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CHAPTER 4
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The Second Principle of
Digital Business Strategy—
Know Your Customer
The second principle is Know Your Customer. In a digitized context, this
concept relates substantially to customer data dynamics and it can be
broken down into three subconcepts: volume, task, and intent.
Before we drill down into the subconcepts of customer data
dynamics, it’s important for us to realize that knowing your customer
is a precursor to the development of a unique value proposition, as
outlined in the previous chapter. Should our perspective of volume,
task, or intent change, it is highly probable that our value proposition will also require reassessment. This is true in reverse—should our
unique value proposition change at any time, we will need to reassess
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42
THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
our customer data dynamics to ensure that our strategy has taken
everything into account.
Let’s take a look at those three subconcepts.
Copyright © 2016. Business Expert Press. All rights reserved.
Volume
If we are to create coherent strategy that permits us to achieve tactical
excellence, it is vital that we understand customer volume and intent.
In Chapter 6, we will discuss the engine of growth within the Ionology
quadrant in more detail. The Ionology quadrant allows us to define our
approach, identify what plays are available to us, and formulate our strategy for making those plays. Marketplace volume is a key part of understanding what plays are available to us.
Conventional wisdom would tell us that high volume of search in
the marketplace for our specific product or service (our task) is a good
thing and that low volume is not good—but that’s not always the case.
Understanding volume is about more than simply discovering what quantity of customers exists. It is about understanding the nature and level of
demand which then means looking at the volume and intent of customers
in the context of the marketplace and effectively judging our ability to
leverage our resources to find a place in the market.
A low customer volume could mean that we have a product or service that nobody wants—but equally, it could mean that the product or
service we are looking to provide to customers is innovative and that our
customers are not yet aware that it exists. The former may preclude us
from entering the market, while recognition of the latter will permit us to
formulate our strategy around the recognition that we must raise awareness of the availability of our product or service and convey the relative
advantage of that proposition.
By the same token, high customer volumes in our desired marketplace
don’t necessarily mean that it is a good time to enter that marketplace.
A high level of volume is often coupled with a lot of competition. Additionally, a marketplace that has a high level of volume might be approaching maturity, or even entering decline.
McKeown, Niall, and Mark Durkin. The Seven Principles of Digital Business Strategy, Business Expert Press, 2016. ProQuest
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
43
Copyright © 2016. Business Expert Press. All rights reserved.
When we understand the customer volume that exists in our marketplace and why it exists, we can look at it in the context of digital business
strategy and understand where we are in the Ionology quadrant. From
here, we can better choose what course of action we should take to help
us to achieve the ambition we defined under the first principle of digital
business strategy.
One of the most readily available tools for measuring volume is
Google’s Adwords. Google Adwords is not the most accurate desktop
tool on the market, but at the time of writing it is the most accessible
and cost-effective. The only requirement for using Google Adwords is
that the user should have a Google account. The keyword planner tool of
Adwords, located under the tools option, has some very interesting and
unique features. It allows us to plug in our keywords and then select a specific geographical area, for example. When we come to our macroanalysis
and discuss Principles 5 and 6, we will discuss geographical lens locking,
and through that, we will understand which geographical areas we may
wish to target.
Once we’ve selected a geographical area, we are able to obtain feedback about how many potential customers are searching in an area and to
further narrow those keywords to give us a more accurate picture of what’s
going on in the marketplace.
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THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
To take an example of how high volume in a marketplace can translate
into that marketplace being a poor choice for entry, we’ll look at orthodontists. In the state of Connecticut there is an average of 880 searches
for orthodontists made daily. In New York there are 3,600 searches. This
could easily be put down to the difference in population density between
Connecticut and New York, but if we look at another area—California—
we can see that the number of searches performed daily for the keyword
“orthodontist” is disproportionately higher, at 12,100.
What we see here is that there is a five-fold increase from C
onnecticut
to New York, and there is a four-fold increase from New York to C
alifornia.
From a digital perspective, volume is extremely high in California, in
comparison with Connecticut, but if an orthodontist is looking to set
up a business and compares the volume in the market to the level of
competition that exists within that market, we might see that C
onnecticut
could be as good an option as California—if not better—because of the
level of competition within the marketplace.
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
45
And now for another example, where low volume in a marketplace
does not necessarily mean that targeting that market is a bad idea. Form
4 Type 7 switchboards are electrical distribution systems that are used to
take high voltages as they come into a data center and break them down
into low voltages for use within computer racks. One of the advantages
of Form 4 Type 7 switchboards is that each of the cubes that are used
to power certain sections of a rack are separated out—this means that
if there’s a fault in one cube, like a blowout, it has no impact on the
other cubes that are within the rack. Form 4 Type 7 switchboards have
been used in Europe for some time, but now companies that manufacture them are beginning to target U.S. markets. There is certainly
demand as many of larger data centers want to switch to Form 4 Type 7
switchboards, but there are no signs of them going to Google looking
for suppliers of it.
In fact, when we look at the Google Adwords results for Form 4 Type 7
switchboards, globally, we can see that there are only on average 10
searches done per day. This doesn’t mean that there is no demand, but it
does indicate that there would be little point in a business that provides
Form 4 Type 7 switchboards attempting to make an attention style play
with pay-per-click advertising or Search Engine Optimization (SEO).
Rather, for companies selling Form 4 Type 7 switchboards, the apparently low demand portrayed through our Google Adwords data is a sign
that business can be done better by using specifically targeted advocacy
selling to find our customers.
To summarize, the measurement of volume tells us that if there
is low demand, it is an innovation that our potential customers are
not yet aware of, that business by advocacy might be a better route to
customers, or that the market is in decline and there is little point in
attempting to find customers within it. If there is high volume, it tells
us that there is an opportunity to make plays later that will allow us to
use attention-driven plays and potentially become a prime business,
because there is particular demand in our marketplace. In either case,
whether the volume we see when using Google Adwords is high or
low, we must use the data contextually to decide where we sit in the
marketplace.
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THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
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Task
For many traditional marketers, demographics have long been the holy
grail of understanding and targeting customers. Using various indicators,
such as age, gender, ethnicity, language, and home ownership status, marketers would attempt to identify specific demographic groups that might
purchase the product or service they were offering, to better target them
with advertising. With the explosion of the Internet and online business, we
see the death of demographics as a tool for identifying potential customers.
For example, cruise vacations have traditionally been marketed toward
very specific demographic groups, in particular, the “boomer” woman, the
older lady who longs for strolls along the beach in a sarong. Marketers set
about selling to this demographic, creating images that portray the boomer
lady in a sarong, strolling along a beach, but when we take a look at the
demographics, we can see that this picture of the average customer is inaccurate. In fact, there is no such thing as an average customer, in terms of
demographic factors. When we try to sell cruises, we find that it is neither
the woman nor her desire for long strolls on the beach that actually makes
conversions. People choose the cruise and vacations based upon three
things—destination, how they can bring parties of people with them, and
their ability to relax on the cruise. Their task, then, is the booking of a cruise
that goes to a specific location, permits group bookings, and sails aboard a
ship that facilitates relaxation. Messaging for this task needs to be specific,
and gender is not a viable point of distinction because men book cruises
just as often as women. The factors that convert potential customers into
customers are those that help them to complete their tasks at hand.
To look at another service, we recently undertook a project where a
banking institution wanted to build a new website based on demographics for three stages of life: newly married, saving for college, and retirement. When the data are examined, though, we discover that people are
not looking for bank accounts based on their stage of life. Rather, they
are looking for bank accounts based on individual needs that are not
necessarily affected by, nor reflective of, their demographic characteristics.
Customers were looking for convenience tailored to their specific needs.
Some wanted the ability to use nearby automatic teller machines, others
wanted user-friendly online tools, and yet others were looking for close
McKeown, Niall, and Mark Durkin. The Seven Principles of Digital Business Strategy, Business Expert Press, 2016. ProQuest
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
47
personal relationships with the bank. The stage of life of the customer was
not a factor in deciding which of these was a priority for them.
The best way for this bank to target customers, then, is to target the
customers by promoting these specific characteristics and advertising to
the people who want them, and not by targeting specific demographic
groups and presuming that they desire certain characteristics in their
banking experience.
To put it another way, if an architect wanted to sell their services,
they wouldn’t look for CEOs and they wouldn’t attempt to target specific
niches or people. They would look at the task the customer comes to
them with and seek to respond to that customer task more effectively than
anyone else in the marketplace. In the marketplace, we know that people
are looking for architects that can make more efficient seating and eating
arrangements—say a canteen has a specific seating issue they require a
solution for. The architect that is best able to respond to the customer’s
task of solving the seating issue will get the attention of the customer the
quickest. That architect is the one that will receive the contact from the
customer. Anyone might be making the call—the CEO of the company,
the maintenance manager, or the canteen manager. The business may be
large or small. It doesn’t matter. The one thing they have in common is
that they all have a seating and eating arrangements issue, and the architect best placed to address that issue will get the business.
So we see from these examples that, rather than attempting to sell our
products and services to specific demographic groups, in digital business,
we must identify what task the customer will be looking to undertake when
they do business with us and focus on the ways in which we can be the most
effective in the marketplace at allowing them to complete that task.
Intent
Angry Birds Don’t Need Therapists
When we seek to understand our customer data dynamics as they relate to
digital business, knowing what intention lies behind our customer’s decision to perform a specific search is vital if we’re to make a good strategy.
A recent search for the keyword “angry birds” showed that 36,800 people
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48
THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
had searched for the term in 1 month. Without contextualizing these
data within the real world, and understanding that Angry Birds is a game,
originating as a smartphone app, which has soared in popularity over
the last 5 years, we might be led to believe that there is huge demand for
veterinary services or bird whisperers to soothe our feathered friends’ tempers. Obviously, this would be a huge mistake and exemplifies just how
important it is that we make sure that the customer’s intent aligns with
the capabilities, products, and services of our business.
Let’s look at some case studies that demonstrate how a company that
has identified high demand and has clearly defined customer tasks might
stumble if they misunderstand customer intent.
Case Study 4.1
Copyright © 2016. Business Expert Press. All rights reserved.
Certification Europe
Certification Europe is an accredited certification body that provides
International Organization for Standardization (ISO) management system certification and other management standards to organizations globally. The business conquered its main territory successfully and wanted
to move further through Europe, with specific focus on its certification
ISO27001, which is an information security standard. When the business
looked at ISO27001, it saw large volumes of customer demand in the
marketplace, using keyword data from tools such as Google’s Adwords.
To help them to meet the demand for ISO27001 certification in
Europe, Certification Europe decided to open a new office to help them
better serve their clients. Their intent was to base certification consultants
in this office so that they could use attention-driven marketing, such as
pay-per-click and SEO, and send consultants out into the field when customers started calling for them.
The first question they had is which country would be the best place
to base their office; that is, which geographical area showed the highest
demand for ISO27001 certification. Because the search term “ISO27001”
is the same in any language, Certification Europe was able to get an
immediate picture from the data of where, geographically speaking, the
searches were being made from.
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
49
Inside Google Adwords, they were able to find the quantity of searches
that existed by country. In France, there were on average around 180–220
searches per day. In Germany, there was around twice that v olume—360–440
searches per day. This immediately suggested, on the face of it, that G
ermany
would be a better location for Certification Europe to open their new office,
assuming the supply level within the marketplace was still low enough to
make it viable, but when they looked at the UK, they saw that volume was
twice that of Germany—733–896 searches per day.
Within Google Adwords, it is possible to narrow down the geographic area even further. When Certification Europe looked at the data
for London, it became apparent that the volume that existed just within a
25 mile circumference around the M25 in London was almost as
high as the volume for the whole of France. Logic would tell us that if
Certification Europe were to go into a new market, London would be
the best place for an office, because it would be the most likely to permit
their consultants to effectively serve their customer. So now that they’d
used this desktop research to understand demand, and they had defined
their task as consultancy and certification for ISO27001, they came to the
logical conclusion that their best play would be to open a new office in
London, but does this match up to the intent of the customer?
To understand the customer’s intent, they must perform a test. The
best test that can be used is what we refer to as baseline and base camp
testing. With baseline testing, we’re trying to find out what the minimum
amount of sales opportunities are, if we were to enter the marketplace.
With base camp, we aim to ensure that we have a unique value proposition (as defined under the first principle of digital business strategy) by
checking it against demand to ensure that our ambition is not misguided.
In other words, we are testing our value proposition and ambition against
customer intent.
To test for this match, Certification Europe ran pay-per-click ads,
because a high level of demand existed within the marketplace and created what’s called a minimum viable product. This concept is outlined
in The Lean Startup by Eric Ries. The concept dictates that we do the
minimum amount of work required to answer the leap of faith hypothesis (in this case “we believe that there are people in London who want to
get ISO27001 accreditation, and they’re looking for consultants online”).
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THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
We are seeking, with our testing, to prove this hypothesis is true. Certification Europe did this by creating a temporary website and running
Google Adwords. The Adwords covered ISO27001 from two different
perspectives and allowed the business to see whether their understanding
of the customers’ motivation matched up to reality.
The first version of the advertisements that were run by Certification
Europe advertised help with certification for ISO27001. The second advertised information and training about ISO27001. The click-through rate of
those who wanted to get ISO27001 certified (and would therefore be potential customers for Certification Europe) is 3.89 percent. For the advertisements
offering training and information, it was approaching 32 percent. This clearly
tells us that the vast majority of people searching for ISO27001 are motivated
by a need or desire for education and not a desire to actually get certified.
With these data available to us, we work out how many people are
searching and how many of those we could potentially attract, work out
the cost per search and the likelihood of conversion, and arrive at baseline
figures. These figures then easily show us, when we factor in the customer’s motivation, that being a digital business in this crowded marketplace
is not an economically viable option.
Being a savvy business, Certification Europe recognized that the customer intent did not necessarily match up with their unique value proposition and resourced the project more appropriately. They created websites,
supporting sales reps and building brand in the London area. Knowing they had to fight differently to gain a foothold in the marketplace,
Certification Europe realized it could not wait on digital to deliver sales
opportunities. Rather than ignoring or denying this fact, it acknowledged
that this could have a knock-on effect on its growth ambition and started
to develop a secondary set of tactics and resources to run alongside digital.
In response to this test, Certification Europe also built a free o nline
education portal to attract new customers seeking knowledge on ISO27001.
They understood that if they helped deal with the customers first task, they
would be much more likely to be in line to deal with the second, profitable
task of helping the organization achieve its ISO objective.
The concept of offering free training was not even a consideration at
the outset of creating the digital business strategy. It came about by following the process of the Seven Principles of Digital Business Strategy
and seeking to understand customer intent.
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
51
Case Study 4.2
Copyright © 2016. Business Expert Press. All rights reserved.
Creme Global
For 15 years (at the time of writing), Creme Global has been creating
advanced models that allow us to understand the cumulative intake of
toxins to the human body. For example, a person brushing their teeth
would take in a small, harmless dose of toxin from their toothpaste. If
that same person goes on to use lipstick, walks across pesticide-covered
grass, and gets into a car, then with each new activity they receive another
small dose of various toxins at each point. Creme’s models look at the
cumulative levels and effects of these toxins over time.
Because Creme’s models and modeling software are an innovative
technology, little-to-no demand exists for them within the marketplace
they see themselves entering. For a decade, Creme has aimed to talk to
those who would be potential customers and has found it difficult to
reach new clients—usually because their clients do not yet understand the
concept or realize that the technology exists. The customer doesn’t necessarily know what task they’re even attempting to solve—they’re not aware
that intake modeling across multiple geographies and multiple lifestyles
exists. Once the customer does understand, they have a very clear motive,
defined roughly as “We want to make our product as safe as possible.” The
intent of the customer will then revolve around understanding how their
products affect the toxin intake of people going about their day.
The first thing the company needs to do is go right back to value proposition and understand that it must now create a new wave in order to create
demand within the market. We cannot expect to find motivated clients
within the market unless we create demand by raising awareness of our product. To do this, we must be able to clarify which customer task we are able
to get done. Taking that into account, Creme starts to take a look at what it
could use as a term that will work to effectively create demand. It looks across
the web and uses Google search to try and find waves starting to emerge.
One such wave term is around Advanced Consumer Safety Predictive Intake Modeling. This aligned with Creme’s desire to create healthier
consumer products through their expert, real-world models but we felt the
acronym just didn’t work. However “predictive intake modeling” as a wave
term is something that could create demand and that Creme could “own.”
McKeown, Niall, and Mark Durkin. The Seven Principles of Digital Business Strategy, Business Expert Press, 2016. ProQuest
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THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
When we start to see scholarly articles being cited for predicting
intakes, and using mathematical models, we find that the citations are
an indication of a breaking wave, but many in the academic world don’t
necessarily have the ability to create tasks to align with customer motives,
in order to convert them into customers. Creme Global decides that it is
going to take up that challenge. It takes the term “predictive intake modeling” and says that this is what they’re going to do better than anyone
else—they have invented the term and they wish to create demand and
make sure the customers have that task at hand.
Copyright © 2016. Business Expert Press. All rights reserved.
Competency and Capacity
The challenges both of competency and capacity are evident in these case
examples and in understanding how and why staff may or may not get
motivated around the digital opportunity. When managers and staff are
busy “doing” and not having time to think it is unlikely they will see
a need for the new analytical approaches and associated competencies
needed in this new context. Many will not have the emerging competency
sets needed for managers to envision and exploit what more sophisticated
metrics and modeling can bring to their business.
A competency is an underlying characteristic of a person, which results
in effective and/or superior performance in a job or the attributes that
firms require to be able to compete in the marketplace. A competency
is a set of related, but different sets of behaviors organized around an
underlying construct, which we call the “intent.” Competency also r elates
to the “personal characteristics” of individuals. This approach focuses on
the person and on the characteristics that make people competent.
Managerial competencies have been variously described as the traits,
skills, behaviors, and values of effective managers. While managers of
a company are significant contributors to its competitive performance,
there has been little success in pinpointing the competencies required for
a manager to operate successfully in a particular organization.
The context in which the firm operates is also extremely important
when considering competency. It is argued that it is unlikely that a single,
universal model of competence can be applied to different situations or
contexts. Clearly, different industries and types of company have different
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
53
requirements that influence the particular grouping of skills required of
individuals to satisfy those requirements. It has also been proposed that
context is important. They have argued that the scope and process of
management are not easily isolated from the context in which it takes
place. Thus, managerial competencies are closely linked to the context of
the organization, its culture, and its environment.
So, in our increasingly digitized marketing environment, it is appropriate to consider if there is a competency base within the firm’s marketing team to manage both push and interactive communications through
new media such as Facebook and Twitter, and as well as to what extent
there is a competency in actually envisioning the potential value of such
an engagement. One aspect of this is regulatory compliance, an area that
has been considered by many researchers in relation to social media, with
suggestions to aid compliance including “clear social media guidelines”
and “training staff on social media compliance.” In smaller enterprises
knowing what to say and when through these new channels can be challenging and time-consuming as can the management of the resulting
engagement and ongoing customer dialogue. An organization’s culture
also influences its competency when undertaking something new. George
Day refers to “organizational rigidities” and a “fear of failure” when extending organizations capabilities, while KPMG calls for “something of a
culture change” to implement social media effectively. In larger firms, the
creation of a digital marketing employee post can prove a disservice to the
organization as once again the perception that “digital is different” is perpetuated and inculcated within the culture of the company. In so creating
a digital position, digital marketing efforts become separated from “traditional marketing,” and this artificial separation can create disconnected
customer communications, bring branding challenges, and create issues
around managing customer relationships effectively.
In liaising with managers over the past 36 months and in combination with other business development and training activity, we became
increasingly convinced that traditional models of marketing training and
education were not fit for purpose in an increasingly digitized environment. Traditional teaching and training models in marketing management are characterized by linear and sequential thinking often rooted in a
predictive rationale. So, for example, a traditional syllabus may advocate
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54
THE SEVEN PRINCIPLES OF DIGITAL BUSINESS STRATEGY
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a process of opportunity identification through learning about internal
resource potential and environmental audit, market research, new product development (NPD), segmentation, targeting and positioning (STP),
planning, launch, and review. Many of these stages are hierarchical in
themselves and together they reflect much from “big business” and
bureaucratic thinking. As the implementation of such models was discussed in class/seminar contexts with the managers, it became increasingly
clear that a gap existed in what such education provided and the usefulness of applying this thinking in the manager’s working lives and that over
the 3 × 12 month training and education periods this relevance gap was
widening. Understanding the aspects of digitized market environments
appeared to require a different, nonlinear, and nonsequential thought
process and one which was more comfortable in effectual rather than predictive modeling. As these challenges to prevailing teaching approaches
in marketing education became more marked over the 36 months, the
nature of the required competencies we needed to inculcate in these
marketing managers also became an issue for greater exploration. A new
competency set has begun to emerge in our thinking and a provisional
competency cluster emerged as represented in Figure 4.1.
Competency Set
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THE SECOND PRINCIPLE OF DIGITAL BUSINESS STRATEGY
55
This competency set was inherently interdisciplinary in nature involving thinking traditionally lodged within engineering, art and design,
architecture and psychology, as well as in marketing.
Table 4.1 illustrates the characteristics within each role and the
emphasis required at a competency level for successful deployment.
Copyright © 2016. Business Expert Press. All rights reserved.
Table 4.1 Characteristics of role and issues of competency
Role
What they do
Skills they have
Where to find them
Marketing
technologist
Discover,
investigate, and
prioritize
Curiosity, inner geek,
and network
Journalism, large
marketing agencies,
academia, and
information technology
functions
Systems
Architect
Create single
customer view
Systems, data
integration, data
quality
IT, systems integrators
vendors
CX Engineer
Map customer
Multidisciplinary,
engagement/process customer-attuned,
blueprinting
systems design
Consultancy and
marketing agencies
Content
Strategist
Creation of useful
and sustainable
messaging materials
across platforms
Planning, creativity,
and customer
empathy
Marketing agency and
publishing
Insight
Analyst
Predictions,
associations, and
performance
Curiosity, statistics,
and visualization
Data science and
marketing
Behaviorist
Discover,
experiment, and
understand
Economics,
psychiatry, and
sociology
Consultancy, academic,
and megatech
McKeown, Niall, and Mark Durkin. The Seven Principles of Digital Business Strategy, Business Expert Press, 2016. ProQuest
Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=5089199.
Created from apus on 2021-10-24 23:28:14.
Copyright © 2016. Business Expert Press. All rights reserved.
McKeown, Niall, and Mark Durkin. The Seven Principles of Digital Business Strategy, Business Expert Press, 2016. ProQuest
Ebook Central, http://ebookcentral.proquest.com/lib/apus/detail.action?docID=5089199.
Created from apus on 2021-10-24 23:28:14.
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