ecommerce

B2B E-Commerce – 5 Big Mistakes to Avoid

B2B commerce may not have embraced the digital revolution quite as readily as B2C businesses did, but this initial reluctance is quickly changing as more and more B2B companies—driven by the speed of technological change and the high expectations of digitally sophisticated customers—realize that it’s simply no longer an option to do without digital. However, although today’s B2B businesses are joining the e-commerce landscape at an increasingly rapid rate, not all of them are doing it effectively. Many companies, incorrectly assuming that there’s little more to B2B e-commerce than a website and some sales software, fail to plan properly or conduct thorough due diligence; as a result, far too many B2B e-commerce efforts end up hampering, rather than helping, the companies behind them.

For B2B companies that are considering making the leap to e-commerce, understanding where many businesses go wrong is one of the most helpful ways to guard against failure. Read on for a look at five of the most common mistakes companies make in B2B e-commerce implementation, and ideas for how to avoid them.

1. Failing to outline business-specific requirements.

checklist

In their hurry to jump on the e-commerce bandwagon and get a digital platform running as quickly as possible, many B2B companies don’t spend enough time on creating a detailed list of requirements for their future e-commerce system. But shortchanging this step of the process is a very risky move. Choosing a B2B e-commerce system is not a one-size-fits-all activity, and companies that don’t think carefully about what specific things they want from their system are much more likely to end up with a platform that doesn’t quite fit; this is a mistake that could have significant opportunity and efficiency costs down the road. Instead, companies should avoid rushing this step and should take the time to thoroughly document their requirements in order to find a platform that will be viable over the long term.

2. Underestimating the importance of the user experience.

B2B businesses need to come to terms with the fact that the expectations of B2B buyers are determined by their experiences as B2C customers. In their personal lives, B2B buyers are making purchases from some of the world’s most sophisticated e-commerce sites, and they see no reason why their experience shopping for products in their professional capacity should be any different. That’s why B2B businesses must remember to keep the user at the center of all their e-commerce efforts. A strong investment in user experience design—including fully optimized mobile sites and omni-channel capabilities—is a critical step in building long-term customer loyalty.

3. Not involving the sales team.

All too often, B2B sales teams view e-commerce as a competitor that will usurp their responsibilities and cause them to lose out on their commissions; this fear is amplified by the fact that many B2B companies plan and implement e-commerce efforts with little or no input from the sales team. But in fact, when e-commerce is aligned with sales, both aspects become more powerful: sales input provides valuable customer insight that can guide the e-commerce design process, while an effective e-commerce platform helps eliminate low-value, routine tasks from the sales team’s to-do list and frees up time and energy for them to focus on more strategic selling. In other words, B2B businesses shouldn’t make the e-commerce initiative the sole province of a few top executives or the marketing team. Instead, they should open the effort up to sales in order to unlock significant value potential.

4. Underestimating organizational requirements.

organization

Many B2B businesses assume that, thanks to the power of digital technology, e-commerce will basically run itself, but unfortunately the truth is not quite that simple. Adding an e-commerce platform is more than just adding a website; it involves the addition of an entirely new channel to the business, and that new channel is going to need corresponding roles to manage it effectively. Significant internal investments are typically needed on web operations, web merchandising, customer service, digital marketing, technology, and fulfillment. Of course, it’s not necessary to build a huge team right away, but it’s important for businesses to be aware of the scale of an effective B2B e-commerce support system to avoid being blindsided by the level of organizational requirements required.

5. Not planning a post-launch investment.

As appealing as it may be, a “set it and forget it” approach does not work in the e-commerce world. To tap into new markets, gain greater traction with existing customers, and drive traffic, strong digital marketing initiatives are needed to supplement the initial e-commerce efforts. Many B2B companies only plan as far ahead as the launch of their e-commerce platform and then can’t understand why they’re not getting the revenues they projected. In addition, businesses must handle new features and site updates regularly in order to grow the e-commerce operation most effectively and ensure that the platform is always fully optimized.

Advertisements
home office

5 Rules You Need to Know for Digital-Physical Fusion

When the digital revolution first began sweeping the business landscape, many experts and insiders were quick to announce that the full-scale demise of physical commerce was at hand. Pundits predicted that, in relatively short order, e-commerce would completely take the place of physical retail and services across a broad range of industries, from banking to entertainment. But while there’s no question that digital transformation has completely upended most industries, it also seems to be the case that brick-and-mortar retail is not going anywhere—at least not yet.

workstationThe insight that many of these early predictions of digital annihilation failed to take into account is that the physical world is, and remains, an indispensable part of both business and life. Humans value physical and social interaction; we like to have in-person exchanges with other people, and to touch, handle, and make real things. What’s really going on with digital transformation, therefore, is not the replacement of the physical world by the digital world, but rather the fusion of both worlds into new combinations that open up completely new sources of value. In an article from 2014, Bain & Company coined the term “digical” to describe this phenomenon. The new word recognizes the changes that both digital and physical innovations are bringing to the business world.

But despite the fact that the future seems to be all about digital-physical fusion, a surprising number of businesses still behave as if these two worlds were separate and distinct, running their digital operations as fully independent business units. For every company that has figured out a successful path to fusion, there are many others who continue to separate physical from digital—and who suffer the consequences of doing so. A typical case in point is the retailer that offers a different price for an item sold online versus an item sold in-store, but has no idea how to handle the customer who comes to the store in person wanting to pay the online price.

Writing for the Harvard Business Review, Bain & Company analyst Darrell K. Rigby reviews five important rules for businesses tackling digital-physical mashups, using insights drawn from the results of a study of more than 300 global companies and leaders across 20 different industries.

Rule #1: Make strategic digital-physical fusion your new competitive edge.

In a world where technology changes extremely rapidly and advantages are quickly copied, companies must learn to ride each new wave of opportunity as it comes their way, without throwing away vital core advantages or pouring too many resources into high-risk ventures. What’s important here is to understand exactly what advantages your core business can offer the new venture. These may include elements like proprietary customer insights, unique capabilities, or strategies for capitalizing on competitor vulnerabilities. Leveraging these strengths when embarking on a digical fusion initiative can provide just the edge that a company needs.

Rule #2: Add and improve linkages throughout the customer experience journey.

links

Digical innovations aren’t just about changing existing products or services; rather, they’re about improving the customer experience overall. Companies that are digically savvy take a systematic, end-to-end look at the customer journey, identify adjacencies (spheres outside the company’s traditional boundaries of operation), and use those to strengthen the core business and open up new revenue streams. The ultimate goal is the development of an innovative and holistic system, focused on the customer, that maximizes competitive advantages to accelerate growth.

Rule #3: Transform your approach to innovation.

The “waterfall approach” that previously characterized traditional companies’ traditional approach to innovation has had its day. Now, rather than having marketers and product designers create ideas and prototypes and then kick the ideas down to IT, companies that are having success in the digical realm are starting by creating teams of complementary experts from both digital and physical territory. With digital experts engaged at every stage of development, integration becomes dramatically deeper and broader, and the solutions generated are more innovative and wide-ranging, fusing the best of what the digital and physical worlds have to offer.

Rule #4: Separation is a transitional step.

office

Successful innovators often start by keeping their digital component separate from their core business. But while this strategy can be useful at the beginning, allowing for the formation of an innovative culture free from corporate bureaucracy and traditional business practices, at some point the goal must focus on creating the best of both worlds. In this way, companies will gain an edge over pure play digital disruptors who don’t have the physical assets and capabilities that the companies they are disrupting do. Integrated companies are better able to give customers a seamless digital-physical experience, communicate and coordinate effectively, and leverage existing assets.

Rule #5: Create a digically savvy management team (CEO included).

Traditional executives can have a challenging time leading digical transformations. Often, they are not fully aware of how limited their grasp is on technological issues, making it hard for them to spearhead innovation or hire the people who can do so. The key here is for businesses to boost the know-how of management teams by appointing chief digital or technology officers, implementing “no executive left behind” programs to ensure that digital training and mentorship is provided to all managers, and working towards a comprehensive understanding of how technology can transform the business.

business

What You Need to Know about Choosing a B2B E-Commerce Platform

With B2B online retailing revenues projected to reach $6.7 trillion by 2020, according to research from Frost & Sullivan, it’s clear that B2B businesses no longer have the option of doing without an e-commerce platform. However, selecting the right one can be a challenge, particularly for B2B businesses that are still in the early stages of digital transformation. If your B2B business is struggling with the question of how to choose an e-commerce platform, the following tips and strategies can help:

Understand your drivers.

The first big step in choosing a B2B e-commerce platform is understanding why your business needs one. At present, it’s not difficult to find information on the broad drivers of B2B e-commerce, including the fact that the high quality of consumer experience now available in the B2C marketplace is strongly influencing buyers’ expectations of B2B transactions. Buyers are looking to replicate the same ease and personalization of their B2C experiences in their B2B decisions, as well as to achieve targeted goals like shifting their procurement process online, placing business orders from mobile devices for greater convenience, and making their sales force more strategic by decreasing manual tasks and enabling off-hours ordering. Helping customers meet these and similar goals is therefore a strong motivator for most B2B businesses.

ecommerce

In addition, it’s important to clearly define your business’ individual objectives and expectations for implementing an e-commerce platform. Broad market drivers work well as initial motivators, but in order for your e-commerce platform to fit your business well, you must be clear about what specific challenges you want the platform to address and solve. For example, do you primarily want to make transactions easier for repeat buyers in order to boost customer loyalty, or is your main objective to drive new traffic and leads to your site? Being precise about your goals will greatly improve your chances of making a smart platform investment.

Perform a realistic self-assessment.

After you’ve identified why your business needs an e-commerce solution, the next step is to assess your organizational readiness; understanding the reasons for implementing e-commerce and having the capacity to execute it are two very different things. To make this self-evaluation stage worthwhile, it’s important to be both thorough and realistic.

First, look closely at your business’ current capabilities, particularly at the personnel who are most likely to assume the responsibility for setting up the e-commerce platform and maintaining it once it goes live. You also need to clearly identify how automated e-commerce solutions will impact current processes like sales, service, and inventory. Next, assess whether your organization has or can put measures in place to effectively analyze and leverage the new volumes of customer data that an e-commerce platform will deliver. Then, you should evaluate the current technical environment of your organization, including how your e-commerce platform would integrate with pre-existing software like ERP, CRM, or accounting tools.

Ask the right questions.

Once you’ve conducted a thorough assessment of your company’s organizational readiness, it’s time for a comprehensive evaluation of possible platform solutions. Having a list of key questions to ask of each platform will help you match your business’ needs with platform functionality. Some of the most important features to analyze include whether the platform offers responsive design that optimizes content across multiple devices; whether the platform offers self-service capabilities and to what degree; how the platform handles customer-specific pricing options; what payment options are available through the platform and how customizable those options are; and whether the platform is hosted on-premise or is cloud-based.

mobile devices

Know the risks.

B2B e-commerce platforms represent a significant investment of time and money. On average, a mid-market B2B company can spend anywhere between $250,000 and several million on an e-commerce solution and can take between nine months and two years to launch it. Given these figures, it’s not surprising that many B2B companies making their first foray into the world of e-commerce are tempted to scale down and look for less costly “starter” options. But while this might make sense in some cases, it’s vital that you understand the risks associated with focusing more on up-front savings than on effective solutions. These risks include the following:

Poor integration—Choosing less expensive software options and attempting to piece together an e-commerce site may appeal to businesses that are interested in a DIY approach, but this often leads to poor integration. As a result, it can become harder to fulfill orders because the various systems required for the job don’t play well together.

Lack of customization—It’s true that a higher degree of customization will be more costly in an e-commerce platform, but businesses should remember that customization is exactly what their buyers are looking for. Generic e-commerce solutions may be cheaper, but they frequently lack the personalized experience that is essential for today’s B2B customers.

Too many sacrifices—It may be difficult to find an e-commerce solution that fits your budget and meets all of your business’ needs, but if you find yourself having to sacrifice too many of your initial requirements, it could be a sign that you need to increase your investment. You’re not actually saving money if you’re spending a smaller amount on an e-commerce platform that doesn’t effectively help your business.

Startup

How to Deal with Digital M&A

In their quest to find new ways of delivering products and services and connecting with customers in today’s digital era, many incumbents are turning to M&A—that is, buying or partnering with startups—in order to integrate a much-needed digital component into their business operations. But, increasingly, these companies are finding that the M&A process itself has been impacted by digital disruption and that digital M&A requires a different approach and different considerations than those associated with traditional M&A.

When global management consulting firm Bain & Company recently interviewed leading European M&A executives, three-quarters of respondents said that digital disruption had strongly impacted their M&A strategy, even to the point of requiring a complete strategic overhaul. However, very few executives described themselves as prepared to meet this challenge; only 11% of interviewees self-identified as either “mature” or “advanced” on the digital learning curve.

So what do incumbents entering the world of digital M&A need to do if their efforts are to be successful?  A recent article from Bain & Company breaks down the process into the following four critical steps:

  1. Identify an explicit M&A strategy.

startupCompanies that have the most success with digital M&A are extremely clear about the precise role that digital M&A will play in supporting and enhancing their overall corporate strategy and objectives. A good place to start is by evaluating how the established value chain of the industry in question has been distorted by digital disruption, and then working out the specific ways that M&A would help the company to gain a strategic position within the new value chain—by enabling digital customer engagement, for example, or by protecting the company against the business models of digitally disruptive competitors.

Key questions that companies can ask themselves about digital M&A strategy include the following: Are both offensive and defensive M&A moves are being considered? Is the screening approach for digital targets forward-looking and value-based? What steps will be taken to help the company fill the role of thoughtful parent for the acquired digital company?

It’s also important for companies to be aware that M&A strategy is not a one-off solution. Rather, it’s an integral part of a global growth strategy, and is therefore something that needs to be consistent and repeatable.

  1. Be smart about corporate financing.

There’s no question that digital assets are expensive—many companies would say too expensive—so it’s important for companies to understand how a digital acquisition will affect their equity profile and the growth-value profile of their stock. Ideally, a digital acquisition will signal to the market that the acquiring company is committed not only to adapting, but also to becoming a digital leader in its industry; such a signal should serve to influence the market perception of the company and consequently its price-to-earnings (PE) ratio.

However, the question of how to finance a digital M&A deal remains a tricky one. The high price of the targets limits an acquirer’s ability to use stock (in order to avoid exposing existing shareholders to a high dilutive effect), but a cash-only deal could result in overvalued goodwill and future write-offs for the company. Acquiring companies must be prepared to evaluate and consider all potential financing solutions, including adapted payment terms or deferred payment mechanisms.

  1. Look to the future when doing due diligence.

timeIn some ways, digital M&A due diligence is a reverse version of traditional due diligence. That is, rather than evaluating the past business performance and current competitive status of a target, digital M&A acquirers need to look ahead, evaluating what the future success of the business model is likely to be under different scenarios, and screening the target before value has been monetized.

To help with this task, successful digital M&A companies build a strong community of external experts to serve as a vital connecting link between the company and the digital ecosystem it wants to be a part of; these experts provide invaluable diligence support in areas where objective assessment is challenging. Some areas that require particular attention in digital as opposed to traditional M&A include the capability of the acquirer to serve as a strong corporate parent and the scalability of the people, technology, and business models of the acquired assets.

  1. Use a “scope” model of merger integration.

In the vast majority of cases, digital acquirers are most successful when they approach digital deals with a “scope” mindset instead of a “scale” mindset. (Scope deals, as their name implies, increase a company’s scope through the addition of new products, customers, markets, or channels, while scale deals add similar products or customers, thereby increasing a company’s scale.)

Part of the reasoning behind this is that scope deals, for the most part, require only selective integration, thus preserving the autonomous, unique identity of each company and avoiding the problems that can arise when two highly different corporate cultures attempt to fuse. Nevertheless, smooth integration tactics, such as instituting cultural exchange programs between companies or including digital acquisition leaders in central governance forums, are a good idea even in scope deals.

digital tech

A Look at the Top 10 Digital Trust Challenges – Part 1

Given the potential of today’s rapidly evolving technology to create major risks as well as enormous opportunities, the question of digital trust has emerged as one of the defining issues of our era. Trust has always been situated at the very heart of a fully functioning society, but today, the institutions that have long protected key societal norms, like property rights and privacy ownership, are under huge strain now that digital disruption has challenged the traditional qualities and behaviors that have long defined trustworthiness.

So how can today’s institutions, and indeed the entire system, adapt in order to create trust within this new and constantly changing context of digital transformation? One of the first steps is to break the concept of digital trust down into its component parts. A recent article from global professional services firm PwC looks at 10 of the most important digital trust challenges that institutions and organizations must develop the capabilities to address. Read on to learn more about the critical questions surrounding the first five of these issues.

  1. Data privacy and usage

data securityCompanies of all sizes are now capable of collecting huge amounts of data on everyone they come into contact with, from customers to partners to employees; similarly, sophisticated analytics tools now allow people to leverage this data to create new knowledge and insights, thereby affecting how the data itself is used. And while public has been slow to realize just how much personal information is being collected and used by companies, the majority of consumers now rank data privacy and usage as one of their top digital trust concerns.

Against this backdrop, organizations must ask themselves some tough questions about their information governance strategies. What level of transparency, for example, are their customers entitled to? Can they legitimize data access and analysis through a customer application’s legal terms and conditions? How can they educate their customers and the public on managing their technology footprint? The challenge here lies in striking the right balance between the competing interests of individual privacy rights and the use of data for a greater benefit.

  1. The ethics of people data

People analytics is transforming talent management, turning the recruitment and retention of employees into a function that is much more scientific, fact-based, and linked to business strategy and performance than ever before. But what are the rules of behavior in this new operating environment? How much personal employee information is necessary or acceptable for employers to use?

Take, for example, the fact that many people today have little separation online between their personal lives and their professional existence. Are employers entitled to use information shared on social media platforms to make character decisions when hiring or to evaluate whether existing employees pose a risk to their organization? Are new governance guidelines and processes needed to ensure that such data is monitored and used ethically? What new policies could help manage trust issues around managerial use of personal information?

  1. Predictions and profiling

digital profileWhen big data is used to profile individuals and predict behavior, the business benefits, such as strategic workforce planning or targeted customer segmentation, are clear. But equally obvious are the issues that arise in relation to individual rights and privacy, both in a workplace context and in wider arenas like policing and national security.

If data allows us to predict behavior to a highly accurate degree, are institutions entitled to take steps before that behavior is acted on? What if public safety is at stake? Similarly, is it reasonable for employers who use predictive analytics to anticipate future workplace risks to shape policies that could impact specific individuals or groups in a punitive fashion?

  1. Algorithmic regulation

Algorithms and automated rules are rapidly coming to define more and more of our everyday lives. From the suggestions of “customers who purchased this also purchased these” on retail websites to automated credit card approvals, digital code is the new law of our era. But when the enormous power of these algorithms is combined with their significant lack of transparency, it’s clear that there is a massive trust issue at stake. Without clear transparency and accountability, for example, how can we be sure what companies are basing algorithmic decisions on? And, in the cases of algorithms being regulated by other algorithms, to what extent can we trust machines to effectively control other machines.

  1. Creating AI safeguards

Now that algorithms can learn and make predictions from data without the need for any human input, the machines that surround us are becoming smarter. But, science fiction-style speculation aside, is there a real risk that these algorithms might “go rogue” and take over? Do we need to have override controls that we can use, if necessary, to take control back from our machines? While there’s no clear answer to the contentious artificial intelligence debate, it’s clear that we must further explore the ethical and trust implications of this issue, particularly as collaborations between humans and machines become a more common feature in the workplace.

hiring

Spotlight on Digital Talent, Part 2 – How to Hire the Right People

Once companies have identified the digital talent they need for their organizations, as described in the previous post, the next step is to find people to fill those roles. But in today’s fast-paced and fiercely-competitive landscape, that’s no easy task.

Companies can no longer rely on the recruiting processes they used even a decade ago to find and attract cutting-edge talent. Instead, like virtually every other aspect of business operations, talent acquisition strategies must be updated and rebooted for the digital age.

To best accomplish this, according to McKinsey analysts, companies need to focus on these six main strategic areas:

  1. Develop an exciting concept.

Many companies don’t realize that today’s digital talent is motivated by different considerations than their predecessors were. This is particularly the case for established incumbents.

business planOf course, money is always an important part of attracting talent. However, it’s far from the only factor. In fact, more digital candidates than ever are prioritizing companies that can offer an inspiring vision and value proposition over companies that offer little more than a paycheck.

But for companies working to reinvent their brand for the digital era and develop a cohesive narrative about their digital transformation, it’s vital not to promise more than can be delivered. Talent acquisitions who find that the reality doesn’t live up to the vision won’t stick around for long.

McKinsey suggests businesses explore strategies like creating mini-startups within the company. These mini-startups should be complete with their own vision, reporting structures, and career trajectories. This may boost the value proposition offered by the existing enterprise.

  1. Invest in targeted “anchor hires.”

When it comes to getting top digital talent on board, many companies are adopting a “like attracts like” approach. The idea is to invest in targeted hires, so-called “anchor hires,” who are highly-regarded leaders within their own discipline or industry.

These figures may help to pull in other top level talent through their personal networks and reputation. Not only that, but their presence within the organization serves as a signal to the broader industry of the company’s commitment to digital leadership and innovation in that particular sphere.

While anchor hires can certainly facilitate the hiring of other talent, the process of attracting the anchor hires themselves takes a considerable investment of time, care, and thought. In addition, anchor hires will likely expect significant influence in shaping whatever emerging unit the business is recruiting them to head.

  1. Using non-traditional recruiting practices.

interviewCompanies should not expect the innovative talent they are seeking to be searching for jobs using traditional methods like career sites or conventional resumes. Businesses that want cutting-edge talent must get used to engaging with those candidates on their own terms.

This means embracing new recruiting strategies and capabilities. For example, companies can target community discussion boards like StackOverflow and GitHub. Alternatively, companies can look through programmers’ source-code repositories or host hackathon events.

  1. Network using digital-labor platforms.

It’s easier than ever for top talents to find all the information they need about companies. Jobseekers can obtain information through platforms like Glassdoor or Hacker News, where current employees can share thoughts on job satisfaction and company culture.

Leading companies are going one step further, creating their own sourcing platforms to frame the conversation and connect more effectively with digital candidates. Such platforms also provide prospective employees with a forum where they can showcase their technical skills.

It’s a smart move. Research from the McKinsey Global Institute estimates that companies using these kinds of digital-talent platforms to their highest potential could boost output by 9 percent, reduce employee costs by 7 percent, and add 275 basis points on average to profit margins.

  1. Make smart use of vendor partners.

codingPart of developing a successful digital talent strategy today involves recognizing that “digital talent” is no longer restricted to in-house employees. One of the major shifts that has occurred in the technology ecosystem recently is that companies are no longer serviced by only one or two primary IT vendors.

Instead, companies are utilizing a wide variety of external options. These include new partners, alliances, and crowd-sourcing, as well as traditional vendors.

As a result, all these specialized relationships effectively function like partnerships. In other words, companies working with these vendors can take advantage of digital talent and expertise without necessarily bringing it on board into the organization itself.

  1. Making “acqui-hires.”

In the “acqui-hire” approach, a company builds up a desired talent set by acquiring a start-up with the needed capabilities. This has become a widely-used method among larger, more established enterprises.

However, the problem of how to effectively mesh two very different organizational cultures is a difficult one to overcome. To address this, many companies are adopting what has become known as a “reverse takeover” mindset.

This tactic sees rotating teams from the acquiring company moving into a “ring fenced” environment. There, they can integrate and work with employees from the start-up .

This way, the acquiring organization can take advantage of the newly-acquired talent right away. At the same time, employees from the acquiring organization can get used to the start-up culture in a more controlled environment, one small group at a time.

computer

3 Reasons Why Your Business Needs an IT Investment Council

While information technology investments have traditionally been the province of IT departments and organizations, that dynamic is shifting considerably as more and more businesses undergo sweeping digital transformations. With digital activities no longer confined to a specific department or area, but instead permeating the entire fabric of a company, it is now business units rather than IT that are more often taking charge of technology spending. According to recent estimates from Gartner, enterprise spending on technology will effectively double by 2020 as a result of business-unit-based investments carried out in large, digitally transforming enterprises (Forrester’s term for this phenomenon is “business-owned technology spending”).

The technology spending gap.

technologyIt’s not surprising, however, to discover that this shift in responsibility for technology investments is not without its challenges. In fact, the transition is serving to highlight what Forrester analysts refer to as “the technology spending gap”; that is, the longstanding schism between technology investments and business requirements where, historically, technology decisions were made with ambivalent business backing, and business decisions were made without fully taking into account associated technology considerations. This rift has spiraled into a situation that many large enterprises are familiar with, one wherein IT units are unable to successfully demonstrate the value or impact of technology investments through rigorous metrics, and as a result, are frequently left out of high-impact business decisions. In many companies, it is not unusual for IT and business units to be completely siloed.

Technology decisions = business decisions

However, this separated state of affairs can no longer hold up under the pressures of digital transformation. One of the primary tenets of the digital revolution is that digital technology is not something detached or apart from the business; instead, digital technology is the business. As such, it’s no longer a question of making technology decisions, but a question of making business decisions.

But for executives who have historically been cut off from IT, knowing which technology investments will add value to a company and which are a waste of resources is no easy task. Enterprises may want to increase technology spending in order to capitalize on digital business opportunities, but without a history of technology decision-making, they run the risk of diverting resources to opportunities that do little to advance the company’s strategic agenda or of missing important chances to leverage business-owned technology spending to create effective improvements and transformation across the enterprise.

How IT investment councils can help.

To address this lack of IT expertise on the part of business leaders now responsible for making technology spending decisions, many enterprises are employing committees known as IT investment councils or IT governance councils to help their decision-makers maximize outcomes and value and minimize waste when it comes to technology spending. To ensure the success of these broad goals, IT investment councils fulfil three main functions:

  1. Ensuring investments support overall business strategies

businessSound technology investments must align with both broad business goals and the strategies developed for accomplishing those goals; today, technology spending that does not fulfil a strategic business function is wasted spending. That’s because new technologies are integral to the changes happening at scale in digitally transforming enterprises, and as a result, the technologies a company chooses to invest in are an important part of the narrative the company is creating about where, when, and how it is progressing toward its goals. IT investment councils help ensure that technology spending is enabling a company to tell the story it wants to tell by carefully assessing the key questions of whether the company is spending the right amount on IT, and whether those resources are being spent on the right IT.

  1. Demanding high-quality proposals

Proposals for technology investments can no longer get away without justifying themselves in relation to business outcomes. Today, technology spending proposals must be able to present a sound business case, leveraging established business metrics to provide measurements of how investments will impact strategic business objectives and to assess the level of associated risk. Investments that cannot delineate their outcomes in terms of business performance have no value whatsoever to a company; instead, they are a liability diverting critical resources from higher-quality projects. IT investment councils help businesses set a high standard for proposals and effectively weed out those that are simply a waste of time.

  1. Rejecting projects with a high risk of failure

According to surveys, approximately 20 percent of technology-supported initiatives will end in failure, and that percentage goes up as projects become larger and more complex. Fortunately, unsuccessful projects commonly show unmistakable warning signs of failure even before the project has been implemented. An IT investment council’s job here is to recognize those warning signs, and ensure that projects with a high chance of failure do not make it past the proposal stage.

While IT investment councils can be enormously valuable to companies in helping guide technology spending decisions, it’s important to note that this does not mean that the role of the IT investment council is to run the IT unit. The council’s job is purely an advisory one (i.e., they rank, recommend, and approve investments), but it is the CIO that remains in control of handling IT’s day-to-day budget.