What is digital strategy and does it really matter?

This chapter discusses the evolving notion of digital strategy and its underpinning digital technologies, outlines an overarching framework for understanding the fundamental reasons why every organization needs a digital strategy, and explores the implications for incumbents and digital native firms alike competing in the digital age. The framework is based on two fundamental changes in the business environment: the changing nature of the economy and the rapid development of digital technologies. These changes together redefine the “rules of the game”, forcing all organizations to evaluate and re-invent their strategies and business models by exploiting rapidly expanding digital capabilities. As the digital and physical worlds are increasingly meshed into one, a new cyber-physical environment is emerging, which has profound implications for how digital strategy is developed, executed and evaluated. For business leaders, the main challenge is often not in generating more new ideas, but rather in effectively managing the transition to new technologies, new strategies and business models, and new organizational designs. The theoretical contributions are discussed and three new areas for future research are highlighted.