With faster, nimbler and smarter modern business models, companies need to continuously invest in technology. The problem is, the slow process of IT funding hasn’t kept pace with customer demand.
IT has traditionally been a cost center with an annual budgeting cycle and a classic funding process, explains Jason Byrd, managing director, technology business management at KPMG. “If want to fund a technology-driven initiative, you traditionally look for those dollars by doing an ROI study, funding the project and finishing years later,” he says. The problem? In a world when Facebook releases code every three minutes and consumers expect real-time software updates, that process no longer works for the speed of business.
“We need IT to be able to fund their investments quicker and faster and not use these big, multiyear, monolithic decision-making processes,” he says. “Organizations should expect their own IT department to release code faster and pivot in the marketplace.” That means discovering what is not viable sooner, in order to redirect money, dollars and effort, he adds.
In addition, says Rob Breakiron, technology advisor at KPMG, business stakeholders have been developing IT for a long time. Shadow IT used to be a bad word, whereas now we think of it as business led IT. “ As an IT organization, we need to remove the friction and constraints that hold back or slow technology development in order to deliver what the business needs at the speed they need it,” he says.
The New Model: Dynamic Investment
KPMG’s new paper, Funding Technology at Market Speed: The need for dynamic investment in the future of IT, details a new approach. Dynamic investment enables investing almost anytime and anywhere — based on value, releasing minimally viable products, and gauging customer response, while easily shifting direction when needed.
“Dynamic” is about flexibility, rather than remaining static, says Byrd. It is also an ongoing process rather than one that focuses on batch or discrete decision-making. “We are trying to evoke a method that is both flexible and continuous,” he explains. “If you walked into Shark Tank with a great idea and Mark Cuban said, ‘I want to fund that, but it’s not in this year’s budget — can I fund it next year?’ That doesn’t happen.”
Most companies have access to capital, unless they truly are at dire straits with their business, he adds: “Since they can afford any initiative IT is trying to put forth with the business, it makes sense to go ahead and not wait around for an annual cycle.”
That doesn’t mean IT departments need to begin a $200 million transformational program. Instead, they can begin with small investments. “The idea is to see how it’s being adopted, how it is doing by some leading indicators, which serve as canaries in the mine that are proxies for the actual benefits,” he says. “Use those as gauges for whether or not you want to put more money in. If not, you can stop the project and do something else.”
The bottom line, says Breakiron, is to stop putting all the effort up front to protect against failure. Instead, organizations should put in small amounts of time and money to test theories and, like a VC firm, set up different rounds of funding to continue rewarding winning ideas that meet predefined OKR success criteria. “We’re starting to build IT in much smaller chunks,” he explains. “In this new world, you test a theory and if it’s not delivering the benefits that you want, it is ok to stop the investment and go after something else. If a product is meeting or exceeding your OKRs then it is time to double down”
In Part 2 of this two-part blog series, we will dive into the cultural shifts necessary for dynamic investment to succeed and some key action steps IT organizations should take.
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