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What is ‘Digital’ – Part 1

Digital is about understanding users, building products that meet their needs and being able to respond to their changing demands.
It includes all those things that are required to create and take a digital product to market and keep it competitive. It requires a cradle to grave approach from concept to delivery, operation and continuous improvement. It requires a team accountable, responsible, vertically aligned and empowered to improve the product.
Digital infers that the team responsible for product definition is also the team responsible for delivery, operation and maintaining its competitiveness in the market. There are no organisational divisions between those that specify and those that deliver and maintain. If your digital team isn’t integrated in this way or intending to be, it’s not working as it should.

WHAT IS A PRODUCT?
In a digital team, a product is any user journey that can be measured and optimised (e.g. registration or checkout) and as broad as an application or website.

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An innovation or proposition expert might have a different view and argue that a product is made up of an opportunity (target market, market growth rate, differentiator, gap, etc.), a customer offer, experience, financials, risk, operations, etc. They would of course be right, there are many valid definitions. But, in a digital context, and for the purposes of this paper, we are referring to anything that can be managed ‘like’ a product – that means it can be measured and optimised and requires all the skills regardless of its size.

FUND PRODUCTS TO BE COMPETITIVE
Because these teams are responsible end-to-end and are delivering constantly (i.e. teams form around products and not projects) the size of the team required is directly related to the competitiveness of the marketplace (or the attractiveness of that market to new entrants) and the organisation’s ambitions within it. If you are the only player in your market, your product is the best-in-class and your market isn’t attractive to new entrants, then you can get away with a smaller team and a low rate of release. If you are in a hyper-competitive, fast moving market that is very attractive to new entrants, then you might need larger teams, short release cycles and to constantly improve the product.
This differs from a traditional project approach within IT to product development. Rather than building specifications to a time and budget, or releasing features at a certain speed as a measure of effectiveness, funding is used to resource teams based on the product opportunity. It is a continuous funding commitment that recognises that launch is just the beginning. The point at which funding ceases is the point at which the product is withdrawn from market – at the very least because there would be no budget for maintenance and operations resource!

ALL REVENUE CAN BE LINKED TO USER BEHAVIOUR
Digital products are unique in that a direct ‘real-time’ correlation can be established between desired benefit and users engaging with a product. Whilst there are lots of different business models (refer to some below) there is always a correlation between users and desired benefit. This correlation is a real digital equation that can be optimised to maximise outputs. That just doesn’t mean focusing on attracting more users because more in means more out – it’s more complex than that. Understanding how each component of the ‘digital equation’ affects outputs and by how much is the job of the digital team. The success of digital products, the changes made to them and the teams responsible for them can be very transparently measured based on these metrics. For example:

Digital Flow[1]_large

The above diagrammatically represents a digital equation and works exactly like one, for example:
1 visitor x 2 visits/week x 5 pages/visit x 3 ads/page x 1p revenue/ad = 30p/wk ad revenue.

Optimising this equation helps us to understand:

 

(A) Which referral sources are the most valuable and how are they trending

(B) Which visitors and their user journeys generate the most revenue and how are they trending

(C) What type of pages generate the most revenue and how are they trending

(D) As a function of traffic, how are the revenue models performing and how are they trending

It also helps us balance investment in marketing (reach) and product development (engagement, actions), to drive decision making. For example:
• It is inefficient to spend money driving visitors to a site where the dropout rates are high.
• It is inefficient to spend money on increasing engagement when the checkout process has a 95% drop out rate.
• It is a false economy to increase the number of adverts on a page because that adversely affects page views.

Read Part 2

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