new research of Forrester found that companies prepared to change their attitudes, especially when it comes to how they make investment decisions, grow 1.6 times faster than their peers. Furthermore, the data shows that the biggest obstacle to success is the continued reliance on traditional ROI-based decision making.
Forrester has published new insights based on his Future Fit Survey, 2022 in which he shows how the different attitudes and behaviors of business and technology professionals impact growth.
In a report based on the data titled Future Fit technology strategies require a new approach to making investment decisions, Principal Analyst Bobby Cameron writes: “One of the biggest hurdles for technology executives to implement a future-fit technology strategy is the finance department and its requirement for strong, ROI-driven business cases. Many technology executives struggle to get the approval of their executive peers for major initiatives because they don’t know how to translate the capabilities of the IT organization—especially adaptability, creativity, and resiliency—into clear and robust ROI.”
Playing it safe doesn’t always work
By exploring how traditional ROI-driven business cases can lead to flawed technology choices, the report identifies three key issues:
- First, the authors note that generally accepted accounting principles (GAAP) encourage companies to invest in safe, tangible assets rather than those that would be appropriate for a future fit organization, such as software, data, algorithms, or even culture. and loyalty. While GAAP does not reflect these intangibles on the balance sheet or in traditional ROI models, the authors say they are what investors are looking for.
- Second, while “safe” projects may generate a positive ROI, they may not provide as much return (either in budget or time investments) compared to projects that have less certain outcomes but a large return. upside potential.
- Finally, the report acknowledges that it is crucial for leaders to invest in emerging technologies such as cloud-native computing, natural language processing, or cutting-edge intelligence. However, the report’s authors note that it is difficult to prove the business case when they cannot predict the exact future innovation that could be built on the back of these investments.
Outdated short-term growth strategies are likely to fail
Warning technology leaders against falling into the trap of short-term growth strategies is the subject of another Forrester report, The customer-obsessed growth engine.
Forrester research director and lead author of the report, Sharyn Leaver, advises leaders to take bold action when she writes: “Stakeholder, shareholder, customer and employee expectations for growth remain strong, despite of the lingering effects of a pandemic and the economic headwinds ahead. In fact, many of these expectations have risen after innovating, adapting, and creating new experiences over the last three years. Now is not the time to duck. It’s time to step up.”
This is especially true when dealing with an increasingly empowered digital customer. Forrester data shows that 56% of US online adults are “always up to do or try new things.” Additionally, 60% of US online adults have used chat platforms to transact business, while 30% actively use Alexa, Siri and other voice assistants to do so.
Abandoning traditional ROI models does not mean more risk
To help technology leaders avoid the pitfalls of traditional business cases, Forrester has created frameworks and tools to help design technology investment models that are most appropriate for today’s challenges.
Forrester’s Cameron believes that a future focus To address these challenges you must be adaptive (recognize the threat and impact of disruptive competitors), creative (prioritize business and customer outcomes over cost reduction as an operating principle), and resilient (address risk and recognize the full cost of mitigation). Taking this approach allows companies to maintain customer trust even during crises.
Forrester also believes that a robust financial evaluation framework is required as we move away from traditional ROI models. The company advises technology leaders to adopt an iterative process and use early results as the basis for future investment decisions. This allows successful decision makers to view a business case as a life cycle rather than a single checklist.
Finally, Cameron cautions that technology initiatives cannot be effectively judged when using models that assume a one-time capex with reliable returns. Rather, he says decisions should include risk-adjusted data that includes various scenarios, both optimistic and pessimistic, as well as plans to adjust investment based on early results from the new business.
To better understand the components that make up a future-proof technology strategyas well as how to adopt new ways of evaluating innovative proposals, contact joan osterloh in firstname.lastname@example.org – Forrester Authorized Research Partner for Southern and Eastern Africa.
Forrester helps business and technology leaders use customer obsession to accelerate growth. That means empowering yourself to put the customer at the center of everything you do: your leadership, strategy, and operations. Becoming a customer-obsessed organization requires change, it requires being bold. We give business and technology leaders the confidence to put boldness into action, to shape and guide how they navigate today’s unprecedented change to succeed..
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