Why investing in digital transformation is no longer optional?

As technology continues to evolve, investment in digital transformation initiatives becomes more of a necessity rather than an option. It has become expected that businesses digitize their processes and data. (insert statistics on growing need for digital transformation here). Many companies with digital transformation are industry leaders, such as Starbucks, LEGO, and Unilever.

Once a company knows how to build a digital transformation strategy, they move on to developing a budget for that strategy. Having a budget that focuses on the digital transformation goals that the company wants to achieve will help focus investment towards technologies that will help reach its ultimate goal.

Investing in digital transformation also saves businesses time and money in the long run. The ability to quickly retrieve any necessary data lets employees produce results faster, improving customer experiences. Digital transformation also helps employees by automatically solving repetitive tasks, giving the employees more time to work on more productive tasks.

In a 2023 survey by Deloitte, majority of leaders that were surveyed listed “increasing efficiency,” as one of their top three expected outcomes of digital transformation.

Digital transformation encompasses the previous steps in digitalizing business development as the final step that results in businesses enjoying the benefits of having automating processes that carries out mundane tasks. All aspects of a company is involved in this process, with the ultimate goal to improve the overall efficiency of the company.

Common expenditures in a digital transformation projects

Investing in a digital transformation project can become large business costs as various business processes will undergo digitization.

According to IDC, global spending on digital transformation is predicted to reach almost $3.9 trillion in 2027 with a 16.1% compound annual growth rate (CAGR) of five-years. More companies will continue to commit to digital transformation, which increases the importance to commit to digital transformation to have a competitive advantage within the industry.

Many companies decide to get help from a digital transformation consulting firm as they have experts who are able to assist the companies reach their planned goals. Companies are also considering speeding up the digital transformation process as they can reap the benefits of a digital acceleration strategy for their business such as gaining a higher competitive advantage.

Read more about digital transformation:

• Digital transformation in manufacturing: preparing for the future of work in the industry
• Roadmap for product development — what do you need to know?
• Why digital transformation is important (and its impact on IT departments)

The average cost of digital transformation includes the costs of acquiring softwares, upgrades to infrastructure, employee training, and integration of processes.

Components of a comprehensive digital transformation budget

When creating the digital transformation budget, it is important to conduct a throughout review of past business endeavors, evaluate current business models, and formulate future goals. It is also important to brainstorm tactics to secure essential funding for a successful digital transformation.

Historical analysis: evaluating past IT expenditures and their ROI

Conducting a thorough analysis of previous IT expenditures is a great starting point for businesses mapping out their digital transformation strategy as it provides vital information about the relationship between digital tools and its business processes. A historical analysis allows businesses to review which tools did and did not integrate well into the company structure.

Digital tools that have integrated well and have a positive ROI should indicate that new technologies that complement current tools should be prioritized when creating the budget.

However, tools that have a negative ROI should be a sign that its functions do not integrate well with current business processes and further investment in similar technology should be avoided.

Projecting costs: anticipating expenses in software, infrastructure and training

When creating a budget, it is important to consider the expenses. The overall cost of digital transformation is high, oftentimes scaring businesses away from considering digital transformation. However, with a budget, total costs stay within the predetermined amount set by the company, focusing on software, infrastructure, and training.

Software is the most common cost of digital transformation that investors think about. Depending on a company’s current solutions, additional software may not be necessary.

To decide whether funds within the budget should be allocated to improving software, leaders should determine if the current technology stack can be updated to maintain the current level of competitiveness of the company. Companies can streamline their legacy systems and reduce costs rather than spending on new software.

If companies determine that they should continue investing in new software, it is important to note that to see a change in digital transformation, companies cannot solely invest in one specific software.

Softwares also include technical support, an essential tool to have when helping customers. Having a well-structured technical support platform can improve customer experiences, increasing the rate of customer retention as customers can easily access the help they need in regards to company products.

Investing in proper infrastructure is essential to ensure processes are capable of handling new technology. Infrastructure sets the foundation of a company, as all components of a business is located within a company’s infrastructure.

This also includes artificial intelligence, machine learning, and other emerging technologies. Adding tools such as AI into a company’s infrastructure helps streamline processes, allowing employees to enhance productivity as they save time on repeating less productive tasks.

Training employees is another category of top priority when planning a budget. Employee’s ability to handle change management can ultimately make or break the implementation of digital technologies of a business.

For digital technology to become cost effective, employees must be trained to be productive using the new tools. As employees become accustomed to the digital improvements made in their company’s processes through training, their skill set will also be expanded.

Securing funding: traditional and innovative approaches to finance your digital transformation initiatives

To have a successful digital transformation project, it is crucial that businesses secure funding to follow through on the planned budget. Investors have to be sold the belief that the cost of digital transformation will help the company reach its idea of an ideal future before handing over more money.

Those seeking funding have to prove that the proposed digitally transforming strategies will increase revenue growth, reduce errors, and eventually cut costs.

Traditional approaches include having business leaders convince investors that funding the cost of digital transformation will have a high ROI. Leaders will have to prove that spending on digital transformation would be worth by explaining digital transformation and the potential benefits it can bring to the company.

In a 2022 Forbes article from Tomoko Yokoi, recommends separating digital investments into categories to avoid any confusion from potential investors as these will properly explain the purpose of each component of the investment.

See which areas we can help you with:

• Digital Transformation for the Insurance Sector
• Digital Transformation for the Finance Sector
• and others – just let us know!

As digital transformation is a relatively new technology, businesses don’t necessarily have to the follow the traditional route to secure funding. Some businesses are resorting to innovative tactics to finance the cost of digital transformation. In her article, Yokoi also recommends using a portfolio approach to secure funding.

Similar to categorizing digital investments, using a portfolio approach would break down the overall transformation plan into smaller parts, and explain that if parts lack an ROI, its contribution to the overall plan would still help create a high ROI (Yokoi 2022).

Stakeholder engagement: garnering support and understanding from C-Suite to frontline

Throughout all levels of the company, there will be employees and business leaders who will initially oppose digital transformation. This group of people will argue that the company should continue relying on its legacy systems rather than modifying or creating entirely new processes.

Leaders tasked with garnering support for digital transformation will have to assure people from different levels and departments of the company that the cost of digital transformation will enhance the work the company produces and help them with their jobs.

To convince stakeholders, leaders should emphasize many organizations, have committed to digital transformation, leaving the company at risk of losing competitiveness. Explain to stakeholders the improvements they will witness with digital transformation, such as, increased revenue, increased internal communication, and other factors.

Stakeholders can also be found outside of the company, most notability, as customers. Some of the goals of digital transformation should include improving customer relationships. Customer experiences are directly affected by changes made to their processes.

For example, creating a new platform without seeking consideration from future users may lower the rate of customer loyalty as the change may scare some customers away. A way to have customers voice their opinions, is through customer.

Revisiting and revising: the importance of regular budget reviews and adjustments

As new technology constantly enters the market, it becomes essential for companies to routinely review its digital transformation efforts and adjust its budget accordingly.

Measuring digital transformation progress by using metrics such as customer and employee satisfaction, cost reduction, use of technologies can help a business determine which digital tools are helping the company reach its goals and should receive more money in investments.

Many companies experience digital transformation pitfalls as they don’t take the time to clarify their goals during the pre-planning phase or because they lack the budget to continue the digital transformation plan. It is important to not to do too much digital transformation in a short amount of time.

Instead, companies will need to understand that digital transformation has to be a long-term process to ensure that the transformation will meet its goals and become successful.

Conclusion: ensuring your digital vision doesn’t falter due to financial constraints

Spending on digital transformation is a large investment that should be well-planned out before purchasing any digital technology. A carefully planned implementation plan and budget can help ease concerns about changing current processes and the large investment towards digital transformation.

With a budget, leaders are ensuring investors and stakeholders that money is spent on tools that will result in increasing revenue.

The journey towards digital transformation does not have to be done solely within the company. There are Digital Transformation companies to choose from that will guide companies that are digitally transforming towards the right technology that will lead to ideal business outcomes.

These companies have employees with an abundance of experience with as previous customers were companies seeking digital transformation.