Fresh data from PWC reveals that 60% of senior executives believe that digital transformation will be critical for business growth in 2022. In particular, businesses are poised to make technology investments especially in cloud-related transformations as well as betting on trends in AI, digital identity, 5G and IoT. A U.K.-based survey of 750 business leaders similarly reveals that half of U.K.-based businesses plan to experiment with new technologies and will launch new digital projects, tools or initiatives in 2022.
IDC forecasts digital transformation technology investments to accelerate in 2022, citing a renewed drive towards long-term strategic digital projects. This is reassuring news for digital leaders who often struggle with obtaining the funds needed for digital transformation investment.
At the organizational level, digital transformation differs from standard IT investments. It is rarely a fixed project and traditional metrics such as ROI are difficult to capture in digital transformation projects that require orchestration across diverse people, processes and capabilities. The benefits of digital transformation are on the adoption side, and this has a cost. Adoption costs, such as digital skills building, organizational change, communication and training have to be factored in.
How To Get Support for Funding Digital Transformation
Digital transformation is hard. A recent analysis of eleven research -based studies of digital transformation performance suggests that 87% of programs fail to meet original expectations. The odds are not great for a multitude of reasons, including underestimating the effort involved, technology choices and management misalignment. Not transformation, however, is not an option for many companies. What’s more important is to get started.
Start with Small Projects
Discussing industry disruption, digital vision and sweeping transformational plans can generate a great deal of excitement amongst executive teams. But when the conversation turns to funding the vision, a certain level of healthy scepticism seems to prevail. Rather than investing time to build a highly unpredictable journey, it is better to get started and learn fast in the process. “Starting small with self-funded projects opens up opportunities for seed funding, once more people are onboard with the initiative,” recounts Kjeld Jespersen, a seasoned digital transformation executive at NEOM.
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Shift Conversation to Value Creation and Enablement
Another step to getting funding support for digital transformation is to shift the conversation from technology-related costs towards business value creation and enablement, in areas such as customer experience, generating competitive gains or causing industry disruption. In particular, the importance of enabling value from outside the firm, and from external partners. by leveraging application program interfaces (APIs) is gaining prominence.
Categorise Digital Investments
Categorizing the types of digital investments needed to fund digital transformations provides transparency and clarity for obtaining financial support. There are three categories of digital investments. The first category is maintenance related investments, such as website security and compliance projects. The second category is foundational investments such as core systems and platforms, such as enterprise resource planning (ERP), customer relationship management (CRM) systems and increasingly cloud-based infrastructure. The third category are exploratory investments, such as digitizing products or developing new services that are innovation driven.
Adopt a Portfolio Approach
Taking a portfolio approach to funding digital transformation helps to minimize risk by breaking down the transformation plan into bite.sized pieces.Many individual projects within functions, departments and business units lack an ROI at the initiative level, but there could be a strong ROI at the portfolio level.
And finally, it’s always a good idea to partner closely with a strong finance executive to measure, monitor and report on digital investments. Funding a digital program is both art and science. It requires a clear understanding of the types of investment, the various funding models available and a balanced portfolio of initiatives that will balance short and longer-term returns.