There’s an old saying that tells us “you’ve got to spend money to make money” and that holds true especially in the context of your upcoming digital transformation. You’re about to execute a strategy that will see massive disruption to the foundation of technology, which you’ve been depending on for the last few years. You’re also about to leverage the full power of modern IT to your advantage, properly aligning what you CAN do with what your customers need you to do along the way. And disruption isn’t known for being cheap.
But a key factor to understand is that you’re not spending money for the sake of it, just like you’re not executing a digital transformation because that’s what industry trends tell you to do. You expect to see something very real in return that represents every dollar you’re about to spend, too.
If you truly want to tackle IT budgeting in a way that guarantees the most effective digital transformation possible for your SME, there are a few key things you need to keep in mind.
Start By Telling Your Transformation Narrative
If you really want to craft a budget that supports the digital transformation you’re about to undergo, you need to first sit down and think about the story at the heart of it all. WHY, specifically, is this the right transformation for your company at this time? Is the market about to be disrupted? Are you suddenly facing increasing competition? What do you stand to gain by better positioning yourself in the market at large through such a massive technological shift?
This is more than just a fun, helpful exercise at the start of a longer process — it’s also a great way to crystalise what your true priorities are. Then, you can start crafting a budget that supports not only the larger idea of digital transformation, but the smaller focus of actually achieving those priorities.
Your digital transformation budget will be created in a way that allows you to either grow into something new or defend your existing position in the market (or for some, it will do both at the same time). Knowing and believing the narrative at the heart of the process will put you in a far better position to actually design a budget that can bring it to life, giving you certain goal posts to hit along the way.
It’s All About Execution
Next, you need to have a firm understanding of the idea that every part of your plan needs to be created with an eye towards real-world execution. Consider your transformation narrative and larger plan as a roadmap. It’s one thing to say that you’re going to drive from one city to the next — it’s another thing entirely to know how you’re going to pay for it before you leave the driveway.
Start by reviewing your current processes to identify areas where they can intersect with new technology, thus helping you execute your digital transformation. Make budgeting decisions based less on “what we’re going to do” and more with an eye towards “how we’re going to do it”. The difference here is subtle, but critical.
Because of this, it is hugely important that you fill in as many of the "little details" as possible. It’ll be nearly impossible to get leadership to buy into a plan that doesn’t take a micro look at digital transformation, or that isn’t built around actual data.
Likewise, you’re going to want to have a reactive fund in place to help respond to certain factors or changes that were not a part of your original intended journey. If the market is innovating faster than you are, you have to be able to adapt — and that requires having a budget that accounts for it.
Don’t Be Afraid to Move Money Around
Remember that in terms of digital transformation, you’re likely talking about a multi-year initiative. Because of this, the way you build your IT budget needs to shift away from maintaining legacy operations and more towards actually supporting the new environment (and possible new business model) that you’re going to end up with.
This is likely going to require you to move money around, so to speak — shifting capital across business and functional units to find the right fit and to support the pace you need. This is another one of the many reasons why considering the bigger picture is so important because you need to understand how a change in one area of your infrastructure will affect the larger whole.
It’s Not About ROI Anymore… At Least, Not Right Away
Finally, if you truly want to create an effective IT budget that supports your digital transformation, you’ll need to change the way that you think about IT budgeting in the first place. This will require a shift in perspective, away from focusing solely on return on investment and more about the larger business impact and value generated.
Focusing too much on ROI when budgeting only slows the pace of digital transformation, as a lot of the steps you’re going to be taken don’t have a strong ROI at the portfolio level.
Instead, focus on the value that will be created and the business impact that will be sustained. Don’t allocate budget resources because you’ll be able to turn $100 into $1000 overnight — instead, create an IT budget that actually allows you to support the speed and flexibility needed for the journey you’re about to take.
This one factor can mean the difference between success and failure when it comes to effective digital transformation.
Powernet: Your Digital Transformation Partner
At Powernet, we understand just how critical a successful digital transformation is to the future of your business. After all, the world around us is changing all the time and the same can be said of the market you’re trying to serve. Only by understanding these changes, doing what you can to remain agile, and properly aligning your technological spine with your long-term objectives will you be able to guarantee the outcome you need for the long haul.
If you have any additional questions about how to best approach your IT budget for an effective digital transformation, or if you’d just like to discuss the topic of your own digital transformation in a little more detail, take the next step — contact Powernet today.