Digital Evolution Series – Part Three
Changing your financial mindset for Digital Evolution
You’ve already heard me talk about the importance of leaving digital transformation in the past and shifting to a digital evolution mindset. Digital evolution involves the ongoing adoption and refinement of emerging technologies, while digital transformation is a disruptive shift achieved by digitising non-digital products. Unfortunately, it’s not as simple as merely saying that you’ve shifted to a new way of thinking and being – you must make certain changes. Chief among these is your financial mindset.
The typical, traditional financial mindset for digital transformation is significant upfront investment. However, the danger here is that money is spent quickly and easily with very little left over. Often, these types of projects run over budget, and fail to deliver on key objectives – leaving stakeholders frustrated and leading to digital project failure.
Digital evolution requires regular, sustained investment over a long-term period to achieve meaningful improvement. In this article we will cover the following things you can do to adopt a digital evolution financial mindset:
Products over projects
Part of the shift to a financial mindset is reframing your thinking to consider smaller, regular product releases over larger, longer-term projects. With digital transformation, there’s a tendency to view a large capital investment to evolve digital capabilities as a one-and-done initiative, after which it’s time to press pause to reflect. While this may be appealing after a period of significant organisational change, the reality is that without regular refinement of your digital estate, you risk standing still against a tide of ongoing technology change.
By applying a financial mindset to digital evolution, you can shift your organisation’s focus from larger, more costly digital initiatives to smaller, incremental product-driven improvements, while still being mindful of budgetary concerns. This has a number of benefits:
- Small-scale iterations of products force you to be lean, focusing spend on the maximum value for your customer or end-user.
- You accelerate your time-to-market, so realise your technology investments sooner.
- Smaller, incremental improvements unlock the ability to test and learn, helping you refine your approach with reduced commercial risk.
- Smaller, product releases with new features give you an opportunity to regularly engage your audience, soliciting direct feedback which drives decision-making for your product roadmap and priorities.
- You have the ability to pivot your product when needed, using data and analytics to continually measure and target the things that matter for your audience.
- You are agile and fleet of foot, able you to respond quicker to changes in market conditions, competitor actions or new market opportunities.
Lack of innovation as a financial risk
While expenditure on digital initiatives needs to be considered in careful terms of ROI, when working with stakeholders it helps to equally consider the financial risk of a lack of digital innovation, or the cost of doing nothing. The technology industry is littered with examples of businesses that failed to innovate. Nokia’s Chief Executive infamous internal post to employees stated ‘we are standing on a burning platform’ after the smartphone giant failed to compete with the superior software-focussed solutions from Google’s Android and Apple’s iOS platforms; resulting in a loss of market dominance. A lack of innovation can have serious financial consequences for your customer and end-user engagement with your offering:
- Customers and end-users have a bad experience due to dated technologies or poor user experiences.
- Your customers and end-users seek out competitor products and experiences that better meet their needs and result in better outcomes, resulting in churn.
- Your audiences hold and amplify a negative perception of your digital products, services and experiences as unsuitable or outdated, resulting in a negative network effect.
- In the age of citizen developers, your internal end-users and stakeholders may turn to external platforms and providers, resulting in shadow IT and a lack of joined-up platforms and thinking.
Flipping this situation on its head, consider the value attached to a positive customer/end-user experience in terms of satisfaction, positive outcomes and driving of referrals. A product and UX review of the products and services of competitor or comparator organisations versus your own can be an effective yardstick; helping you identify capability gaps, productivity barriers and financial risks to your organisation.
Don’t forget Customer/End-User Value
When applying a financial mindset to digital products and services, in can be tempting to focus in on topics such as market awareness, market share, product/service attach rates per customer, licensing revenue versus overheads, customer segments, commercial risk, budgets and profit. While these are all important measures, it’s important to never lose sight of customer or end-user value. If your focus is on chasing profitability, you may be outpaced by competitors who are laser-focussed on meeting their audience’s needs. Consider, for example, how challenger banks and fintech startups such as Starling, Revolut and Monzo have disrupted the banking market with a focus on delivering intuitive mobile banking services and experiences that their customers want. Their introduction of innovative features such as enabling customers to ring-fence pots of money in their account, round-up purchased to add money to savings accounts and manage overseas currency payments. This disruptive change left traditional banks, focussed on sales of their traditional insurance, mortgage and finance products, scrambling to catch-up.
Use KPI data to shape resourcing and rationalise spend
Technology leaders are continually tasked with identifying best fit technologies and platforms that help their organisations deliver value for their audiences and stakeholders, while also driving cost savings, productivity and efficiency gains and new capabilities. I’ve previously talked about the importance of stakeholder consensus on the KPIs and success measures that deliver positive outcomes. Applying a financial mindset alongside KPIs helps you know when to refocus digital spend on areas that will deliver the greatest benefit, competitive advantage or audience value. With the smaller investments of digital evolution, you can more readily course-correct based on your KPI data, diverting funding or resources to other products or services while limiting your financial exposure to underperforming ones.
By applying a financial mindset to digital evolution, we can ensure greater agility and control over digital products and services, while reducing costs and mitigating the risks of industry change or disruption.