💸️️️️️️ Digitalization Will Not Pay Off? Or is it a Matter of ROI Calculation Principles?
Estimating ROI for a digital transformation is impossible. Would you agree? That’s because digital transformation is not a traditional form of investment. Check out the alternative approach to make the right decision.
It’s relatively easy to calculate direct costs, but it’s challenging to understand the benefits.
Digital transformation does not generate revenue directly
Everything is already working without it
Calculated period until positive ROI could be 10-20 years
It’s expensive in absolute values
With this in mind, it could be a hard decision to embark on company digitalization. This can lead to delay and loss of optimal moment on the company scale, but most usually is a trade-off, that could be called semi-digitalization. This means cutting costs on tool research and approbation, inability to change tools even if they don’t fit, next-to-zero user training, minimal buffer period, and straightforward KPIs.
And here’s the long-expected plot twist: The semi-digitalization approach is one of the reasons why digital transformations fail or do not pay off. Leftovers, in the form of extensive manual processes, siloed workspaces, data multiplication, and divination reporting. Semi-digitalization has a negative potential for business, but how do you set your mind to full-fledged transformation? Here are some tips:
Risk-based approach: how much will it cost, if you don’t take up digital transformation? If the business grows, the risk is high, because the company processes need to scale proportionally, especially with manual compliance, anti-fraud, and data security processes.
Butterfly effect approach: evaluate the benefits from additional sources of revenue that you’ll get if you transform the company. It could be advanced analytics, data-driven insights, and prediction. New directions of business and sales channels can unfold.
Imagine the potential and efficiency that your employees can unveil with smart processes and data management.
Let’s face it: a company's digital transformation might always have low traditional RIO, but the right way to think of it is like health care or insurance. What are the risks of not doing it? What could be the consequences?
Another nice analogy is fundamental science. It’s impossible to understand its ROI, but scientifically advanced society will always have a technological and healthcare advantage.
