Why Planning for Digital Investment Matters

Harvard University researcher Joe Peppard says most companies do not distinguish among different types of digital investment, but spend on all technology in the same way, regardless of its present and future impact on business.

The researcher presents a decision matrix and an argument for established organizations to plan their investment in technology.

If established companies aren’t formally planning their technology investments, smaller organizations concerned with building their business are likely not thinking about it either.

Sooner or later, though, they must.

Digital Investment Deferred

A new, lean company starts out with the most expedient processes at hand, which often means very little investment in technology. A computer, spreadsheet software, some easy, inexpensive way to track accounting and payroll.

A company that sells any physical product will have inventory to manage. The companies often start off with spreadsheets (Excel, Google) to track stock, manually pushing COGS data to their accounting software. That is, if they’re tracking stock at all.

It’s common for companies like this to start off with a small (or no) staff, focused on breaking into a market, finding customers, building a brand. They are more worried about cash-flow to cover the near-term business activities core to their business. Even a couple hundred dollars a month might seem like cash better spent elsewhere.

The Tipping Point

A lot of Cin7 customers come to the realization within two years of founding their business that they need to invest in technology if they want to grow.

They typically find that their manual spreadsheet processes become a drag on their business. Spreadsheets are cheap and easy to start off with, but as a business grows, they take up too much time to administer, they’re prone to key-input errors, and they’re difficult to mine for data.

They find they are losing money from inefficient administration tasks, error corrections, and most of all, from an inability to accurately report purchase orders, invoices, and COGS.

The Digital Investment Decision Matrix

Peppard recommends a matrix for enterprises to weigh key operational (what you currently need to survive), strategic (critical for future growth), high potential and support (valuable but not critical) digital investments.

It’s a little “high level” for smaller organizations, but the key benefit is the same: a digital investment should be made according to the contribution it will make to the company’s current and future business performance.

For key operational investments, the focus is about improving the performance of existing activities, which often entails looking for opportunities for integration and rationalization to speed up business processes and remove inefficiencies.