Value vs. Profit: Considerations for the C-Suite When Making Tech Investments
Blog: Solutions Review - Business Process Management
As part of Solutions Review’s Contributed Content Series—a collection of articles written by industry thought leaders in maturing software categories—Joe Mattioli, the co-founder and chief planning and strategy officer at Xfactor.io, outlines some of the considerations a company’s C-suite should make when making tech investments.
Today, every purchasing decision and renewal is under scrutiny. Businesses across all industries are facing supply chain challenges, economic constraints, labor shortages, and emerging technologies like generative AI that are giving their competitors an advantage. Beyond these macro challenges, each company also faces additional unique challenges depending on their industry. Despite that, leaders are still asked to make decisions about their business while prioritizing the bottom line.
Balancing Profitability and Value
From the cloud to data to cybersecurity and beyond, there are many considerations for today’s businesses on the technology front. To take it a step further, within each sector, there is seemingly an infinite amount of tech vendors and providers to choose from. While that is an exaggeration, it may not feel like it to many tech buyers. Forrester estimates that global tech spending will grow 4.7 percent to reach $4.4 trillion in 2023, and a recent survey shows that 81 percent of US enterprise technology decision-makers expect their company’s tech investments to increase over the next year. With so many options, it can be challenging to sort through the crowded market and evaluate what will work best for your business, and that remains true even when budgets increase.
Although the way businesses operate evolves over time, one thing has remained constant—profitability is critical. Companies and leaders want to be profitable or look like they will be. It makes sense profitability impacts the longevity of any business. However, this focus has ensured that almost all business value is centered around profitability.
This focus on profitability has become a significant factor in decision-making for technology investments. While profitability shouldn’t be forgotten, there are multiple ways to approach purchasing decisions that go beyond just determining what’s best for the bottom line right now. If you’re constantly focused on solving short-term problems, you may not make the best long-term decisions.
Determining the value of your tech investments is crucial, but how can value be measured?
Focus on Measuring Value
Every digital solution you invest in should be able to provide specific metrics of how it will improve your business. Especially as companies pull back on spending, decision-makers must be continuously vigilant in searching for business tools that deliver value.
Value can have many definitions based on different goals, so you should work with your team and other decision-makers in the company to define the value realization metrics that are important to your business. Value realization metrics provide you with broad measurements to track general performance. Similarly, key performance indicators (KPIs) help you track performance for a specific, critical objective. KPIs and value realization metrics are essential to monitoring and will give you vital insight to inform your decisions.
Here are three KPIs that can be used to monitor value:
- Return on investment (ROI): The amount of value received after implementing a solution, product or service
- Time to live: The time it takes before the solution, product, or service is live and operational
- Time to value: The time it takes to receive value from implementing the solution, product, or service
Over time, your business goals and objectives may change, especially as external factors impact them. The metrics used to measure value and success should change to reflect and align with that evolution.
ESG value should be brought into purchase decisions
As much as revenue and expenses are top of mind in financially challenging times, in 2023, we will see an increasing emphasis on more intangible factors relating to products’ sustainability and social impact. With that, environmental, social, and governance (ESG) value should also be brought into purchase decisions. In the long run, businesses know that ESG is essential, and more people are beginning to prioritize sustainability efforts, especially as Gen Z enters the workforce. Despite this, ESG isn’t always prioritized in purchasing decisions, partly because it can take a long time to see the impact of ESG-related initiatives.
As a decision-maker for your company’s tech investments, you can help the company make significant strides to further a sustainable mission. One of the easiest ways to get buy-in from the entire C-suite on incorporating ESG into purchasing decisions is to quantify and explain its value. If you’re asked about specific investments, you can leverage the value ESG-focused tech can bring to the company to help defend your choices.
From ESG strategies to the many factors that must be considered when determining technology investments, or any investments into products or services for that matter, value is significant. The ability to measure and convey the value of your investments will help you meet your organization’s goals and stakeholder expectations.
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