Technology is now a key player in virtually all industries and businesses who want to stay in the game are expected to make sizeable investments. There’s no doubt it can make the difference to a business’s success, but it has two fundamental hurdles to get over first. Firstly, it has a reputation for being a cash guzzler and is more often treated as an expense rather than an investment. Secondly, big spend won’t deliver big change or benefits on its own - IT investment must be strategic.
The expense versus investment debate has rattled on for years, and you can find conflicting lists of pros and cons all over the internet, but the reality is, it’s how the business manages IT spend and the IT budget that will determine where it sits on the balance sheet. And that’s the most important take away here.
Studies have shown there’s no direct correlation between technology investment and profitable growth, so spending alone won’t necessarily lead to better financial performance, customer service or successful pitches.
That shouldn’t be news for any business, but for some, it is and it’s an expensive lesson to learn. We’ve all heard the expression: ‘Clothes don’t make the man,’ and the principle is the same here. It’s the technology a company chooses and how they use it that will make a difference, so it’s important to know in advance what your business requires.
The strongest correlation between technology and profitable growth is when investment is focused on targeted business objectives and is supported by the right operating model and implementation strategy - an IT roadmap.
That means putting some serious grey matter into your business strategy, before you part with a penny, looking at:
- Where you are now
- Where you want to be
- How you’re positioned relative to your competitors
- What strategic or operational changes are required to put you at an advantage
- How that translates into practical projects
- How you’ll resource the implementation
- The role IT will play in delivering change and helping to keep you ahead
There’s good reason why IT considerations come late in the list. It’s not that they’re less important. They’re vital. But, for the investment to be sound, the planning that comes before it must be sound too.
It’s that kind of strategic thinking that will allow a business to stand over IT spend as an investment, because they can confidently attribute it to a specific need, objective or growth initiative.
Four steps to get started:
- Align technology with business capabilities
Identify business capabilities that support growth, have potential to increase profits and align with the IT roadmap. Research the technology investments required to help get you there.
- Line up technical ability
Don’t underestimate the skills required to execute your tech strategy. Ensure the business has (or is willing to acquire) the technical expertise needed to successfully implement planned IT projects or to outsource this to an experienced third-party that can act as a virtual CIO.
- Be up-front about risk v reward
Even the best planning in the world doesn’t guarantee success. Be open about the risks, and using clear insights, look at potential value and measure it against any executional, transitional or operational costs.
- Ensure supportive operating model
Make sure the business is ready to adopt and benefit from the new technology solutions.
Collaboration with other business units is key to success, so communicate and test any new processes or procedures and train employees where required.
Management buy-in
Full management buy-in is essential if you want to develop a technology strategy with responsibilities for improving performance.
A good IT Manager should be pushing the tech agenda and asking the business to think about IT spend in the same way it considers sales, operation, marketing or brand budgets.
One way to get the conversation started is to raise questions that ask the business to make their intentions around IT clear. Questions such as:
Q: How will we split the IT budget between functional/business as usual spend and improving our business capabilities?
Some suggest no more than 40% should be spent keeping the show on the road with IT support covering everything from day to day operations such as permanent connectivity to business continuity planning, and if it’s taking more than that, the operational costs may need a rethink.
Q: Does the business have the right operational structure to support upcoming change?
This depends largely on how much focus there is on growth, innovation and industry seachanges such as with GDPR, and may require the business to review structure, processes and procedures to make sure they’re still fit for purpose.
Q: Does our workforce reflect our business needs?
This isn’t just about technical experience. It’s about ensuring the business objectives are supported by the right people, experience, skill set and mindset.
Are the right people in the right roles? Is leadership in good hands? Is the passion and drive required to make good on your IT investment still there?
Q: How do we decide where to invest?
Understanding where IT sits in the grand scheme of things and how the business prioritises projects is important.
Will customer experience initiatives with good CRM software always trump marketing analysis or compliance automation, for example? Forewarned is forearmed and clear priorities allow you to focus time, energy and resources where the business will value them most.
Q: Are we measuring success correctly?
Agreeing what constitutes ‘a win’ up-front is good advice. Success means different things to different people, so be clear about your targets and ambitions and set KPIs that allow you to assess return on investment, with measures everyone’s agreed on.
Strategic collaboration is key
It should be clear by now that IT investment isn’t about spending money. For tech spend to truly be an investment, it must also be strategic and that goes for investment of any size.
The premise is the same whether you’re a small business with ten employees spending £10k, or £1m on a business with 10,000 employees. Setting goals and being smart about the most efficient and effective way to get there just makes sense.
Otherwise, to go back to our ‘Clothes don’t make the man’ adage: it’s like buying a holiday outfit before you know where you’re going.
Discover how IT can play a major part in growing your business by downloading our eBook on The Role of IT In Your Growing Agency:
