Finding Money for your Digital Transformation
The businesses of today are not the businesses of tomorrow and the systems, consumer touch-points and infrastructure that is working now, will not service the business of the future.
You may well have a clear picture of what the future looks like, or you might not (If you don’t check out our POP workshops). And that future contains different leadership, new business structures, greater innovation, new technologies, a lot of hard work and MONEY.
And therein lies the rub. The biggest barrier I hear from the CEO’s and CIO’s I talk to is “we don’t have the money”. We want to move forward but we are constrained by finances.
But in honesty, that is simple just not true. The reality is it’s a choice. A difficult choice nonetheless.
Let me give you an example; if someone asked me if I could afford a brand new Lamborghini Huracan Coupe, my straight up response is no. But in reality if I sold my house, rented a smaller space and my wife didn’t get involved in the decision making, I could.
Businesses will find themselves needing to make these type of big strategic choices very soon, if not already. The business and industries of the future are not the one’s you are currently spending your money on, so you will need to make sacrifices somewhere in order to spend elsewhere and still be relevant in 5 years time.
So if you find yourself saying we don’t have the money, then unfortunately you’ve already made a choice not to change.
But the companies that make a different choice, a choice for change, are finding ways to fund that digital transformation. I’m not saying it’s easy as you still need to keep the lights on to make the change happen, but they make a choice to move forward at the fear of being left behind. How they are doing it depends on many factors, including; current financial status of your business, the industry, your leaderships propensity to risk, etc. But these companies are exploring new ways to finance the creation of their digital vision.
The starting point for most companies is internal self funding. But the difficulty with this is it tends to then be short, quick win projects so the business can see a return within the same financial year. Thereby the project pays for itself. But this method isn’t really shifting the money needed for real disruptive change.
The other common method is working within existing budgets. A new project comes up and you have to either squeeze or cancel Peter in order to pay for Paul. This sounds good, but can be difficult as it requires maturity within the business for departments to give up their budgets in order for another department to get the budget. But some companies have realised that not all departments are equal in their digital future and therefore re-appropriation of budgets across the business is required. For this to work requires strong leadership and a very clear vision and road map. But be careful, there will be collateral damage from some departments and politics will become rife.
Some businesses will break open the piggy bank and dip into their reserves. The nice thing about using this type of money is it doesn’t impact your current business. It allows you to build a new business on the side. It obviously needs careful agreement at board level to spend this money, but it is a great way of accelerating the digital transformation change needed.
Obviously there is also the option to borrow money or trying to generate capital from new investment and braver options are to choose to decrease profits or sell old assets and provide yourself with a runway to the future.
But the key message here is in order to move into the future you have to find the money somehow. And depending on the extent of the change needed and your current capital strength those options will be more or less. But this is a no longer a conversation that can be ignored or brushed under the carpet with a “we don’t have the money”. It requires bold leadership, a clear vision and the strength to make difficult choices.
Note: This article is pitched at a managerial level. Please don’t take this as financial advice. You’ll need to speak to your Finance geeks before making any decisions.
Reference Material: Gartner | CEO and Business Executive Survey 2017
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