How are investment decisions made on digital projects?

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You may think that executives and board members take a very pragmatic approach to deciding on digital CapEx projects. Unfortunately, it is seldom the case, however!

Most investment decisions made on digital projects are driven by the ‘carrot or stick’ syndrome.

Carrot

The decisions of investment are made if there is an ample opportunity:

  • Selling the company: Upgrade digital assets and software to make the company more attractive to the buyers
  • Retiring: The top executive decides to invest in digital assets to respectfully retire and hand over the responsibility to the next in line
  • Vacuum: Your competition does not have the digital capabilities you plan to implement. So, there is an opportunity to be first in the market

Stick

The decisions of investment are being made to save yourself from the stick:

  • Regulatory and compliance: If you are not fully compliant with the governing body, you may have to implement digital solutions to claim compliance (e.g. Banks, Telecom, Security)
  • Out of support: Your existing systems will be End of Service Life (EOSL). It means that the vendors of your current digital assets will no longer support your digital assets after a specific deadline.
  • Competition: If you do not match and compete on digital capabilities with others in your market, you will lose market share.

One may think that investment decisions are made by carefully assessing business problems and solutions options. It is seldom the case, however.

Here is the question for the executives and sponsors, are you too operating under ‘carrot or stick’ syndrome?

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