The changing landscape of budgeting for digital transformation| FB Consultancy

In the past, companies were far more averse to invest in digital transformation initiatives without any sort of plan or understanding of what they were getting themselves into. However, as the benefits of digital transformation have become more clear, organizations are now taking a more measured and deliberate approach to budgeting for these projects.

10 years ago the question on the table was "Should we invest in digital transformation?" It has now evolved into a different one: "How much should we spend and, more significantly, how quickly should we do so?" The new question's simplicity hides the numerous problems that must be addressed during the strategic debate that must precede the actual budgeting process. Here are some of those problems:

- What is the right level of investment?

- How do you compare different digital transformation investments?

- How do you balance the risk and reward of digital transformation initiatives?

- What is the most effective way to fund digital transformation?

In this Article, I hope to take you through some of the ways my clients have tackled the budgeting question and lay the foundations for a successful transformation.

The "right" level of investment?

When it comes to budgeting for digital transformation, one of the most important questions to ask is how much money you should invest. This question can be difficult to answer, as there are many factors that need to be considered.

One thing to keep in mind is that not all digital transformation initiatives are created equal. Some will require more investment than others, depending on factors such as the size and complexity of the project, as well as any external dependencies that may be involved.

That being said, there are some general guidelines that can help to inform your decision when it comes to budgeting for digital transformation. These include considering how much you stand to gain from the initiative in terms of increased revenue or efficiency savings, as well as how much risk you are willing to take on.

It is also important to think about the most effective way to fund digital transformation initiatives. One option is to set aside a dedicated budget for these projects, which can be used to pay for things like new software or hardware, training costs, and the hiring of specialized talent. Another option is to leverage existing funds within the organization, such as shifting resources away from less critical projects or reducing overhead costs.

Ultimately, the key to budgeting for digital transformation successfully is to take a strategic, measured approach that considers all of the relevant factors and aligns with your company's overall business goals. With the right level of planning and execution, digital transformation can be a powerful tool for driving growth and competitive advantage.

How do you categorise different levels of investment?

There are a number of different factors to take into account, such as the size and complexity of the project, the potential benefits, and the amount of risk involved.

Now. Certain parts of the project will require more investment than others, depending on factors such as the size and complexity of the project, as well as any external dependencies that may be involved.

It is important to not get distracted during the initial budgeting and discovery phase of any programme, there will be a lot of people with different agendas trying to influence the process. It is really important to recognise the reality of running a programme like this, with studies consistently showing the high levels of failure within a transformation programme averaging at 70% a focussed and detailed exploration phase is a must.

Assurance and DMA

Run a complete DMA and Assurance process (preferably by an independent 3rd party), there are many maturity frameworks out there that you can build up on but when it comes to Assurance, it's best to partner with a trusted consultancy.

Looking at your current "digital" state and running an assurance solution will scrutinise risks, benefits, what works, what doesn't and give you a baseline of your companies internal and external processes. It should focus on identifying bottlenecks, obstacles, challenges and give you the information needed to stabilise and future proof your system.

The information gained from these two integral process can then be used to create a materiality matrix or simply categorised as:

>Critical

>Mandatory

>Desirable

>Optional

From here, you can start to understand where your focus areas are and what will have the most impact. It is important not to try and boil the ocean but instead make meaningful change that will have an tangible return on investment for the business.

Getting that balance

Materiality Matrix's are a good way to get balance and opens dialogue between the different levels of stakeholders within the business . It is important to understand that if you don't have the people behind your transformation then it's not going to work.

Size and complexity, Potential risks or benefits involved, are all factors . However, getting the balance right will help ensure the success of your project in the long-term.

When it comes to budgeting for digital transformation initiatives, companies have to weigh the potential risks and rewards associated with these projects. On the one hand, there is the potential for significant benefits, such as increased efficiency, reduced costs, and improved customer engagement. However, there is also a certain amount of risk involved in any large-scale transformation project. As such, it is important for companies to take a balanced approach when budgeting for these initiatives.

In Summary?

Digital transformation can be a daunting process, but it's important to remember that there are significant benefits to be gained by undertaking these initiatives. When it comes to budgeting for digital transformation projects, companies should take a balanced approach, weighing the potential risks and rewards associated with these initiatives. It's important for them to categorise and prioritise the different stages of the programme, taking direction from internal and external stakeholders. Running a DMA and Assurance package will help you to do this in an independent way that helps ensure that you are doing what's right for the business, making it easier to justify any budget allocations. By doing so, businesses can ensure the success of their transformation programmes in the long-term.

FB Consultancy can help your business with a detailed DMA and Assurance process. We have years of experience in helping companies to stabilise and future proof their systems, and our team of experts can help you to get the most out of your digital transformation initiatives. We understand the importance of taking a balanced approach when budgeting for these projects , and our experts can help you to create a materiality matrix that accurately identifies where your focus areas should be. With our guidance, you can confidently make well-informed budgeting decisions and ensure the success of your digital transformation initiatives. Contact us today to learn more!