Overcoming digital difficulty #6: No business case
Blog: The Digital Enterprise
“An investment in knowledge pays the best interest”. Successful digital transformations take heed of Benjamin Franklin’s advice. Nevertheless, it can be difficult to make a positive business case for digital. Execution costs are often high (especially if legacy IT systems are involved) and returns can be elusive. This is the 6th post in a series building on 10 reasons why digital transformations are difficult. Here are some proven approaches for making the case:
- Revisit the investment framework. Every organisation has an embedded investment process and criteria that have been optimised over time to reflect strategic priorities and financial constraints. Sometimes, digital drives a significant shift in both strategy and business model, in turn requiring the investment framework to change. For example, analysts in some sectors are starting to value digital business based on revenue instead of profit.
- Avoid incremental change. Incremental change (e.g., partial automation of a process) often costs as much as transformational change (e.g., 100% automation) but with markedly lower benefit. Projects that set an unreasonable aspiration (e.g., ‘5x productivity improvement’) have a more attractive payback, and drive a better answer.
- Get granular. As with any investment, 20% of the scope delivers 80% of the benefit. Cutting the business case into more granular units can yield great insight on what to keep vs. what to cut.
- Challenge assumptions. A few assumed constraints may hugely impact the attractiveness of a business case. For example, many organisations still assume on-premises (as opposed to cloud-based) deployment of technology. This assumption can dramatically increase delivery costs.
- Build support. Digital creates winners and losers in any market – just ask any music retailer, travel operator, or motor insurer. Sometimes it takes years of investment to capture the digital prize. In turn this may necessitate deep engagement with boards, investors and other stakeholders, to build support for investments with a slow payback.
In summary, digital is rarely optional. If your business case doesn’t add up, you may need to change the way you do the maths.