How Should CFOs Approach Digital Investment Projects?

Digital transformation has been adopted by businesses during and post pandemic at a staggering pace. The reason behind this is the need of organizations to modify their business models, in order to cope with the challenges posed by the pandemic. And these modifications haven’t just been made to business models, products and services have also undergone significant changes. The responsibility of not only putting digital initiatives higher on the priority list but also arranging funds to get those initiatives rolling sooner rather than later lies with the CFOs and their approach towards digital investment initiatives. Time is of the essence and a delay in rolling those digital initiatives out could cost organizations a lot.

The funding model that CFOs turn to for acquiring funds to start digital initiatives and strengthen their digital transformation standing has to take into account the nuances associated with digital investment. So, what CFOs need to do to avoid falling in this trap is look at digital initiatives from the perspective of a product development initiative. In other words, consider the digital initiative as a product. And that’s not it, the CFO before starting off with the digital investment project, first needs to understand the digital strategy that is in place and how it will affect the business and its objectives. Having said that, understanding the digital strategy is completely different from understanding the way the digital project should be funded so that it becomes successful.

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All this while, the delivery of IT projects was done by creating a detailed plan to execute the project, in order to achieve the desired outcome and meet business goals. For instance, the execution of an ERP project was most of the time done to achieve two goals – deliver goods to customers at a faster pace and reduce costs. However, realization of return on such large-scale digital investments takes time. However, businesses don’t have enough time on hand to wait for delivery of projects. And especially in the case of digital products, time of delivery could have a huge impact on whether your customers stay loyal to you or go to your competitors, denting your market reputation and making you lose a significant share of the market. 

This is why product-based delivery of digital initiatives should be the way to go for CFOs. It allows product teams to schedule delivery on an incremental basis – similar to how software teams work by coming up with software updates every now and then. What this also does is enable teams to act as per the market condition as well as the priorities and preferences of customers. Products in such a funding model are classified as platforms, capabilities, good, or services developed for a particular target audience. In the same way, digital investment made for the development of training and mentorship programs could be put in the product category of enhancing productivity of employees. 

It is important for CFOs to turn from traditional funding models to the product-based one, in order to not only have control over the funding but also help their organization get value out of the investment. 

Reference: The CFO’s Guide to Digital Investment | Gartner | Rob van der Meulen | September 13, 2021

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