Six steps to kickstart your company’s “digital growth engine.”
June 21, 2024
Illustration by Antti Kalevi
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Measuring earnings before interest, taxes, depreciation, and amortization (EBIDTA) profits may be the gold standard for assessing traditional companies, but it is not the way digital businesses think. Successful digital disruptors focus on creating long-term value through two distinct levers: customer lifetime value (CLV) / customer acquisition cost and the end-to-end customer experience. While digital disruptors have pioneered this approach, established companies are actually often better positioned to take advantage of this “digital growth engine” because they have one thing startups lack: customers. To kickstart their own digital growth engine, companies should: 1) Align their customer experience ambition with financial ambitions and operational reality, 2) Optimize their customer data strategy, 3) Differentiate engineering for experience, data and AI, and enterprise, 4) Develop an “electronic brain” powered by predictive AI models (with feedback loops). 5) Launch a data and AI-enabled omnichannel customer outreach program, and 6) Transform KPIs, structure, and incentives.
One of the great myths of the digital world is that you can best measure a company’s success by its earnings before interest, taxes, depreciation, and amortization (EBIDTA) profits. Although this may be the gold standard for assessing traditional companies, it is not the way digital businesses think. It’s not that digital disruptors don’t make money — they do. But these profits are only part of the picture.
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Nathan Furr is a Professor of Strategy at INSEAD and a coauthor of five best-selling books, including The Upside of Uncertainty, The Innovator’s Method, Leading Transformation, Innovation Capital, and Nail It then Scale It.
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KC
Kunal Chakraborty is the founder and CEO of CygnusRED, a customer data and AI/ML infrastructure engineering company. Since June 2023, Kunal has also been the Interim Global Vice President for Digital Platforms, Products & Marketing Services at Mars Inc. Kunal has also worked at EssilorLuxottica Optical Retail (formerly GrandVision), was one of the founding members of Accenture’s Digital Strategy EMEA practice, and is an adviser to AlixPartners, a global consultancy.
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New!
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Strategy Planning and Execution Course
Accelerate your career with Harvard ManageMentor®. HBR Learning’s online leadership training helps you hone your skills with courses like Strategy Planning and Execution. Earn badges to share on LinkedIn and your resume. Access more than 40 courses trusted by Fortune 500 companies.
How to develop a winning strategy—and put it to work.
