Digital Transformation Series: It’s Time - Financing New-School Digital Operations (Part Two)

It’s a tale as old as the iPhone: you want to develop an app. The app, which would allow your customers to track and manipulate package delivery, would be fairly simple, technologically speaking, though it would require robust, cross-functional back-end support.

Your financial model is . . . well . . . traditionally bureaucratic. The process, from business case development through funding, could take two to three months. Factor in development and inevitable hiccups, and a six-month span – from inception to launch – it’s completely conceivable.

Even for something as simple as an app – not to mention larger, more transformative initiatives – organizations don’t have six months anymore. In the last six months alone, 147,967 apps were added to the iTunes App Store (December 2016 - May 2017).

To keep up with this frenetic pace, it’s time to adopt a finance model that is as nimble and transformative as digitization itself. This new normal requires leaders to adopt more flexible, customized budgeting models that give development teams near autonomy to quickly and inexpensively create, test and iterate proof of concepts (PoCs).

While the “right” funding model for any organization will depend on your culture, existing processes and risk adversity, traditional budgeting models can hinder faster, cheaper and smarter development in a world being eaten by software.

In order to compete, it’s imperative that organizations adopt new financial models that:

  • Get comfortable with a degree of uncertainty and establish governance that fosters end goals without making front-end assumptions about the end product.
  • Eschew drawn-out business cases in favor of business capability road maps that outline at a very high level the capabilities needed to meet goals, and describe what users will be able to achieve – in business terms, not technical ones.
  • Approve smaller budgets more continuously to fund PoCs to be delivered every few weeks to prove feasibility and benefit against goals. Only then can these goals be expanded on with further funding.

Flexible funding models aren’t a blank check for developers. Instead, they allow you to work more effectively and at scale. The result is less rebalancing and waste and, ultimately, greater overall business value.

These new finance model principles can be daunting for traditional finance leaders. But once you take the plunge, fears can be quickly assuaged by the accelerated business value that flexible budgeting can deliver. It’s time to make the shift. Is your organization ready?

You can read Part One of this series by clicking here.