Digital Revolution marks the transition from the industrial age to the digital information age. Decisions in the context of such profound change must be made in view of great uncertainties. In this situation, strategy is an indispensable decision-making tool – for managers, for politicians and for every individual.
At the same time, the instrumentarium of strategy formation itself is subject to change due to digitalization. In all phases strategy formation is based on the use of information. Digitalisation changes fundamentally the way information is handled: from perception to communication, from processing to its analysis. As a consequence, the methodological instruments which form the basis of strategic action are changing.
Digitalization thus prompts us to deal with the topic of “strategy and decision” in two respects. To succeed in digital transformation, instruments of strategy and decision making are needed, which themselves are subject of change in the course of digitalization.
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Strategy as a Method in Digital Transformation
Strategy is an instrument of decision-making which has evolved over thousands of years. Countless generations have used strategy as an instrument for aligning individual and collective action. But strategy has rarely been more important than it is today. Our time is marked by a profound upheaval, which is afflicted with great uncertainty: digitalization and digital transformation.
Digitization is taking place in a multitude of transformative developments. Many of these changes are so fundamental that they have far-reaching effects on their own. In their interaction, they initiate profound upheavals that change the structure and functional logic of existing systems dramatically.
These transformative change affects all areas of human existence and leads to an inescapable need for adaptation. The need for action goes hand in hand with the compulsion to make a decision. However, this is made more difficult by the unpredictability of the course of change, which causes substantial uncertainty. Strategy is an appropriate instrument to deal with such uncertainty. Therefore, strategies for digital transformation are needed. And strategies for doing business and living in the digital age.
Innovation, Disruption, Strategic Management, Corporate Development, Digital Strategy, Digital Transformation, Digitalization
Digitization changes the instrument of “strategy”
Strategy is the pivotal tool to meet the challenges of digital change. At the same time, the methodological instruments on which the formation of strategies is based are themselves subject to digital change.
Digitisation directly affects the toolset of strategy formation. The design of any strategy is based on several procedures, all of which are directly related to the handling of information. Consequently every one of them is directly affected by the ongoing transformation caused by digitization. This includes the determination of exogenous conditions, the discovery of interdependencies and causal nexuses, the abstraction from individual observations, the design of plans, the evaluation of alternatives and the decision making.
Many basic principles of strategic action remain valid in the digital age. However, their implementation is based on a broader information base and more comprehensive capabilities for information processing. This shifts the range of possible uses of strategy as a methodological approach. In addition, the way in which strategies are designed and implemented is changing. The genesis of strategy itself is a subject of change.
To successfully master digital transformation, it is necessary to use instruments that itself have to be developed further in the course of change. The comprehension of the digitally induced change in the instrumentarium itself thus becomes a strategic success factor for digital change.
Strategy, Strategy Formation, Strategic Management, Methodological Transformation
Digitization changes the instruments of “decision”
Digitalization affects not only the methods of strategy formation but also all other instruments of “decision making”.
All of this applies in a similar way to other instruments of decision-making. Analysing the situation, identifying alternative courses of action, evaluating options and communicating the decision – all parts of the decision making processes are based on information and information processing. Digitisation expands the information base. The processing of the information can be automated. And the arsenal of available methodological instruments is becoming more extensive. As a consequence, decisions are made on a different foundation – better informed and rationally justified. This fundamentally changes the behaviour of people and thus the functioning of economic, political and social systems.
Since strategy means taking into account the possible reactions of others in one’s own decision, a general change in the decision-making behaviour of others is of the greatest relevance for one’s own process of strategy formation.
Decision, Decision Making, Methodological Transformation
Digital Era Framework
What strategies should be pursued with regard to digitisation? And: What does strategy and decision mean in the context of a digital world?
In view of the key role of strategy and decision-making in digital change, this topic is currently gaining high priority on the agenda of many executives in business, politics and society.
These questions need to be answered in a coherent way. A starting point for this offers the “Digital Era Framework”, a reference model for describing digital transformation presented by Dr. Dr. Jörn Lengsfeld.
The model is designed to describe the effects of digitisation on a conceptual level. It helps to build a conceptual bridge between digitisation and the methodological instruments of strategy and decision. At the same time, the “Digital Era Framework” allows to analyse the structure and functional logic of systems on the basis of a reference framework and to identify potential changes due to digitization. This makes it possible to analyse both issues in a coherent way using a unitary reference framework.
Reference Model, Frame of Reference, Strategy Formation Model, Strategic Management, Digital Transformation, Digitalization