Investing in new technology for my business
We all know that if you keep doing the same things you generally get the same results. Similarly, if you keep doing the same thing in an ever-changing sector, you will probably suffer worse results. So there comes a time when you need to invest in something new to move your business forward. Any investment is a big decision. If it’s an investment in new technology, the stakes are even higher because the playing field moves so quickly.
None of us have a crystal ball. So, without the benefit of being able to guarantee the outcome, what factors should you consider when deciding whether to invest in the unknown of new technology to give you the greatest chance of a positive return?
What are the advantages of introducing new technology in business?
The most important question to ask is: what will the new technology add to your business?
It can be easy to be carried away by geek speak and techno wizardry, but you need a cold analysis of the business case. Most industries face constant challenges from procurement teams to deliver year-on-year cost savings and this can only be achieved by looking at new ways of doing things; adopting new technology can play a key role in delivering this.
But you need to know things like:
- How many steps might your new technology eliminate from your current processes?
- How much quicker would that enable you to deliver to clients?
- How much better will your finished product be?
- How much of an edge will these factors give you over your competitors in your core business area?
One of the attractions of new technology is it can not only help you to do what you currently do better, but it can also enable you to expand in new directions. If the investment you are considering would deliver new strings to your bow, you need to assess if this diversification is going to enhance or detract from your core business. Are you positioned to achieve the best momentum out of these new opportunities? Will you need to make further investments, for example in new staff, to capitalise on these new possibilities?
The second thing to consider is the real cost of your investment. This can be less easy to predict than other investments. If you buy a bit of kit, the cost is the best price you can negotiate. Investing in new technology – particularly in-house – can be more open ended. How many glitches will your designer encounter along the way that could push development back by one, two or more months? What would the real impact on your business be of such delays? And what is the real cost to your business of your designer not pursuing other activities? One way round this can be to outsource the development, which can give you greater control over costs but may give you less direct control overall.
Can you afford to stand still?
Having examined the costs of new technology and whether you can afford the investment, you also have to consider whether you can afford not to invest?
It can be helpful to look at a more concrete example to see how to shape your cost/benefit analysis. Think of a manufacturing firm considering investment in its own production plant that will deliver greater control of the manufacturing process, improved flexibility and enable them to price more competitively. The cost of the investment is the cost of the machinery; the cost of not investing is the loss of those benefits and the impact this might have on customer relations and sales.
In the same way, you need to assess the costs to your business of not investing in new technology. The imperative challenge for investment is to find ways to reduce costs or save time. Technology that delivers either – or both – of these will give you an edge over the competition, which in turn could lead to an increase in sales that more than justifies your investment.
But the investment could deliver far more than this: investment in new technology could become a point of difference for a business. The real cost of the missed opportunities from not investing may well outweigh the value of the investment on your balance sheets.
With any investment in new technology in business you also need to be realistic about the window of opportunity that your investment will buy you. Investing in a new technology may give a business six months before competitors catch up. Such a short head start requires strategic planning to capitalise on your advantage while you have it.
Learning from your investment in new technology
Finally, having taken the leap of faith and invested in the new technology that you hope will take your business forward, it is vital to analyse what worked, what didn’t, and what you can learn for next time. If you’re lucky, others who have paved the way may be willing to share from their experience to help you avoid some of the pitfalls.
In the ‘lessons to be learnt’ column, look at how you could have improved the project. Could budgets have been signed off earlier? Could you have tracked costs more closely, so that you would have had a more accurate measurement against which to balance the impact of the new technology for your business?
It’s an established truism that the only constant is change. If you want your business to survive, you’re going to need to keep up with that change. If, on the other hand, you want your business to thrive, you’re probably going to have to lead that change. This is particularly true if you have only a small window before your competitors catch up with your investment: if you rest on your laurels after your first investment, you’re likely to see your competitors overtake you.
The pace of change in today’s world means that adopting new technology in business is never a one-off: realistically any investment you make needs to be viewed as the start of a rolling programme. And with such high stakes at risk, it’s vital you ask the right questions to make sure you invest in the right technology to deliver success for you and your company.
