When To Invest in Digital Technology
Among the many tough decisions you face as a business owner, deciding where to make key technology investments is among the top three. As you evaluate opportunities to optimize your investments, when is it the right time to make investments in the digital space?
As a CEO, I am bombarded with many digital technology-investment options that “could” improve our operations, eliminate overhead, engage our customers, or bring in more sales. I thought I would share with you the key steps we take in making these types of decisions internally and with clients.
Aligning digital transformation with business goals
“Digital transformation” encompasses a variety of steps that can move your business forward, such as:
While digital transformation is a powerful process that can help businesses succeed, it's essential to align digital investments with business goals. At Spry Digital, we use the Entrepreneurial Operating System (EOS) to align our long-term vision with our short-term and annual goals.?
When working with clients on digital engagements, we start by understanding their business goals, which allows us to identify key performance indicators (KPIs) that can help measure the impact of digital investments. This alignment ensures businesses focus their efforts on what matters most to move their businesses forward and help them grow.
Many businesses struggle with getting leaders to align on what problems they are trying to solve with digital transformation. Facilitated workshops can help all stakeholders in the organization come to a consensus on the right path forward. When everyone in the organization agrees on what is being done and why, faster execution and quicker adoption is possible.?
Continuous technology investment: why it’s critical for your business
As you face these tough – and necessary – decisions in your business, it is helpful to understand the “why” of these types of investments.
In today's digital age, technology is crucial to an organization's success. From websites and content management systems to web servers and security protocols, every layer of technology requires continuous maintenance to keep it secure and up to date. The Southwest Airlines holiday flight cancellations highlighted the importance of investing in existing technology platforms and keeping them current.?
Let's consider your website. It serves as the digital front door to your business, and it's essential to keep it running smoothly. Every feature, functionality, or integration you add to your website adds another layer of technology to maintain. Every component requires regular updates to keep it secure and functioning correctly.
One of the biggest challenges businesses face is keeping up with the constant changes in technology. To address this, continuous technology investment must be a part of any business strategy; it is just as important as investing in your physical infrastructure. By planning annual investments in your current systems, you can stay ahead of potential disruptions and ensure your digital presence remains secure, accessible and frictionless. Failure to do so can result in outages, security breaches, or data loss, which can be catastrophic for businesses of any size.
Determine the return on investment (ROI)
When faced with a significant investment in our business, understanding what the return on the investment is critical.
A typical digital investment is made for one of three key reasons:
The trick is making sure that you can directly attribute these improvements to the initial investment and that you already have effective mechanisms in place to track these data points.
Once we identify the total cost of ownership or implementation, we can determine the rate of return on the investment. A simple ROI example is:?
You spend $150,000 to have your new website built with an ecommerce component that is new to the business. In the first year, you generate $200,000 in online sales revenue. The ROI is: (200,000 - 150,000)/150,000 = 33.33%. You may have to look at the cumulative ROI when your investment may be realized over a period of time.?
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What type of return do you expect? Many business owners expect to have a specific profit margin, such as 20% profit on all sales. When we save for retirement, we are thrilled when we see a return of 10% or more. Currently, savings accounts might be returning a .01%. Do you have an expected rate of return on your company investments?
If it is not your normal practice to look at the total rate of return on your technology investments, I encourage you to start simple. As you become more comfortable with the practice in the organization, you can introduce the time value of money and/or the cost of capital.?
Managing change in an organization
The success of any digital transformation is dependent on the organization’s reaction to change. Don’t forget to factor in this important element when implementing new or updated technology.
Investing in digital technology requires change in your organization. It may affect only one or many areas of the organization and your customers. Resistance to change can be a significant factor that slows down or hinders the implementation of a change, resulting in reduced effectiveness and delays in achieving desired outcomes.
It is important to note that resistance to change can be a natural reaction to something new or different, and it may not necessarily be a bad thing. It can signal that people care about the organization and want to ensure that changes are implemented in a way that is beneficial for everyone. However, if resistance is not addressed or managed effectively, it can become a major obstacle to change.
Factors that can affect resistance to change include:
It is essential to anticipate and address resistance to change proactively by involving stakeholders early on, communicating effectively, and providing support and resources to manage the transition.
Technology and vendor evaluations
Let’s say you have successfully identified business goals for which automation, self-service, or a redesign of your website are priorities. Your budgets are allocated for new investments, along with spending funds on day-to-day maintenance and security of your current technologies. The next step is to determine what you need and to select the right vendor, software, or hardware. Easy, right??
Let’s say you have successfully identified business goals for which automation, self-service, or a redesign of your website are priorities. Your budgets are allocated for new investments, along with spending funds on day-to-day maintenance and security of your current technologies. The next step is to determine what you need and to select the right vendor, software, or hardware. Easy, right??
Many leaders go directly to selecting a company they know or saw in an advertisement, without conducting a proper evaluation. Making decisions this way can be costly, frustrate those using the digital tool, and create resistance to change. We have a simple process we used to identify and select technology, vendors, and service providers:?
NOTE: It will not be possible to validate every requirement or feature in a hands-on review or demo. Sometimes you have to rely on the vendor or others who have reviewed the product for the rating.?
If you are interested in using our template, you can download it from our Google library.
Schedule your consultation with CEO Sheila Burkett today
So you understand the importance of investing in technology but are unsure of your next steps. Or are you considering switching technology vendors or implementing a new software within your organization? Schedule your consultation with CEO Sheila Burkett today.