An introduction to budgeting and planning for new technology investments
The will to invest in tech is there. What follows is planning and execution. Selecting what tool or tech you want is only the first step in the process.
Less than 30 per cent of digital transformation projects succeed. Indeed, one of the main reasons new technology investments fail stems from a lack of planning and a failure to understand how the technology should be successfully implemented.
Budgeting for new investments should play a part in this question. Just as important – and often overlooked – is how leaders involve employees in the process and prepare for implementation. In this guide, we’ll explain common mistakes to avoid and how you can get your tech rollout right.
The next step is to use our simple five-step action plan to direct your next steps.
What factors influence how you budget and plan for new technology?
Organisational fit
In 2013, the multinational cosmetics brand Avon had to pull the plug on a £100m tech rollout. Four years in the making, the plan to digitise the classic Avon door-to-door sales model failed because the new app didn’t fit with how employees worked.
Speaking about the failure, Avon’s CEO said “the degree of impact or change in the daily processes to the Representative was significant”. Its employees, in other words, started to quit in droves.
The example provides an object lesson for smaller businesses. Yes, you may not be doing a £100m tech rollout, but you need to consider how employees work on a day-to-day level. Any new technology needs to fit in with your workers and business model.
Broader implementation costs
Just like when you’re buying a car, any investment in tech is not just about the purchase price. It’s also about the costs that come with it. If you’re comparing two different services, one may appear cheaper on the surface but end up being dearer in the long run.
Small businesses should always bear training costs in mind. That is where tech will live or die. The cost is not only monetary, you need to budget time for employees to adapt to new technology. Or, if tech expands your capacity, you may need to hire people.
Thinking about the long term
As a small business with limited resources, an option is to simply patch or add onto existing technology. In the shorter term, that might be a savvy move, particularly if cash flow is tight.
However, it’s always worth thinking about the longer term and your growth ambitions. A bigger upfront investment might sting now, but could save costs later down the line by eliminating the need for repairs or keeping a patchwork system stable.
Lorraine Dallmeier thinks carefully about her vision for the business when making a new investment
“I have a plan for where I want my brand to be and the number of people I need. We’re constantly growing and scaling and we need to get up to full capacity as soon as possible.”
Lorraine Dallmeier, owner of Formula Botanica
The cold hard facts
Although they have far smaller budgets and capacity, smaller companies are better at tech implementation. According to McKinsey, organizations with fewer than 100 employees are nearly three times more likely to report a successful digital transformation than large corporations.
Common mistakes when budgeting and planning for new technology investments
Inadequate budgeting
According to YouGov research, 57 per cent of business decision makers say price is the primary factor when it comes to investing in new technology. Concerns over time investment (31 per cent) and complexity (30 per cent) lag far behind.
Cost is obviously a big sticking point for any business. But it’s a mistake to fixate solely on upfront costs. You also need to think about costs over time.
Not considering cloud or on-premises
Specifically when it comes to new IT systems, the choice of cloud or on-site is a big decision. While on-site tools do require IT staff to maintain the system and hardware, cloud leaves you quite dependent on a working internet connection and your provider.
Both come with advantages and disadvantages. Don’t just read the marketing material – consider what is most appropriate for your business. Cloud solutions can work wonderfully for some businesses, but for others, on-site may be more appropriate.
Overemphasis on features
This brings us nicely to our next point – a general overemphasis on features. Product features are important, but a consideration of any tech’s features should not replace a holistic look at its flexibility and capacity to integrate with other systems.
Take time to evaluate the resources required of any technology before rolling it out across the business. Product features will only attain their full potential on the back of a successful rollout.
Discussing the risks of technology investments is an essential step for Kai Feller
“We have a deeper belief in building a proper and profitable business, so we always talk about the risk [of any investment]. What value are we going to add?”
Kai Feller, co-founder of Bark.com
The cold hard facts
In his oft-cited book “E-myth, why most businesses don’t work and what to do about it”, Michael Gerber argues for planning around business functions – not people.
“Build systems within each business function. Let systems run the business and people run the systems. People come and go but the systems remain constant.”
Quick wins for budgeting and planning for new technology
Try before you buy
The good news is that the business-to-business (B2B) technology market is very competitive. As such, many services and products offer quite generous trial periods, which can allow you to see how a tool works first hand.
“Try before you buy” arrangements give you a practical window into whether a piece of tech works for your business. It can help you avoid getting tied into years of subscription costs for things that won’t work for you.
Think around the tech
Think about your teams, employees and customers. What is it that they need from the tool? What will they need to help them use the tool?
Your product or service needs to solve your business needs but also work for those who will be using it. Your business might also lack the necessary skills and manpower required to make a technology work.
These shortcomings can be rectified, but only if you plan ahead. Often the fix can be quite simple, like upskilling employees or hiring the right people.
Be user led
Technology solutions should always start with the users. Digital is 90 per cent sociology and ten per cent technology. You’ve got to make sure everyone is going to be involved in creating it, installing it and using it.
For example, when you’re using an external vendor to help you implement a new tool, you need to spend a lot of time understanding its approach and what it means for your business.
You want to find a vendor that is going to spend time talking to users – normally, your employees – and then go from there. Start from the user, not the package.
Jane Vincent (right) focuses on how technology could improve and speed up processes
“It's been quite hard because you're trying to run a business, you're trying to make money, but then at the same time look at technology. There's never enough time to do that stuff but it's so important because, ultimately, if you do get it right, it's going to improve processes and speed up what you do.”
Jane Vincent, director of Fortem People
The cold hard facts
It’s estimated that UK SMEs waste 120 days a year doing admin. Those routine, mindless tasks that are part and parcel of running a business are a great easy-win for automation. So much admin – from invoicing to social media – can be easily sorted with the right tech.