Why Digital Should Be Part of the Due Diligence Toolkit

James Prebble

Due diligence is all about identifying the assets and risks of a potential investment or venture. However, that term is typically used to refer only to financial, operational or legal assets and liabilities. Today’s investments, mergers or undertakings bring with them a host of digital assets, and even ‘digital debt’, which can be difficult to assess or even detect using traditional DD methodologies.

You need to have all available knowledge at your fingertips before making an investment decision, including how a business is positioned to maximise the effectiveness of increasing digitisation, and so you need to engage in ‘Digital Due Diligence’ as well.

Due Diligence

What areas should digital due diligence encompass?

  • Who champions digital transformation within the organisation
  • What digital tools, processes and systems are already in place to support and grow the business
  • How effectively the business engages with its customer base
  • Whether its online reputation is prominent and well managed
  • How they compare with their competition in terms of online visibility
  • How much they have earmarked for future digital investment

However, a simple tallying of these and other relevant facts will present an incomplete picture of a company’s real digital position, both strategically and tactically. A digital due diligence report should include analysis of a few key areas in detail, making their relative positions and values clear.

These key focus areas include:

Digital Touchpoints

Does the offering address multiple digital channels and platforms effectively? Are these touch points truly integrated and effective, rather than just trendy?

Customer Experience

Do the digital systems used support the customer base, giving them the experience they demand, across different devices and platforms?

Demand Management

How well does the company generate, track and measure customer demand? How does it perform in practice?

Reputation and Brand Identity

What is the business’ online reputation, and how influential is it compared to the competition? Is its digital brand identity actively (and effectively) managed?

Technology Support

What platforms are in place, and how effectively do they support the business? How do they handle innovation and adoption?

Digital Capability

Does the business include the necessary digital skill sets, either internally or through partner organisations? How do they nurture and/or recruit digital talent?

Digital Business Processes

Does the company handle collaboration and innovation effectively? How are new digital processes developed, assessed, reported and implemented?

A well-assembled digital DD assessment will detect both ‘red flags’, as well as opportunities such as areas where competitors underperform or markets which remain untapped. It will make clear exactly how much investment would be required for the business to achieve true digital excellence and forms the seed of a roadmap for improvement

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